A REPORT

ON TOP FIVE BEAVERAGES INDUSTRIES PROFILE

AT IIMT PROFESSIONAL COLLEGE, MEERUT

UNDER THE GUIIDANCE UNDER THE GU DANCE

OF OF

Miss. Swati Gupta

SUBMITTED BY; PRAVEEN SHARMA PGDM 2th

STUDENTS DECLARATION

I hereby declare that the project entitled TOP FIVE BEVEARAGES INDUSTRIES IN INDIA and the information presented in this report has been made by me . This is correct to the best of my knowledge and the report presented has not been published anywhere else. I bonafide record of work done by us during the course of project work and that it has not previously formed the basis for the award to us, for any degree/diploma associate ship, fellowship or other similar title, any other institute/society.

ACKNOWLEDGEMENT

Its my pleasure to express my sincere gratitude to DR. P. K. Agarwal, Director PGDM, IIMT PROFESSIONAL COLLEGE, who had wholeheartedly directed this project. I owe my deepest sense of gratitude to Mr.Kapil Garg, HOD, PGDM, IIMT PROFESSIONAL COLLEGE, Ms. Swati Gupta, project head, for his valuable suggestions, continuous encouragement, open discussion and his generosity in allowing me the freedom to exercise thoughtfully and intelligently the program of investigation and analysis so as to attain a successful culmination of the project. And at the last but not the least, my heartfelt gratitude to my parents and family members for their continuous inspiration.

INTRODUCTION BEVEARAGES INDUSTRY AN OVERVIEW

Soft drinks can trace their history back to the mineral water found in natural springs. Bathing in natural springs has long been considered a healthy thing to do; and mineral water was said to have curative powers. Scientists soon discovered that gas carbonium or carbon dioxide was behind the bubbles in natural mineral water. The first marketed soft drinks (non-carbonated) appeared in the 17th century. They were made from water and lemon juice sweetened with honey. In 1676, the Compagnie de Limonadiers of Paris were granted a monopoly for the sale of lemonade soft drinks. Vendors would carry tanks of lemonade on their backs and dispensed cups of the soft drink to thirsty Parisians. Joseph Priestley In 1767, the first drinkable man-made glass of carbonated water was created by Englishmen Doctor Joseph Priestley. Three years later, Swedish chemist Torbern Bergman invented a generating apparatus that made carbonated water from chalk by the use of sulfuric acid. Bergman's apparatus allowed imitation mineral water to be produced in large amounts.

John Mathews In 1810, the first United States patent was issued for the "means of mass manufacture of imitation mineral waters" to Simons and Rundell of Charleston, South Carolina. However, carbonated beverages did not achieve great popularity in America until 1832, when John Mathews invented his apparatus for the making carbonated water. John Mathews then mass-manufactured his apparatus for sale to soda fountain owners.

Health Properties of Mineral Water The drinking of either natural or artificial mineral water was considered a healthy practice. The American pharmacists selling mineral waters began to add medicinal and flavorful herbs to unflavored mineral water. They used birch bark, dandelion, sarsaparilla, and fruit extracts. Some historians consider that the first flavored carbonated soft drink was that made in 1807 by Doctor Philip Syng Physick of Philadelphia. Early American pharmacies with soda fountains became a popular part of culture. The customers soon wanted to take their "health" drinks home with them and a soft drink bottling industry grew from consumer demand.

The Soft Drink Bottling Industry Over 1,500 U.S. patents were filed for either a cork, cap, or lid for the carbonated drink bottle tops during the early days of the bottling industry. Carbonated drink bottles are under a lot of pressure from the gas. Inventors were trying to find the best way to prevent the carbon dioxide or bubbles from escaping. In 1892, the "Crown Cork Bottle Seal" was patented by William Painter, a Baltimore machine shop operator. It was the first very successful method of keeping the bubbles in the bottle.

Automatic Production of Glass Bottles In 1899, the first patent was issued for a glass-blowing machine for the automatic production of glass bottles. Earlier glass bottles had all been hand-blown. Four years later, the new bottle-blowing machine was in operation. It was first operated by the inventor, Michael Owens, an employee of Libby Glass Company. Within a few years, glass bottle production increased from 1,500 bottles a day to 57,000 bottles a day.

Hom-Paks and Vending Machines During the 1920s, the first "Hom-Paks" were invented. "Hom-Paks" are the familiar six-pack beverage carrying cartons made from cardboard. Automatic vending machines also began to appear in the 1920s. The soft drink had become an American mainstay. In the past half-century, the food and beverage industry has blossomed from a collection of mom-and-pop operations to a trillion-dollar powerhouse led by huge international corporations. Familiar names like Coca-Cola, Starbucks and McDonald's can be found in every corner of the globe. The overarching theme dominating the food and beverage industry is exploding global demand and rapidly rising food prices. The breakneck economic growth of countries such as China, India, Brazil and Vietnam gives billions of people the ability indulge in ways previously enjoyed only by those in developed nations. A massive influx of consumers onto the global food market has resulted in a rapid and sustained increase in food prices, stoking global inflation. The related shift to ethanol and other bio-diesels in the face of rapidly rising energy prices has only exacerbated the world's food inflation headache. Although some members of the food and beverage industry (primarily farmers and agribusinesses) benefit from higher prices, most corporations in the industry have seen their cost of doing business increase, biting into profit margins. These higher costs are passed, in part, onto consumers, who find their discretionary spending restricted when they must spend a larger chunk of their paycheck at restaurants and grocery stores. So, just as oil prices are a key economic indicator, so too are the prices of key agricultural commodities such as corn, wheat, and soybeans. The first marketed soft drinks (noncarbonated) in the Western world appeared in the 17th century. They were made from water and lemon juice sweetened with honey. In 1676, the Compagnie des Limonadiers of Paris was granted a monopoly for the sale of lemonade soft drinks. Vendors carried tanks of lemonade on their backs and dispensed cups of the soft drink to thirsty Parisians.

Carbonated drinks
Soft drinks displayed on supermarket shelves. In late 18th century, scientists made important progress in replicating naturally carbonated mineral waters. In 1767, Englishman Joseph Priestley first discovered a method of infusing water with carbon dioxide to make carbonated water which has 3.4 mg in the drink [4] when he suspended a bowl of distilled water above a beer vat at a local brewery in Leeds, England. His invention of carbonated water, (also known as soda water), is the major and defining component of most soft drinks. Priestley found water thus treated had a pleasant taste, and he offered it to friends as a refreshing drink. In 1772, Priestley published a paper entitled Impregnating Water with Fixed Air in which he describes dripping oil of vitriol (or sulfuric acid as it is now called) onto chalk to produce carbon dioxide gas, and encouraging the gas to dissolve into an agitated bowl of water. Another Englishman, John Mervin Nooth, improved Priestley's design and sold his apparatus for commercial use in pharmacies. Swedish chemist Torbern Bergman invented a generating apparatus that made carbonated water from chalk by the use of sulfuric acid. Bergman's apparatus allowed imitation mineral water to be produced in large amounts. Swedish chemist Jns Jacob Berzelius started to add flavors (spices, juices and wine) to carbonated water in the late 18th century Phosphate soda A variant of soda in the United States called "phosphate soda" appeared in the late 1870s. It became one of the most popular soda fountain drinks from 1900 through the 1930s, with the lemon or orange phosphate being the most basic. The drink consists of 1 oz fruit syrup, 1/2 teaspoon of phosphoric acid, and enough carbonated water and ice to fill a glass. This drink was commonly served in pharmacies.

Soda fountain pioneers

Main article: Soda fountain Artificial mineral waters, usually called "soda water," and the soda fountain made the biggest splash in the United States. Beginning in 1806, Yale chemistry professor Benjamin Silliman sold soda waters in New Haven, Connecticut. He used a Nooth apparatus to produce his waters. Businessmen in Philadelphia and New York City also began selling soda water in the early 19th century. In the 1830s, John Matthews of New York City and John Lippincott of Philadelphia began manufacturing soda fountains. Both men were successful and built large factories for fabricating fountains. Soda fountains vs. bottled sodas The drinking of either natural or artificial mineral water was considered a healthy practice. The American pharmacists selling mineral waters began to add herbs and chemicals to unflavored mineral water. They used birch bark (see birch beer), dandelion, sarsaparilla, fruit extracts, and other substances. Flavorings were also added to improve the taste. Pharmacies with soda fountains became a popular part of American culture. Many Americans frequented the soda fountain on a daily basis. Due to problems in the U.S. glass industry, bottled drinks were a small portion of the market in the 19th century. (They were certainly known in England, though. In The Tenant of Wildfell Hall, published in 1848, the caddish Huntingdon, recovering from months of debauchery, wakes at noon and gulps a bottle of soda-water.[8]) In America, most soft drinks were dispensed and consumed at a soda fountain, usually in a drugstore or ice cream parlor. In the early 20th century, sales of bottled soda increased exponentially. In the second half of the 20th century, canned soft drinks became an important share of the market. Soft drink bottling industry Over 1,500 U.S. patents were filed for either a cork, cap, or lid for the carbonated drink bottle tops during the early days of the bottling industry. Carbonated drink bottles are under great pressure from the gas. Inventors were trying to find the best way to prevent the carbon dioxide or bubbles from escaping. In 1892, the "Crown

Cork Bottle Seal" was patented by William Painter, a Baltimore, Maryland machine shop operator. It was the first very successful method of keeping the bubbles in the bottle. Automatic production of glass bottles In 1899, the first patent was issued for a glass-blowing machine for the automatic production of glass bottles. Earlier glass bottles had all been hand-blown. Four years later, the new bottle-blowing machine was in operation. It was first operated by the inventor, Michael Owens, an employee of Libby Glass Company. Within a few years, glass bottle production increased from 1,400 bottles a day to about 58,000 bottles a day Production Soft drink production Soft drinks are made by mixing dry ingredients and/or fresh ingredients (e.g. lemons, oranges, etc.) with water. Production of soft drinks can be done at factories, or at home. Soft drinks can be made at home by mixing either a syrup or dry ingredients with carbonated water. Carbonated water is made using a home carbonation system or by dropping dry ice into water. Syrups are commercially sold by companies such as Soda-Club. Ingredient quality Of most importance is that the ingredient meets the agreed specification on all major parameters. This is not only the functional parameter, i.e. the level of the major constituent, but the level of impurities, the microbiological status and physical parameters such as color, particle size, etc Soft drinks by definition are carbonated drinks that are non-alcoholic. Carbonated soft drinks are also refereed to as soda, soda pop, pop, or tonic. 1798 The term "soda water" first coined. 1810 First U.S. patent issued for the manufacture of imitation mineral waters. 1819 The "soda fountain" patented by Samuel Fahnestock. 1835 The first bottled soda water in the U.S.

1850 A manual hand & foot operated filling & corking device, first used for bottling soda water. 1851 Ginger ale created in Ireland. 1861 The term "pop" first coined. 1874 The first ice-cream soda sold. 1876 Root beer mass produced for public sale. 1881 The first cola-flavored beverage introduced. 1885 Charles Aderton invented "Dr Pepper" in Waco, Texas. 1886 Dr. John S. Pemberton invented "Coca-Cola" in Atlanta, Georgia. 1892 William Painter invented the crown bottle cap. 1898 "Pepsi-Cola" is invented by Caleb Bradham. 1899 The first patent issued for a glass blowing machine, used to produce glass bottles. 1913 Gas motored trucks replaced horse drawn carriages as delivery vehicles. 1919 The American Bottlers of Carbonated Beverages formed. 1920 The U.S. Census reported that more than 5,000 bottlers now exist. Early 1920's The first automatic vending machines dispensed sodas into cups. 1923 Six-pack soft drink cartons called "Hom-Paks" created. 1929 The Howdy Company debuted its new drink "Bib-Label Lithiated Lemon-Lime Sodas" later called "7 Up". Invented by Charles Leiper Grigg. 1934 Applied color labels first used on soft drink bottles, the coloring was baked on the face of the bottle.

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1952 The first diet soft drink sold called the "No-Cal Beverage" a gingerale sold by Kirsch. 1957 The first aluminum cans used. 1959 The first diet cola sold. 1962 The pull-ring tab first marketed by the Pittsburgh Brewing Company of Pittsburgh, PA. The pull-ring tab was invented by Alcoa. 1963 The Schlitz Brewing company introduced the "Pop Top" beer can to the nation in March, invented by Ermal Fraze of Kettering, Ohio. 1965 Soft drinks in cans dispensed from vending machines. 1965 The resealable top invented. 1966 The American Bottlers of Carbonated Beverages renamed The National Soft Drink Association. 1970 Plastic bottles are used for soft drinks. 1973 The PET (Polyethylene Terephthalate) bottle created. 1974 The stay-on tab invented. Introduced by the Falls City Brewing Company of Louisville, KY. 1979 Mello Yello soft drink is introduced by the Coca Cola company as competition against Mountain Dew. 1981 The "talking" vending machine invented.

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TOP FIVE BEVEARAGES COMPANY NAME

1.COCA-COLA 2.PEPSICO INC. 3.NESTLE 4.CADBURY SCHWEPPES 5.NATIONAL BEVEARAGES

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TABLE OF CONTENTS

1. DECLARATION

II

2. ACKNOWLEDGEMENT

III

3. INTRODUCTION

IV-XI

4. TOP 5 BEVEARAGES COMPANY NAME CHAPTER-1- COCA-COLA

XII 15-53

COMPANY PROFILE HISTORY KEY EXECUTIVE PRODUCT MIX COMPETITORS STP STRATEGIES SWOT ANALYSIS FINANCIAL ANALYSIS

CHAPTER-2- PEPSICO INC

54-99

COMPANY PROFILE HISTORY KEY EXECUTIVE PRODUCT MIX COMPETITORS STP STRATEGIES SWOT ANALYSIS FINANCIAL ANALYSIS

13

CHAPTER-3- NESTLE

100-125

COMPANY PROFILE HISTORY KEY EXECUTIVE PRODUCT MIX COMPETITORS STP STRATEGIES SWOT ANALYSIS BCG MATRIX

CHAPTER-4- CADBURY SCHWEPPES

126-146

COMPANY PROFILE HISTORY KEY EXECUTIVE PRODUCT MIX COMPETITORS BCG MATRIX SWOT ANALYSIS & PORTERS FIVE FORCES MODEL & 3 CS FOR AMUL FINANCIAL ANALYSIS

CHAPTER-5- NATIONAL BEVEARAGES

147-167

COMPANY PROFILE HISTORY KEY EXECUTIVE PRODUCT MIX COMPETITORS SWOT ANALYSIS FINANCIAL ANALYSIS

14

5. CONCLUSION 6. BIBLIOGRAPHY

168 169

CHAPTER 1 COMPANY PROFILE

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COMPANY PROFILE

MISSION:
Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions.  To refresh the world...  To inspire moments of optimism and happiness...  To create value and make a difference.

VISION:
Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth.  People: Be a great place to work where people are inspired to be the best they can be.  Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs.  Partners: Nurture a winning network of customers and suppliers, together we

16

create mutual, enduring value.  Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities.  Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities.  Productivity: Be a highly effective, lean and fast-moving organization.

WINNING
to make our 2020 Vision a reality.

CULTURE:

Our Winning Culture defines the attitudes and behaviours that will be required of us

LIVE
world.

OUR

VALUES:

Our values serve as a compass for our actions and describe how we behave in the

 Leadership: The courage to shape a better future.  Collaboration: Leverage collective genius.  Integrity: Be real.  Accountability: If it is to be, it's up to me.  Passion: Committed in heart and mind.  Diversity: As inclusive as our brands.

 Quality: What we do, we do well.

FOCUS ON THE MARKET:
 Focus on needs of our consumers, customers and franchise partners.  Get out into the market and listen, observe and learn.  Possess a world view.  Focus on execution in the marketplace every day.

 Be insatiably curious.
WORK SMART:
 Act with urgency.  Remain responsive to change.

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 Have the courage to change course when needed.  Remain constructively discontent.

 Work efficiently.

ACT LIKE OWNERS:

 Be accountable for our actions and inactions.  Steward system assets and focus on building value.  Reward our people for taking risks and finding better ways to solve problems.

 Learn from our outcomes -- what worked and what didnt.

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HISTORY OF COCA-COLA
The prototype Coca-Cola recipe was formulated at the Eagle Drug and Chemical Company, a drugstore in Columbus, Georgia by John Pemberton, originally as a coca wine called Pemberton's French Wine Coca. He may have been inspired by the formidable success of Vin Mariani, a European cocawine. In 1886, when Atlanta and Fulton County passed prohibition legislation, Pemberton responded by developing Coca-Cola, essentially a non-alcoholic version of French Wine Coca. The first sales were at Jacob's Pharmacy in Atlanta, Georgia, on May 8, 1886. It was initially sold as a patent medicine for five cents a glass at soda fountains, which were popular in the United States at the time due to the belief that carbonated water was good for the health.[9] Pemberton claimed Coca-Cola cured many diseases, including morphine addiction, dyspepsia, neurasthenia, headache, and impotence. Pemberton ran the first advertisement for the beverage on May 29 of the same year in the Atlanta Journal. By 1888, three versions of Coca-Cola sold by three separate businesses were on the market. Asa Griggs Candler acquired a stake in Pemberton's company in 1887 and incorporated it as the Coca Cola Company in 1888. The same year, while suffering from an ongoing addiction to morphine, Pemberton sold the rights a second time to four more businessmen: J.C. Mayfield, A.O. Murphey, C.O. Mullahy and E.H. Bloodworth. Meanwhile, Pemberton's alcoholic son Charley Pemberton began selling his own version of the product. John Pemberton declared that the name "Coca-Cola" belonged to Charley, but the other two manufacturers could continue to use the formula. So, in the summer of 1888, Candler sold his beverage under the names Yum Yum and Koke. After both failed to catch on, Candler set out to establish a legal claim to Coca-Cola in late 1888, in order
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to force his two competitors out of the business. Candler purchased exclusive rights to the formula from John Pemberton, Margaret Dozier and Woolfolk Walker. However, in 1914, Dozier came forward to claim her signature on the bill of sale had been forged, and subsequent analysis has indicated John Pemberton's signature was most likely a forgery as well. In 1892 Candler incorporated a second company, The Coca-Cola Company (the current corporation), and in 1910 Candler had the earliest records of the company burned, further obscuring its legal origins. By the time of its 50th anniversary, the drink had reached the status of a national icon in the USA. In 1935, it was certified kosher by Rabbi Tobias Geffen, after the company made minor changes in the sourcing of some ingredients. Coca-Cola was sold in bottles for the first time on March 12, 1894. The first outdoor wall advertisement was painted in the same year as well in Cartersville, Georgia. Cans of Coke first appeared in 1955. The first bottling of Coca-Cola occurred in Vicksburg, Mississippi, at the Biedenharn Candy Company in 1891. Its proprietor was Joseph A. Biedenharn. The original bottles were Biedenharn bottles, very different from the much later hobble-skirt design that is now so familiar. Asa Candler was tentative about bottling the drink, but two entrepreneurs from Chattanooga, Tennessee, Benjamin F. Thomas and Joseph B. Whitehead, proposed the idea and were so persuasive that Candler signed a contract giving them control of the procedure for only one dollar. Candler never collected his dollar, but in 1899 Chattanooga became the site of the first Coca-Cola bottling company. The loosely termed contract proved to be problematic for the company for decades to come. Legal matters were not helped by the decision of the bottlers to subcontract to other companies, effectively becoming parent bottlers. Coke concentrate, or Coke syrup, was and is sold separately at pharmacies in small quantities, as an over-the-counter remedy for nausea or mildly upset stomach. On April 23, 1985, Coca-Cola, amid much publicity, attempted to change the formula of the drink with "New Coke". Follow-up taste tests revealed that most consumers preferred the taste of New Coke to both Coke and Pepsi, but Coca-Cola management was unprepared for the public's nostalgia for the old drink, leading to a backlash. The

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company gave in to protests and returned to a variation of the old formula, under the name Coca-Cola Classic on July 10, 1985. On February 7, 2005, the Coca-Cola Company announced that in the second quarter of 2005 they planned to launch a Diet Coke product sweetened with the artificial sweetener sucralose, the same sweetener currently used in Pepsi One. On March 21, 2005, it announced another diet product, Coca-Cola Zero, sweetened partly with a blend of aspartame and acesulfame potassium. In 2007, Coca-Cola began to sell a new "healthy soda": Diet Coke with vitamins B6, B12, magnesium, niacin, and zinc, marketed as "Diet Coke Plus. On July 5, 2005, it was revealed that Coca-Cola would resume operations in Iraq for the first time since the Arab League boycotted the company in 1968. In April 2007, in Canada, the name "Coca-Cola Classic" was changed back to "CocaCola." The word "Classic" was truncated because "New Coke" was no longer in production, eliminating the need to differentiate between the two. The formula remained unchanged. In January 2009, Coca-Cola stopped printing the word "Classic" on the labels of 16ounce bottles sold in parts of the southeastern United States. The change is part of a larger strategy to rejuvenate the product's image. In November 2009, due to a dispute over wholesale prices of Coca-Cola products, Costco stopped restocking its shelves with Coke and Diet Coke.

GLOBAL MARKET SHARE OF COCA-COLA

Sales Income Data Millions in and 2004 2005 2006 2007 2008

Net Sales

$21,742

$23,104

$24,088

$28,857

$31,944

Net Income $4,847

$4,872

$5,080

$5,981

$5,807

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(Profits) Units sold 19.8 20.6 21.4 22.7 23.7

in Billions In 2009, the company generated revenues of $31 billion with $6.8 billion net income. An increased consumer preference for healthier drinks has resulted in slowing growth rates for sales of carbonated soft drinks (abbreviated as CSD), which constitutes 78% of KOs sales. KOs profits are also vulnerable to the volatile costs for the raw materials used to make drinks - such as the corn syrup used as a sweetener, the aluminium used in cans, and the plastic used in bottles. Furthermore, slowing consumer spending in Coke's large North American market compounds the challenge of increasing costs and a weak economic environment. Finally, Coca-Cola earns approximately 75% of revenue from international sales, exposing it to currency fluctuations, which are particularly adverse with a stronger U.S. Dollar (USD). Despite these challenges, Coca-Cola has remained profitable. Though the non-CSD market is growing quickly, the traditional CSD market is still large in terms of both revenues and volume and highly lucrative. The size and variety of KOs offerings in the CSD category, coupled with the unparalleled brand equity of the Coca-Cola trademark, has allowed KO to maintain its share of this important market. KO has also responded to consumers changing tastes with new, non-CSD product launches and acquisitions such as that of Glaceau in 2007. Strong international growth has also more than offset a weak domestic market. On February 25, Coca-Cola Company announced its plan to buy Coca-Cola Enterprises (CCE) for $12.3 million.[7] Since spinning of Coca-Cola Enterprises (CCE) 24 years ago, the soft drink market has changed dramatically with consumers buying fewer soft drinks and more non-carbonated beverages, such as Powerade and Dasani water. Under the new deal, Coca-Cola Company will take control of the bottler's North America operations, giving the company control over 90% of the total North America volume. In return, Coca-Cola Enterprises will take over Coke's bottling operations in Norway and Sweden, becoming a European-focused producer and distributor.

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In March 2010, Coca-Cola Company entered into discussions to buy the Russian juice company, OAO Nidan Juices. The company is 75% owned by a private equity firm in London and 25% by its Russian founders and controls 14.5% of the Russian juice market. If successful, the purchase would add to Coca-Cola's 20.5% market share, passing Pepsi's 30% market share. The Russian juice market is estimated to be $3.2 billion dollars, and estimates of Nidan's purchase price are between $560-$620 million. In April 2010, Coca-Cola Company purchased a majority share of Innocent, the British fruit smoothie maker. Last year the company bought an 18% share of the company for more than $45 million, and recent purchases of additional shares increased Coke's stake to 58%. In June 2010, Coca-Cola Company agreed to pay Dr Pepper Snapple Group (DPS) $715 million for the continued right to sell their products following the company's acquisition of Coca-Cola Enterprises (CCE). The deal covers the next 20 years with an option to renew for an additional 20 years.

Type Manufacturer Founder(s) Country of Origin Introduced Area served Color Flavors

Soft Drink (Cola) The Coca- Cola Company

John S. Pemberton

United States 1886 Over 200 countries Caramel E-150d Cola, Cola Green Tea, Cola Lemon, Cola Lemon Lime, Cola Lime, Cola Orange and Cola Raspberry.

Related Products

Pepsi, Irn Bru, RC Cola, Cola Turka, Zam Zam Cola, Mecca Cola, Virgin Cola, Parsi Cola, Qibla Cola, Evoca Cola,

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Corsica Cola, Breizh Cola, Afri Cola Employees Servings per Day 92,400 1.6 Billion

ORGANIZATIONAL HIERARCHY OF COCA COLA

24

Managing Director

Chief Operating Officer (Sales)

Director Operations

Director Operations

Quality Control Manager

Sales and Marketing Manager

Regional Sales Manager

HR Manager

Distribution and Logistics Manager

Accounts Manager

Production Manager

Assisstant Manager

Executive Manager

Sales Manager

Senior Officer

Marketing Development Officer Sales and Marketing Officer

Driver

Coke executi es

C ti

ti t

i t i ll l i t ti

i l

i l

l C

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Douglas Daft and former COO Steven Heyer made $11,026,237 and $9,762,588

respectively in 2003 when bonuses and stock options are inc Name Title Chairman, President, Muhtar Kent Chief

Chairman

Committee and Chairman of North America Business Committee Chief Financial Officer, Executive Vice Integration Team Steering

Gary P. Fayard

President and Member of North America Business Committee Chairman of Coca-Cola Enterprises and Integration Team Steering

John F. Brock III

Chief Executive Officer of Coca-Cola Enterprises Chief Executive Officer of Coca-Cola China Industries Limited Chief Executive Officer of Retail Division

Martin Jansen

Vineet Kapila

BOARD MEMBERS - COCA-COLA

Name

Primary Company

e .

Executive of

Officer, Executive

26

Name Muhtar Kent Ingrid Jones Masahiko Uotani K. W. Chan Zahi W. Khouri Saunders

Primary Company The Coca-Cola Company

The Coca-Cola Company

The Coca-Cola Company The Coca-Cola Company Paltel Corporation

EXECUTIVE COMMITTEES* - COCA-COLA Committee Name Audit Committee Compensation Committee Corporate Committee Executive Committee Finance Committee Management/Organization Development Committee Governance Chairperson Peter V. Ueberroth Maria Elena Lagomasino

James D. Robinson III

Muhtar Kent James B. Williams

Donald R. Keough

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PRODUCTMIX

BRANDS OF COCA COLA

Coca-Cola Zero has been one of the most successful product launch hes in Coca Colas history. In 2007, Coca Colas sold nearly 450 million cases globally. Put into perspective, that's roughly the same size as Coca Colas total business in the Philippines, one of our top 15 markets. As of September 2008, Coca-Cola Zero is available in more than 100 countries.

ENERGY DRINKS

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For those with a high-intensity approach to life, Coca Colas brands of Energy Drinks contain ingredients such as ginseng extract, guarana extract, caffeine and B vitamins.

JUICES/JUICE DRINKS
We bring innovation to the goodness of juice in Coca Colas more than 20 juice and juice drink brands, offering both adults and children nutritious, refreshing and flavorful beverages.

SOFT DRINKS
Coca Colas dozens of soft drink brands provide flavor and refreshment in a variety of choices. From the original Coca-Cola to most recent introductions, soft drinks from The Coca-Cola Company are both icons and innovators in the beverage industry.

SPORTS DRINKS

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Carbohydrates, fluids, and electrolytes team together in Coca Colas Sports Drinks, providing rapid hydration and terrific taste for fitness-seekers at any level

TEA AND COFFEE

Bottled and canned teas and coffees provide consumers' favorite drinks in convenient take-anywhere packaging, satisfying both traditional tea drinkers and today's growing coffee culture.

WATER
Smooth and essential, our Waters and Water Beverages offer hydration in its purest form.

OTHER DRINKS
So much more than soft drinks. Coca Colas brands also include milk products, soup, and more so you can choose a Coca Cola Company product anytime, anywhere for nutrition, refreshment or other needs.

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COMPETITORS OF COCA COLA

The competitors to the products of the company mainly lie in the non-alcoholic beverage industry consisting of juices and soft drinks. The key competitors in the industry are as follows:    PepsiCo Nestle Cadbury Schweppes

PEPSI
Caleb Brandhum, a North Caroline Pharmacist, structure Pepsi Cola In2 the 1890s as cure of dyspepsia (indigestion). In 1902, Bradhum applied for a trade mark, issued ninety seven share of stock and began selling Pepsi syrup in earnest. In his first year of business he spends $1900 on advertising a huge sum that he sold only 8000 gallons of syrup. In 1905 Bradhum built Pepsis bottling plant. By 1907 he was selling 10,000 gallons a year, two years later; he hired a New York advertising agency. After passing through many troubles for some period now Pepsi is a market leader in international arence and is available in 187 Nations throughout the world.

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COCA COLA V/S PEPSI PRODUCTS

Both the companies Coca Cola and Pepsi have a number of products. Many of these products are innovations but there are also many products which are brought out just as a competitive product for other companies. Some of these products that are brought in the market by both the companies to compete against each other are as follows:

COCA COLA

PEPSI

The main dark cola drink of the company which started the rivalry between these Companies.

Pepsi version of dark cola which is the major primary competitor to Coke.

Full Throttle is an energy drink produced AMP is and energy drink produced and by the Coca Cola Company. It deputed in distributed by Pepsi CO. under the late 2004 in North America. Mountain Dew soft drink brand.

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Vault is a carbonated beverage that was Mountain Dew MDX is an energy drink released by the Coca Cola Company in manufactured distributed by PepsiCo. June 2005. Under Mountain Dew brand in 2005.

PowerAde is a sports drink by Coca Cola Gatorade is a non carbonated sports Company and currently number two in the drink sports drink market worldwide. marketed by Quaker Oats

Company, a division of Pepsi Co. originally made for athletes but now often consumed as a snack beverage.

Sprite is a clear, lemon lime flavored, non 7 up is a brand of a lemon-lime flavored

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caffeinated soft drink, produced by Coca soft drink. Cola Company.It was introduced in the U.S in 1961.

Minute Maid is a product line of Tropicana products are an American beverages usually associated with orange company based in Bradenton, Florida, juice, but now extends to soft drinks of USA, which is one of the worlds largest many kinds. The Minute Maid company is producers and marketers of orange juice. now owned by Coca Cola and is world It has been owned by Pepsi Co. Inc. largest marketers of fruit juices and since 1998 drinks.

Nestea is brand of iced tea manufactured Lipton Original iced tea is a ready to and distributed by the Nestle companys drink iced tea brand sold by Lipton beverage department in the U.S. and by through a worldwide partnership with Coca Cola in several European countries, Pepsi. Brazil and Venezuela.

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Barqs is a brand of root beer notable for Mug root beer is a brand name of root being the only major North American root beer made by the Pepsi Company. bear to contain caffeine. It has been bottled start of 20th century and is currently sold by Coca Cola Company.

Diet Coke or Diet Coca Cola is a sugar- Diet Pepsi is a low calorie carbonated free soft drink produced and distributed by cola. It was introduced in 1964 as a Coca Cola Company, was introduced in variant of Pepsi Cola with no sugar. U.S. in 1982

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Kinley is a brand of still or carbonated Aquafina is non carbonated bottled water water owned by The Coca Cola Company. produced by PepsiCo.

Aquarius is a

mineral sports drink All Sport was a sports drink. It is

manufactured by Coca Cola Company. It produced by Pepsi Co. was first introduced in 1983.

Fanta is a soft drink brand owned by The Mirinda is a brand of soft drink. Mirinda Coca Cola Company. It is produced and is owned by Pepsi Co. distributed by Coca Cola Companys bottlers.

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Sprite Ice was the first flavor extension for Pepsi Blue is a soft drink made by Pepsi Coca Cola Companys Sprite brand soft Co. and launched in mid 2002. drink.

Coca Cola Blak is a coffee flavored soft Pepsi Cappuccino is a drink introduced by Coca Cola in 2006. by Pepsi Co.

cappuccino

flavored carbonated soft drink produced

Maaza is a Coca Cola fruit drink brand Slice is a line of fruit flavored soft drink marketed in India and Bangladesh. manufactured by PepsiCo and introduced in 1984.

Li mca is a lemon and li me fl avor ed carb onated so ft dr ink mad e in I ndi a by Co ca Col a. Teem; a l em li me fl avor ed sof t drink produ ced by t he P epsi Col ampan y. on o C

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NESTLE
Nestle does not give that tough a competition to Coca-Cola as it mainly deals with milk products, Baby foods and Chocolates. But the iced tea that is Nestea which has been introduced into the market by Nestle provides a considerable amount of competition to the products of the Company. Iced tea is one of the closest substitutes to the Colas as it is a thirst quencher and it is healthier when compared to fizz drinks. The flavoured milk products also have become substitutes to the products of the company due to growing health awareness among people.

CADBURY SCHWEPPES
Cadbury Schweppes are joined force of Cadbury found in 1824 of U.K. and Schweppes of Ireland founded in 1783. Cadbury Schweppes is unified bussing which manages the relations his with over 240 franchised bottling operation on Zambia and Zimbabwe. Cadbury Schweppes has fottlery ands partnership operations in 14 countries around the world.

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OTHER COMPETITORS

 Mecca Cola  Amrat Cola  RC Cola  Shandy Cola  Qibla Cola  Future Cola  Unilever  Kraft Foods, Inc.

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MARKET SEGMENTATION
Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes. In evaluating different market segments, a firm must look at three factors:

 Segment size  Segment growth  Segment structural attractiveness and company objectives and resources.

There is no single way to segment a market. The market has to try different segmentation variables, alone and in combination, to find the best way to view the market structure.

TARGET MARKETING :
This is the process of evaluating each market segments attractiveness and selecting one or more segments to enter. After evaluating different segments, the company must now decide which and how many segments it will target, because buyers have unique needs and wants, a seller could potentially view each buyer as a separate target market. Ideally, then, a seller might design a separate marketing program for each buyer. There are three types of market segments.  Undifferentiated marketing.  Differentiated marketing.  Concentrated marketing. (Mass Marketing) (Segmented Marketing) (Segmented Marketing, small segment)

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SEGMENTATION STRATEGY COCA COLA

Coca cola serves its products using mass marketing technique, which obviously falls in undifferentiated marketing, and undifferentiated marketing means no segmentation, but there are minor factors on which we can say that the coke segments its products and then targets the customers somehow. These factors are as follows.

GEOGRAPHIC SEGMENTATION

INTERNATIONALLY
Coke segments its products country wise and region wise, here the most important thing is the taste and the quality, it varies according to the taste and the income level of the people in that country, and i.e. Third world counties are given low quality taste. Coca Cola Company tries to satisfy the needs of a whole line of different people. They have drinks that target different, age groups, ethnic groups, sexes, lifestyles, etc. There are some of the different brands: Oasis This is a juice made for the younger working adults, 20-30. It is available in berry, lemon and orange tangerine. This drink is most popular in Britain and Ireland.

Minute Maid Minute Maid targets kids and adults, ages 1-10 and 40+. This drink is conveniently packaged to take with you on the go anywhere. The health check is part of the reason for the wide target market, parents want their kids to be healthy and so knowing that this product is accepted by such a well known respected company pleases the parents and gives them a sense of relief.

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Coca Cola The Coca Cola drink is by far there most successful drink. It is very popular among many different nations. It is a soft drink. Because of the huge demand for the coca cola drink, and the trend towards healthier lifestyles coca and begun to produce spinoffs of the coca cola product. They have made drinks such as coca cola zero, coca cola diet, coca cola C2, coca cola with lime etc. By having all these different drinks with the same basic taste they are able to target a much bigger market. Due to the large success of the drinks coca cola is in demand worldwide. As such the Coca Cola brand is sold in most countries in the world.

Coca Coal Zero This drink is specifically targeted at teens that dont want the calories that come with coke but want to same great taste. This Product is sweetened with aspartame.

Coca Cola Diet The diet drinks are targeted at adults of ages 30-50, who are health conscious but still love the great taste of coke. This drink is sugar less.

Coca Cola with lime The drink is sold in both regular and diet. It is for a wide range a coke lovers who are looking for an extra little punch.

Sprite This is a soft drink that has many different target markets. This product has a different taste then coke all together and is not as popular but it is still a very popular drink. Like coke it also has a whole other line of drinks associated with it, such as diet sprite, sprite zero, sprite with a hint of lime. This drink is also sold in many places worldwide.

Powerade Powerade is a sports drink. It is designed with a great taste and is also thirst quenching. It is made for athletes of all ages, sexes and sports, but they would target this drink at teens and young adults, ages 13- 27. This drink is sold in many places but mostly over North America.
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Aquarius Aquarius is a sports drink, enjoyed by people who have healthy lifestyles. It is made for athletes of all ages, sexes and sports, but they would target this drink at teens and young adults, ages 13- 27. This produce is very well known in Europe. Particularly in France, Norway, Spain. But it is still known all over. It became even more successful when it became the official drink of the Olympic games in Barcelona in 1992.

Full Throttle This is an energy drink. It is designed for athletes both male and female but particularly males, of ages 14-25. As we can see by looking at a select few of coca colas drinks they have a wide variety of drinks to satisfy everyones needs.

CLIMATIC Weather is the third major factor in effecting the Cokes selling. In coke marketing, main idea is to serve it cold, so we can say that, they focus more on hot areas of the world, i.e. middle east etc and there sale increase in summer. This is underdeveloped market so the cokes consumption in summers is 60% and in winters is 40%.. It is a source of refreshment when a person is thirsty due to the hot weather.

LOCALLY In Pakistan the coke segments more in urban and suburban areas as compare to rural. 35 % population resides in urban areas and 65% population lives in rural areas in Pakistan. Coca Cola is focusing on urban areas as people there are more inclined towards such beverage while people in rural areas are more inclined drinking lassi and desi drinks.

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DEMOGRAPHIC SEGMENTATION

AGE Internationally coke has segments the small children introducing tastes like vanilla, lime and cherry, they focus children from 4-12. Coke specifically target more young people than older. Pakistan is considered to be a young country i.e. average age of Pakistani population is less than 38 years. Thus targeting young generation can be a beneficial marketing strategy for soft drink companies. In fact this is the case, all the major brands like Coca Cola, Pepsi mainly target younger generation in Pakistan.

GENDER Coca Cola targets both genders with its wide variety of drinks. This market is relatively large and is open to both genders, thereby allowing greater product diversification.

FAMILY TYPE Coca Cola introduces its economy pack, and thats how they focus family and groups.

INCOME Coca Cola segments different income levels by packaging. Like for small income people it has small returnable glass bottle, for middle people it has non returnable bottle and for higher income people it has coke tin.

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PSYCHOGRAPHICS SEGMENTATION
All psychographics variables the social class, lifestyle, occupation, level of education and personality, Coca Cola segments everyone, but again it is their packaging which is different for different consumers.

SOCIAL CLASS Coca Cola is a well known brand. People who are brand conscious will not drink beverages of less known brands and quality such as Amrat cola. They will try to show their status by drinking Coca Cola which is known to all as a quality drink.

LEVEL OF EDUCATION A company has to make promotional strategies keeping in view the customer level. If the percentage of education is high in a country then through advertisements people can be made well aware of their product and can convey their message easily. Promotion and education has a direct relationship.

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BEHAVIORAL SEGMENTATION
It is how people perceive a specific product, in short psychological analysis of a product. Coca Cola all over the world is recognized as a quality drink and therefore people drink it without any hesitation whenever they are thirsty or otherwise. So marketers of Coca Cola have made it a drink for all people and for diabetic people they introduced diet Coke.

OCCASIONS A very special occasion for the people of Pakistan Ramzan, people emphasis on enjoying Coca-Cola at Iftar and then on Eid with friends & family with super price off promotion.

BENEFITS SOUGHT Sometimes, for the promotion strategy of coke, Coca Cola Company introduce prizes in the top cover. So they segment people by benefit sought, i.e. by giving them prizes.

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SWOT ANALYSIS
SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats inside a company, project, or a business venture. It involves identifying the internal and external factors that are favorable/ unfavorable for business to succeed.

INDUSTRIAL SWOT ANALYSIS

STRENGTHS
The soft drinks market in Pakistan enjoyed dynamic growth over the review period in both volume and current value terms. Carbonates dominate the market in both the ontrade and off-trade with the lions share of sales. Carbonates have become part of the culture in Pakistan and multinational companies have maintained their standards over the years to provide consumers with high quality carbonated drinks. Off-trade sales of carbonates are higher than those of the on-trade but both achieved strong growth over the review period.

WEAKNESSES
Liquid concentrates and power concentrates are both seasonal categories in the market and their sales peak in the summer in Pakistan. Both Rooh Afza and Jam-e-Shirin are traditional sandalwood drinks in Pakistan which are highly regarded by consumers. These drinks can be found in every home in Pakistan, especially in rural areas throughout the summer and are the mainstay of liquid concentrates.

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OPPORTUNITIES
The Government of Pakistan has reduced excise taxes to encourage soft drinks manufacturers and importers. The Government also reduced other applicable taxes to promise more profit not only for soft drink manufacturers already in the market but also to attract potential soft drinks manufacturers to invest in Pakistan. Tax reductions proved extremely beneficial to the soft drinks market in Pakistan and certainly encouraged and attracted multinational companies to invest in the countrys soft drinks industry. The government also decided to tax the beverage industry on capacity of production rather than on actual production and that brave move encouraged soft drinks manufacturers to maximize production and reduce prices.

THREATS
Increasing health and hygiene awareness among Pakistanis has greatly increased sales of fruit/vegetable juice products. Both the government and the media have started health awareness campaigns to make Pakistanis realize that consumption of fruit/vegetable juice is as essential as eating food. Fruit/vegetable juices are doing very well in both urban and rural areas. On the other hand, health and hygiene awareness has also led to increased sales of bottled water in Pakistan. Previously bottled water was targeted on at major cities where consumers are more healthconscious and aware of the difference between bottled water and tap water. Nowadays, health conscious rural inhabitants also drink bottled water due to health concerns.

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SWOT ANALYSIS OF COCA COLA

Strengths
-Popularity -well known -branding recognized -A lot of finance -customer loyalty -International Trade obvious and

Weaknesses
-Word of mouth -lack of popularity of many Coca easily Colas brands -Most unknown and rarely seen -result of low profile or non-existent advertising -health issues

Internal

Threats
-changing attitude -legal issues -Health ministers -competition (Pepsi)

Opportunities
health-consciousness -many successful brands to pursue -advertise its less popular products -buy out competition. -More Brand recognition

External

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STRENGTHS

Coca Cola is an extremely recognizable company. Popularity is one of its superior strengths that are virtually incomparable. Coca Cola is known very well

worldwide. It's branding is obvious and easily recognized. Things like, logos and promos shown on t-shirts, hats, and collectible memorabilia. Without a doubt, no beverage company compares to Coca Cola's social popularity status. Some people buy coke, not only because of its taste, but because it is widely accepted and they feel like they are part of something so big and unifying. At the other end of the spectrum, certain individuals choose not to drink coke, based solely on rebelling from the world's idea that coke is something of such great power. Overwhelming is the best word to describe Coca Cola's popularity. It is scary to think that its popularity has been constantly growing over the years and the possibility that there is still room to grow. If you speak the words Coca Cola, it would definitely be recognized all around the world. Money is another thing that is strength of the company. Coca Cola deals with massive amounts of money all year. Like all businesses, they have had their ups and downs financially, but they have done well in this compartment and will continue to do well and improve. The money they are earning is substantially better than most beverage companies, and with that money, they put back into their own company so that they can improve. Another strength that is very important to Coca Cola is customer loyalty. The 80/20 rule comes into effect in this situation. Eighty percent of their profit comes from 20% of their loyal customers. Many people/families are extremely loyal to Coca Cola. It would not be rare to constantly find bottles and cases of a product such as coke in a house. It seems that some people would drink coke religiously like some people would drink water and milk. This is an improbable feat. Customers will continually purchase these products, and will probably do so for a very long time. If two parents were avid Coca Cola drinkers, this will be passed down do their children as they grow loyal to the company. With Coca Colas ability to sell their product all over the world, customers will continue to buy what they know and what they likeCoca Cola products.

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WEAKNESSES

Coca Cola is a very successful company, with limited weaknesses. However they do have a variety of weaknesses that need to be addressed if they want to rise to the next level. Word of mouth is probably a strength and weakness of every company. While many people have good things to say, there are many individuals who are against Coca Cola as a company, and the products in which they produce. Word of mouth unfortunately is something that is very hard to control. While people will have their opinions, you have to try to sway their negative views. If bad comments and views are put out to people who have yet to try Coca Cola products, then that could produce a lost customer which shows why word of mouth is a weakness. Another aspect that could be viewed as a weakness is the lack of popularity of many of Coca Colas drinks. Many drinks that they produce are extremely popular such as Coke and Sprite but this company has approximately 400 different drink types. Most are unknown and rarely seen for available purchase. These drinks do not probably taste bad, but are rather a result of low profile or nonexistent advertising. This is a weakness that needs to be looked at when analyzing their company. Another weakness that has been greatly publicized is the health issues that surround some of their products. It is known that a popular product like coke is not very beneficial to your body and your health. With todays constant shift to health products, some products could possibly loose customers. This new focus on weight and health could be a problem for the product that is labelled detrimental to your health.

OPPORTUNITIES
Coca Cola has a few opportunities in its business. It has many successful brands that it should continue to exploit and pursue. Coca Cola also has the opportunity to advertise its less popular products. With a large income it has the available money to put some of these other beverages on the market. This could be very beneficial to the company if they could start selling these other products to the same extent that they do with their main products. Another opportunity that we have seen being put to use before is the ability for Coca Cola to buy out their competition. This opportunity rarely presents itself in the world of business. However, with Coca Colas power and success, such a

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task is not impossible. Coca Cola has bought out a countless number of drink brands. An easy way to turn their profit into your profit is too buy out their company. Even though this may cost a vast amount of money initially, in the long run, if all goes to plan, it results in a large profit. Also, the company will no longer need to worry about this product being part of the competition. Brand recognition is the significant factor affecting Cokes competitive position. Coca Cola is known well throughout 90% of the world population today. Now Coca Cola wants to get there brand name known even better and possibly get closer and closer to 100%. It is an opportunity that most companies will ever dream of, and would be a supreme accomplishment. Coca Cola has an opportunity to continue to widen the gap between them and their competitors.

THREATS
Despite the fact that Coca Cola dominates its market, it still has to deal with many threats. Even though Coca Cola and Pepsi control nearly 40% of the entire beverage market, the changing health-consciousness attitude of the market could have a serious effect on Coca Cola. This definitely needs to be viewed as a dominant threat. In todays world, people are constantly trying to change their eating and drinking habits. This could directly affect the sale of Coca Colas products. Another possible issue is the legal side of things. There are always issues with a company of such supreme wealth and popularity. Somebody is always trying to find fault with the best and take them down. Coca Cola has to be careful with lawsuits. Health minister could also be looked at as a threat. Again, some people may try to exploit the unhealthy side of Coca Colas products and could threaten the status and success of sales. Other threats are of course the competition. Coca Colas main competition being Pepsi, sells a very similar drink. Coca Cola needs to be careful that Pepsi does not grow to be a more successful drink. Other product such as juices, coffee, and milk are threats. These other beverage options could take precedent in some peoples minds over Coca Colas beverages and this could threaten the potential success it presents again.

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FINANCIAL ANALYSIS OF COCA-COLA

Balance Sheet
31-Dec (In millions except par value) 2009 Assets
Current Assets

2010

Cash and cash equivalents Marketable securities Trade accounts receivable, less allowances of $51 and $56, respectively Inventories Prepaid expenses and other assets
Total Current Assets

$4,701 278 3,090 2,187 1,920 12,176

$4,093 215 3,317 2,220 2,260 12,105

INVESTMENTS Equity method investments: Coca-Cola Hellenic Bottling Company S.A. Coca-Cola FEMSA, S.A.B. de C.V. Coca-Cola Amatil Limited Coca-Cola Enterprises Inc. Other, principally bottling companies and joint ventures Other investments, principally bottling companies TOTAL INVESTMENTS OTHER ASSETS PROPERTY, PLANT AND EQUIPMENT net TRADEMARKS LIVES GOODWILL OTHER INTANGIBLE ASSETS TOTAL ASSETS LIABILITIES AND SHAREOWNERS EQUITY
Current Liabilities

1,487 877 638 463 2,314 463 5,779 1,733 8,326

1,549 996 806 1,637 2,301 488 7,777 2,675 8,493

WITH

INDEFINITE 6,059 4,029 2,417 $40,519 5,153 4,256 2,810 $43,269

Accounts payable and accrued expenses Loans and notes payable Current maturities of long-term debt Accrued income taxes
Total Current Liabilities

$6,205 6,066 465 252 12,988 2,781

$6,915 5,919 133 258 13,225 3,277

LONG-TERM

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DEBT OTHER LIABILITIES DEFERRED INCOME TAXES SHAREOWNERS EQUITY Common stock, $0.25 par value; Authorized 5,600 shares; Issued 3,519 and 3,519 shares, respectively Capital surplus Reinvested earnings Accumulated other comprehensive income (loss) Treasury stock, at cost 1,207 and 1,201 shares, respectively
TOTAL EQUITY SHAREOWNERS

3,401 877

3,133 1,890

880 7,966 38,513 -2,674 -24,213 20,472

880 7,378 36,235 626 -23,375 21,744

TOTAL EQUITY

LIABILITIES

AND

SHAREOWNERS $40,519 $43,269

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CHAPTER 2 COMPANY PROFILE

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2.Company Profile: Pepsico

Pepsico is one of the largest companies there is that is engaged in the food, beverage, and snack industries. Their address is 700 Anderson Hill Road, Purchase, N.Y. 10577. Their phone number is 914-253-2000 and their fax number is 914-253-2070. Their stock symbol is PEP and they are listed on the NYSE. The company URL is http://www.pepsico.com/. Business Summary: PepsiCo, Inc. is engaged in the snack food, soft drink, juice, and fast food franchise businesses. The Company, through its subsidiaries, markets, sells and distributes various snacks in the United States and internationally, manufactures concentrates of Pepsi, Mountain Dew and other brands for sale to franchised bottlers in the United States and international markets and

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produces, markets, sells and distributes juices under several Tropicana trademarks in the United States and internationally. Pepsicos domestic snack food business is conducted by Frito-Lay North America, and its international snack food business is conducted through Frito-Lay International. The Company's soft drink business operates as the Pepsi-Cola Company and is comprised of two business units, PepsiCola North America (PCNA) and Pepsi-Cola International (PCI). In December 2000, the Company announced an agreement under which a subsidiary of PepsiCo will merge with The Quaker Oats Company, and Quaker will become a wholly owned subsidiary of PepsiCo. Quaker is a large worldwide marketer of foods and beverages. It manufactures and markets Gatorade thirst quencher, along with hot cereals, pancake syrups, grain-based snacks, cornmeal, hominy grits and value-added rice products. The proposed merger is subject to certain closing conditions, including approval by shareholders of both companies and regulatory approvals. The transaction is expected to close in the first half of 2001. Pepsico also operates several food franchises including Pizza Hut, KFC, and Taco Bell.

Financial Summary: PepsiCo, Inc. manufactures, markets and sells soft drinks and concentrates (Pepsi-Cola, Mountain Dew, Slice, etc.), snack foods (FritoLay) and Tropicana branded juices. For the 12 weeks ended 3/24/01, net sales increased 8% to $4.54 billion. Net income increased 18% to $498 million. Revenues benefitted from volume gains across all divisions. Net income also reflects an increased gross profit due to higher effective net pricing. (See above for other operations).

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Company History:
PepsiCo, Inc. is one of the world's top consumer product companies with many of the world's most important and valuable trademarks. Its Pepsi-Cola Company division is the second largest soft drink business in the world, with a 21 percent share of the carbonated soft drink market worldwide and 29 percent in the United States. Three of its brands--Pepsi-Cola, Mountain Dew, and Diet Pepsi&mdashe among the top ten soft drinks in the U.S. market. The Frito-Lay Company division is by far the world leader in salty snacks, holding a 40 percent market share and an even more staggering 56 percent share of the U.S. market. In the United States, Frito-Lay is nine times the size of its nearest competitor and sells nine of the top ten snack chip brands in the supermarket channel, including Lay's, Doritos, Tostitos, Ruffles, Fritos, and Chee-tos. Frito-Lay generates more than 60 percent of PepsiCo's net sales and more than twothirds of the parent company's operating profits. The company's third division, Tropicana Products, Inc., is the world leader in juice sales and holds a dominant 41 percent of the U.S. chilled orange juice market. On a worldwide basis, PepsiCo's product portfolio includes 16 brands that generate more than $500 million in sales each year, ten of which generate more than $1 billion annually. Overall, PepsiCo garners about 35 percent of its retail sales outside the United States, with Pepsi-Cola brands marketed in about 160 countries, Frito-Lay in more than 40, and Tropicana in approximately 50. As 2001 began, PepsiCo was on the verge of adding to its food and drink empire the brands of the Quaker Oats Company, which include Gatorade sports drink, Quaker oatmeal, and Cap'n Crunch, Life, and other ready-to-eat cereals.

When Caleb D. Bradham concocted a new cola drink in the 1890s, his friends' enthusiastic response convinced him that he had created a commercially viable product. For 20 years, 'Doc' Bradham prospered from his Pepsi-Cola sales. Eventually, he was faced with a dilemma; the crucial decision he made turned out to be the wrong one and he was forced to sell. But his successors fared no better and it was not until the end of the 1930s that Pepsi-Cola again became profitable. Seventy years later, PepsiCo, Inc. was a mammoth multinational supplier of soft drinks, juices, and snack food. PepsiCo's advance to that level was almost entirely the result of its management style and the phenomenal success of its television advertising.

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Ups and Downs in the Early Years

Doc Bradham, like countless other entrepreneurs across the United States, was trying to create a cola drink similar in taste to Coca-Cola, which by 1895 was selling well in every state of the union. On August 28, 1898, at his pharmacy in New Bern, North Carolina, Bradham gave the name Pepsi-Cola to his most popular flavored soda. Formerly known as Brad's Drink, the new cola beverage was a syrup of sugar, vanilla, oils, cola nuts, and other flavorings diluted in carbonated water. The enterprising pharmacist followed Coca-Cola's method of selling the concentrate to soda fountains; he mixed the syrup in his drugstore, then shipped it in barrels to the contracted fountain operators who added the soda water. He also bottled and sold the drink himself. In 1902 Doc Bradham closed his drugstore to devote his attention to the thriving new business. The next year, he patented the Pepsi-Cola trademark, ran his first advertisement in a local paper, and moved the bottling and syrup-making operations to a custom-built factory. Almost 20,000 gallons of Pepsi-Cola syrup were produced in 1904.

Again following the successful methods of the Coca-Cola Company, Bradham began to establish a network of bottling franchises. Entrepreneurs anxious to enter the increasingly popular soft drink business set themselves up as bottlers and contracted with Bradham to buy his syrup and sell nothing but Pepsi. With little cash outlay, Pepsi-Cola reached a much wider market. Bradham's first two bottling franchises, both in North Carolina, commenced operation in 1905. By 1907, Pepsi-Cola had signed agreements with 40 bottlers; over the next three years, the number grew to 250 and annual production of the syrup exceeded one million gallons.

Pepsi-Cola's growth continued until World War I, when sugar, then the main ingredient of all flavored sodas, was rationed. Soft drink producers were forced to cut back until sugar rationing ended. The wartime set price of sugar--5.5 cents per pound-rocketed after controls were lifted to as much as 26.5 cents per pound in 1920. Bradham, like his rivals, had to decide whether to halt production and sit tight in the
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hope that prices would soon drop, or stockpile the precious commodity as a precaution against even higher prices; he chose the latter course. But unfortunately for him the market was saturated by the end of 1920 and sugar prices plunged to a low of two cents per pound.

Bradham never recovered. After several abortive attempts to reorganize, only two of the bottling plants remained open. In a last ditch effort, he enlisted the help of Roy C. Megargel, a Wall Street investment banker. Very few people, however, were willing to invest in the business and it went bankrupt in 1923. The assets were sold and Megargel purchased the company trademark, giving him the rights to the Pepsi-Cola formula. Doc Bradham went back to his drug dispensary and died 11 years later.

Megargel reorganized the firm as the National Pepsi-Cola Company in 1928, but after three years of continuous losses he had to declare bankruptcy. That same year, 1931, Megargel met Charles G. Guth, a somewhat autocratic businessman who had recently taken over as president of Loft Inc., a New York-based candy and fountain store concern. Guth had fallen out with Coca-Cola for refusing the company a wholesaler discount and he was on the lookout for a new soft drink. He signed an agreement with Megargel to resurrect the Pepsi-Cola company, and acquired 80 percent of the new shares, ostensibly for himself. Then, having modified the syrup formula, he canceled Loft's contract with Coca-Cola and introduced Pepsi-Cola, whose name was often shortened to Pepsi.

Loft's customers were wary of the brand switch and in the first year of Pepsi sales the company's soft drink turnover was down by a third. By the end of 1933, Guth bought out Megargel and owned 91 percent of the insolvent company. Resistance to Pepsi in the Loft stores tailed off in 1934, and Guth decided to further improve sales by offering 12-ounce bottles of Pepsi for a nickel--the same price as six ounces of Coke. The Depression-weary people of Baltimore--where the 12-ounce bottles were first introduced--were ready for a bargain and Pepsi-Cola sales increased dramatically.

Guth soon took steps to internationalize Pepsi-Cola, establishing the Pepsi-Cola Company of Canada in 1934 and in the following year forming Compania Pepsi-Cola de Cuba. He also moved the entire American operation to Long Island City, New
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York, and set up national territorial boundaries for the bottling franchises. In 1936, Pepsi-Cola Ltd. of London commenced business.

Guth's ownership of the Pepsi-Cola Company was challenged that same year by Loft Inc. In a complex arrangement, Guth had organized Pepsi-Cola as an independent corporation, but he had run it with Loft's employees and money. After three years of litigation, the court upheld Loft's contention and Guth had to step down, although he was retained as an adviser. James W. Carkner was elected president of the company, now a subsidiary of Loft Inc., but Carkner was soon replaced by Walter S. Mack, Jr., an executive from the Phoenix Securities Corporation.

Mack established a board of directors with real voting powers to ensure that no one person would be able to wield control as Guth had done. From the start, Mack's aim was to promote Pepsi to the hilt so that it might replace Coca-Cola as the world's bestselling soft drink. The advertising agency Mack hired worked wonders. In 1939, a Pepsi radio jingle--the first one to be aired nationally--caught the public's attention: 'Pepsi-Cola hits the spot. Twelve full ounces, that's a lot. Twice as much for a nickel, too. Pepsi-Cola is the drink for you.' The jingle, sung to the tune of the old British hunting song 'D'Ye Ken John Peel,' became an advertising hallmark; no one was more impressed, or concerned, than the executives at Coca-Cola.

In 1940, with foreign expansion continuing strongly, Loft Inc. made plans to merge with its Pepsi-Cola subsidiary. The new firm, formed in 1941, used the name PepsiCola Company since it was so well-known. Pepsi's stock was listed on the New York Stock Exchange for the first time. Sugar rationing was even more severe during World War II, but this time the company fared better; indeed, the sugar plantation Pepsi-Cola acquired in Cuba became a most successful investment. But as inflation spiraled in the postwar U.S. economy, sales of soft drinks fell. The public needed time to get used to paying six or seven cents for a bottle of Pepsi which, as they remembered from the jingle, had always been a nickel. Profits in 1948 were down $3.6 million from the year before.

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In other respects, 1948 was a notable year. Pepsi moved its corporate headquarters across the East River to midtown Manhattan, and for the first time the drink was sold in cans. The decision to start canning, while absolutely right for Pepsi-Cola and other soft drink companies, upset the franchised bottlers, who had invested heavily in equipment. However, another decision at Pepsi-Cola&mdash ignore the burgeoning vending machine market because of the necessarily large capital outlay&mdash oved to be a costly mistake. The company had to learn the hard way that as canned drinks gained a larger share of the market, vending machine sales would become increasingly important.

1950s: The Steele and Crawford Era

Walter Mack was appointed company chairman in 1950, and a former Coca-Cola vice-president of sales, Alfred N. Steele, took over as president and chief executive officer, bringing 15 other Coke executives with him. Steele continued the policy of management decentralization by giving broader powers to regional vice-presidents, and he placed Herbert Barnet in charge of Pepsi's financial operations. Steele's outstanding contribution, however, was in marketing. He launched an extensive advertising campaign with the slogan 'Be Sociable, Have a Pepsi.' The new television medium provided a perfect forum; Pepsi advertisements presented young Americans drinking 'The Light Refreshment' and having fun.

By the time Alfred Steele married movie star Joan Crawford in 1954, a transformation of the company was well underway. Crawford's adopted daughter, Christina, noted in her best-seller Mommie Dearest: '[Steele had] driven Pepsi into national prominence and distribution, second only to his former employer, Coca-Cola. Pepsi was giving Coke a run for its money in every nook and hamlet of America. Al Steele welded a national network of bottlers together, standardized the syrup formula ..., brought the distinctive logo into mass consciousness, and was on the brink of going international.' In fact, Pepsi-Cola International Ltd. was formed shortly after Steele's marriage.

Joan Crawford became the personification of Pepsi's new and glamorous image. She invariably kept a bottle of Pepsi at hand during press conferences and mentioned the product at interviews and on talk shows; on occasion she even arranged for Pepsi
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trucks and vending machines to feature in background shots of her movies. The actress also worked hard to spread the Pepsi word overseas and accompanied her husband, now chairman of the board, on his 1957 tour of Europe and Africa, where bottling plants were being established.

Steele died suddenly of a heart attack in the spring of 1959. Herbert Barnet succeeded him as chairman and Joan Crawford was elected a board member. Pepsi Cola profits had fallen to a postwar low of $1.3 million in 1950 when Steele joined the company, but with the proliferation of supermarkets during the decade and the developments in overseas business, profits reached $14.2 million in 1960. By that time, young adults had become a major target of soft drink manufacturers and Pepsi's advertisements were aimed at 'Those who think young.'

Al Steele and Joan Crawford had been superb cheerleaders, but a stunt pulled in 1959 by Donald M. Kendall, head of Pepsi-Cola International, is still regarded as one of the great coups in the annals of advertising. Kendall attended the Moscow Trade Fair that year and persuaded U.S. Vice-President Richard Nixon to stop by the Pepsi booth with Nikita Khrushchev, the Soviet premier. As the cameras flashed, Khrushchev quenched his thirst with Pepsi and the grinning U.S. Vice-President stood in attendance. The next day, newspapers around the world featured photographs of the happy couple, complete with Pepsi bottle.

1960s and 1970s: The Pepsi Generation, Diversification

By 1963, Kendall was presiding over the Pepsi empire. His rise to the top of the company was legendary. He had been an amateur boxing champion in his youth and joined the company as a production line worker in 1947 after a stint in the U.S. Navy. He was later promoted to syrup sales where it quickly became apparent that he was destined for higher office. Ever pugnacious, Kendall has been described as abrasive and ruthlessly ambitious; beleaguered Pepsi executives secretly referred to him as White Fang. Under his long reign, the company's fortunes skyrocketed.

Pepsi-Cola's remarkable successes in the 1960s and 1970s were the result of five distinct policies, all of which Kendall and his crew pursued diligently: advertising on
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a massive, unprecedented scale; introducing new brands of soft drinks; leading the industry in packaging innovations; expanding overseas; and, through acquisitions, diversifying their product line.

The postwar baby-boomers were in their mid- to late teens by the time Kendall came to power. 'Pepsi was there,' states a recent company flyer, 'to claim these kids for our own.' These 'kids' became the 'Pepsi Generation.' In the late 1960s Pepsi was the 'Taste that beats the others cold.' Viewers were advised 'You've got a lot to live. Pepsi's got a lot to give.' By the early 1970s, the appeal was to 'Join the Pepsi people, feelin' free.' In mid-decade an American catchphrase was given a company twist with 'Have a Pepsi Day,' and the 1970s ended on the note 'Catch the Pepsi Spirit!'

The Pepsi Generation wanted variety and Pepsi was happy to oblige. Company brands introduced in the 1960s included Patio soft drinks, Teem, Tropic Surf, Diet Pepsi--the first nationally distributed diet soda, introduced in 1964--and Mountain Dew, acquired from the Tip Corporation, also in 1964. Pepsi Light, a diet cola with a hint of lemon, made its debut in 1975, and a few years later Pepsi tested the market with Aspen apple soda and On-Tap root beer. The company also introduced greater variety into the packaging of its products. Soon after Kendall's accession, the 12-ounce bottle was phased out in favor of the 16-ounce size, and in the 1970s Pepsi-Cola became the first American company to introduce one-and-a-half and two-liter bottles; it also began to package its sodas in sturdy, lightweight plastic bottles. By the end of the decade, Pepsi had added 12-pack cans to its growing array of packaging options.

The company's expansion beyond the soft drink market began in 1965 when Kendall met Herman Lay, the owner of Frito-Lay, at a grocer's convention. Kendall arranged a merger with this Dallas-based snack food manufacturer and formed PepsiCo, Inc. Herman Lay retired soon thereafter but retained his substantial PepsiCo shareholding. The value of this stock increased dramatically as Frito-Lay products were introduced to Pepsi's nationwide market. At the time of the merger, key Frito-Lay brands included Fritos corn chips (created in 1932), Lay's potato chips (1938), Chee-tos cheese-flavored snacks (1948), Ruffles potato chips (1958), and Rold Gold pretzels (acquired by Frito-Lay in 1961). Doritos tortilla chips were introduced nationally in 1967. The addition of Frito-Lay helped PepsiCo achieve $1 billion in sales for the
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first time in 1970. That same year, the corporation moved into its new world headquarters in Purchase, New York.

During the 1970s, Kendall acquired two well-known fast-food restaurant chains, Taco Bell, in 1977, and Pizza Hut, in 1978; naturally, these new subsidiaries became major outlets for Pepsi products. But Kendall also diversified outside the food and drink industry, bringing North American Van Lines (acquired in 1968), Lee Way Motor Freight, and Wilson Sporting Goods into the PepsiCo empire. Overseas developments continued apace throughout Kendall's tenure. Building on his famous Soviet achievement, he negotiated a trade agreement with the U.S.S.R. in 1972; the first Pepsi plant opened there two years later. Gains were also made in the Middle East and Latin America, but Coca-Cola, the major rival, retained its dominant position in Europe and throughout much of Asia.

1980s Highlighted by the Cola Wars

By the time PepsiCo greeted the 1980s with the slogan 'Pepsi's got your taste for life!,' Kendall was busy arranging for China to get that taste too; production began there in 1983. Kendall put his seal of approval on several other major developments in the early 1980s, including the introduction of Pepsi Free, a non-caffeine cola, and Slice, the first widely distributed soft drink to contain real fruit juice (lemon and lime). The latter drink was aimed at the growing 7-Up and Sprite market. Additionally, Diet Pepsi was reformulated using a blend of saccharin and aspartame (NutraSweet). 'Pepsi Now!' was the cry of company commercials, and this was interspersed with 'Taste, Improved by Diet Pepsi.' On the Frito-Lay side, meantime, the Tostitos brand of crispy round tortilla chips was introduced in 1981.

In 1983 the company claimed a significant share of the fast-food soft drink market when Burger King began selling Pepsi products. A year later, mindful of the industry axiom that there is virtually no limit to the amount a consumer will buy once the decision to buy has been made, PepsiCo introduced the 3-liter container.

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By the mid-1980s, the Pepsi Generation was over the hill. Kendall's ad agency spared no expense in heralding Pepsi as 'The Choice of a New Generation,' using the talents of superstar Michael Jackson, singer Lionel Richie, and the Puerto Rican teenage group Menudo. Michael Jackson's ads were smash hits and enjoyed the highest exposure of any American television commercial to date. The company's high profile and powerful presence in all of the soft drink markets--direct results of Kendall's strategies--helped it to weather the somewhat uncertain economic situation of the time. On only one front had Kendall's efforts failed to produce satisfactory results. Experience showed that for all its expertise, PepsiCo simply did not have the managerial experience required to run its subsidiaries outside the food and drink industries. A van line, a motor freight concern, and a sporting goods firm were indeed odd companies for a soft drink enterprise; and Kendall auctioned off these strange and ailing bedfellows, vowing never again to go courting in unfamiliar territories.

With his house in excellent order, the PepsiCo mogul began to prepare for his retirement. He had bullied and cajoled a generation of Pepsi executives and guided them ever upward on the steep slopes of Pepsi profits. But he had one last task: to lead PepsiCo to victory in the Cola Wars.

Hostilities commenced soon after the Coca-Cola Company changed its syrup recipe in the summer of 1985 and with much fanfare introduced New Coke. Pepsi, caught napping, claimed that Coca-Cola's reformulated drink failed to meet with consumer approval and pointed to their own flourishing sales. But serious fans of the original Coke were not about to switch to Pepsi and demanded that their favorite refreshment be restored. When blindfolded, however, it became manifestly apparent that these diehards could rarely tell the difference between Old Coke, New Coke, and Pepsi; indeed, more often than not, they got it wrong. In any event, the Coca-Cola Company acceded to the public clamor for the original Coke and remarketed it as Coca-Cola Classic alongside its new cola.

Some advertising analysts believed that the entire 'conflict' was a clever publicity ploy on the part of Coca-Cola to demonstrate the preeminence of its original concoction
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('It's the Real Thing!'), while introducing a new cola--allegedly a Pepsi tastealike&mdash win the hearts of waverers. More interesting perhaps than the possible differences between the colas were the very real differences in people's reactions. Four discrete fields were identified by Roger Enrico and Jesse Kornbluth in their book, The Other Guy Blinked: How Pepsi Won the Cola Wars: the totally wowed (possibly caffeine-induced); the rather amused; the slightly irritated; and the distinctly bored.

The latter group must have nodded off in front of their television sets when Pepsi took the Cola Wars beyond the firmament. 'One Giant Sip for Mankind,' proclaimed the ads as a Pepsi 'space can' was opened up aboard the U.S. space shuttle Challenger in 1985. Presumably, had a regular can been used, Pepsi-Cola would have sloshed aimlessly around the gravity-free cabin. This scientific breakthrough, together with the almost obligatory hype and hoopla, and more mundane factors such as the continued expansion in PepsiCo's outlets, boosted sales to new heights, and Pepsi's ad agency glittered with accolades. The debate persisted, at least within Coke and Pepsi corporate offices, as to who won the Cola Wars. The answer appeared to be that there were no losers, only winners; but skirmishes would inevitably continue.

Late 1980s and Early 1990s: Focusing on International Growth and Diversification

D. Wayne Calloway replaced Donald M. Kendall as chairman and chief executive officer in 1986. Calloway had been instrumental in the success of Frito-Lay, helping it to become PepsiCo's most profitable division. The new chairman realized that his flagship Pepsi brand was not likely to win additional market share from Coca-Cola, and focused his efforts on international growth and diversification.

Calloway hoped to build on the phenomenal success of the Slice line of fruit juice beverages, which achieved $1 billion in sales and created a new beverage category within just two years of its 1984 introduction. From 1985 to 1993, PepsiCo introduced, acquired, or formed joint ventures to distribute nine beverages, including Lipton Original Iced Teas, Ocean Spray juices, All Sport drink, H2Oh! sparkling water, Avalon bottled water, and Mug root beer. Many of these products had a 'New Age' light and healthy positioning, in line with consumer tastes, and higher net prices.
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In 1992, PepsiCo introduced Crystal Pepsi, a clear cola that, while still a traditional soda, also tried to capture the momentum of the 'New Age' beverage trend.

In the restaurant segment, PepsiCo's 1986 purchase of Kentucky Fried Chicken (KFC) and 1990 acquisition of the Hot 'n Now hamburger chain continued its emphasis on value-priced fast foods. But the company strayed slightly from that formula with the 1992 and 1993 purchases of such full-service restaurants as California Pizza Kitchen, which specialized in creative wood-fired pizzas, Chevys, a Mexican-style chain, East Side Mario's Italian-style offerings, and D'Angelo Sandwich Shops.

Pepsi lost a powerful marketing tool in 1992, when Michael Jackson was accused of child molestation. Although the case was settled out of court, Pepsi dropped its contract with the entertainer. The firm launched its largest promotion ever in May 1992 with the 'Gotta Have It' card, which offered discounts on the products of marketing partners Reebok sporting goods, Continental Airlines, and the MCI telephone long distance company. The company also launched a new marketing (or, as the company phrased it, 'product quality') initiative early in 1994, when it announced that packaged carbonated soft drink products sold in the United States would voluntarily be marked with a 'Best if Consumed By' date.

Although Pepsi had commenced international expansion during the 1950s, it had long trailed Coca-Cola's dramatic and overwhelming conquest of international markets. In 1990, CEO Calloway pledged up to $1 billion for overseas development, with the goal of increasing international volume 150 percent by 1995. At that time, Coke held 50 percent of the European soft drink market, while Pepsi claimed a meager ten percent. But Pepsi's advantage was that it could compete in other, less saturated segments. The company's biggest challenge to expanding its restaurant division was affordability. PepsiCo noted that, while it took the average U.S. worker just 15 minutes to earn enough to enjoy a meal in one of the firm's restaurants, it would take an Australian 25 minutes to achieve a similar goal. Pepsi still had other options, however. In 1992, for example, the company forged a joint venture with General Mills called Snack Ventures Europe which emerged as the largest firm in the $17 billion market. By 1993, PepsiCo had invested over $5 billion in international

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businesses, and its international sales comprised 27 percent, or $6.71 billion, of total annual sales.

In January 1992, Calloway was credited by Business Week magazine with emerging from the long shadow cast by his predecessor 'to put together five impressive years of 20 percent compound earnings growth, doubling sales and nearly tripling the company's value on the stock market.' Calloway also worked to reshape PepsiCo's corporate culture by fostering personal responsibility and a decentralized, flexible management style.

Mid-to-Late 1990s: The Enrico Restructuring

Calloway, who was battling prostate cancer, retired as CEO in April 1996 and was replaced by Roger A. Enrico, who became chairman as well later in the year (Calloway died in July 1998). Since joining Frito-Lay's marketing department in 1971, Enrico had stints heading up both Pepsi-Cola and Frito-Lay before becoming head of the restaurants division in 1994. He engineered a quick turnaround of the struggling chains by changing the overall strategy, for example adopting more franchising of units rather than company ownership. Under Enrico, the marketing of new concepts was also emphasized, with one notable success being the introduction of stuffed-crust pizza at Pizza Hut.

After taking over leadership of PepsiCo, Enrico quickly faced major problems in the overseas beverages operations, including big losses that were posted by its large Latin American bottler and the defection of its Venezuelan partner to Coca-Cola. PepsiCo ended up taking $576 million in special charges related to international writeoffs and restructuring, and its international arm posted a huge operating loss of $846 million, depressing 1996 profits. Among the moves initiated to turn around the international beverage operations, which faced brutal competition from the entrenched and better organized Coca-Cola, was to increase emphasis on emerging markets, such as India, China, Eastern Europe, and Russia, where Coke had a less formidable presence, and to rely less on bottling joint ventures and more on Pepsi- or franchise-owned bottling operations.

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Another area of concern was the restaurant division, which had consistently been the PepsiCo laggard in terms of performance. Enrico concluded that in order to revitalize the beverage division and to take advantage of the surging Frito-Lay, which already accounted for 43 percent of PepsiCo's operating profits, the restaurants had to go. Hot 'n Now and the casual dining chains were soon sold off, and in January 1997 PepsiCo announced that it would spin off its three fast-food chains into a separate publicly traded company. The spinoff was completed in October 1997 with the formation of Tricon Global Restaurants, Inc., consisting of the Taco Bell, Pizza Hut, and KFC chains. The exit from restaurants removed one obstacle facing Pepsi in its battle with Coke: that most large fast-food chains had been reluctant to carry Pepsi beverages, not wanting to support the parent of a major competitor. Consequently, Coke held a huge market share advantage over Pepsi in the fast-food channel. Pepsi subsequently made some inroads, for example, in 1999 sealing a ten-year deal with the 11,500-plus-outlet Subway chain.

Enrico placed more emphasis, however, on building sales of Pepsi in its core supermarket channel. In this regard, he launched an initiative called 'Power of One' that aimed to take advantage of the synergies between Frito-Lay's salty snacks and the beverages of Pepsi-Cola. This strategy involved persuading grocery retailers to move soft drinks next to snacks, the pitch being that such a placement would increase supermarket sales. In the process, PepsiCo would gain sales of both snacks and beverages while Coca-Cola could only benefit in the latter area. Power of One harkened back to the original rationale for the merger of Pepsi-Cola and Frito-Lay. At the time, the head of Pepsi, Kendall, had told Frito-Lay's leader, Herman W. Lay: 'You make them thirsty, and I'll give them something to drink.' The promise of this seemingly ideal marriage had never really been achieved, however, until the Power of One campaign, which in 1999 helped increase Frito-Lay's market share by two percentage points and boosted Pepsi's volume by 0.6 percent.

In the meantime, Enrico was active on a number of other fronts. The company in 1997 nationally launched the Aquafina bottled water brand, which quickly gained the number one position in a fast-growing sector. In a move into the nonsalty snack category, Frito-Lay acquired the venerable Cracker Jack brand that year, and subsequently bolstered the brand through renewed advertising, a new four-ounce-bag
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package, the addition of more peanuts, the inclusion of better prizes, and the strength of Frito-Lay's vast distribution network. In August 1998 PepsiCo opened up another front in its ongoing war with Coca-Cola by acquiring juice-maker Tropicana Products, Inc. from the Seagram Company, Ltd. for $3.3 billion in cash--the largest acquisition in PepsiCo history. Coca-Cola had been the owner of Tropicana's arch-rival, Minute Maid, since 1960, but Tropicana was the clear world juice leader, led by the flagship Tropicana Pure Premium brand. Tropicana had a dominating 41 percent share of the fast-growing chilled orange juice market in the United States. The brand was also attractive for its growth potential; not only were sales of juice growing at a much faster rate than the stagnating carbonated beverage sector, there was also great potential for brand growth overseas. Psychologically, the acquisition also provided PepsiCo with something it very much needed: it could boast of holding at least dominant position over Coca-Cola. In 1999 PepsiCo divested itself of another low-margin, capital-intensive business when it spun off Pepsi Bottling Group, the largest Pepsi bottler in the world, to the public in a $2.3 billion IPO. PepsiCo retained a 35 percent stake. PepsiCo was now focused exclusively on the less capital-intensive businesses of beverages and snack foods.

On the beverage side, Enrico, who had gained a reputation as a master marketer, spearheaded a bolder advertising strategy for the flagship Pepsi brand. In 1999, PepsiCola was the exclusive global beverage partner for the movie blockbuster Star Wars, Episode 1: The Phantom Menace. The company also revived the old 'Pepsi Challenge' campaign of the 1970s with the new Pepsi One diet drink facing off against Diet Coke. Pepsi's 'Joy of Cola' advertising campaign was gaining accolades and in 2000 captured renewed attention following the signing of a string of celebrities to endorsement deals, including singer Faith Hill and baseball stars Sammy Sosa and Ken Griffey, Jr. Pepsi also greatly increased the number of vending machines it had planted around the United States, making a renewed push to gain on Coke in another area where the arch-enemy had long dominated.

By the end of 1999, after three and one-half years at the helm, Enrico had clearly turned PepsiCo into a stronger, much more focused, and better performing firm.
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Although revenues were more than one-third lower due to the divestments, earnings were higher by more than $100 million. Operating margins had increased from ten percent to 15 percent, while return on invested capital grew from 15 percent to 20 percent. Net debt had been slashed from $8 billion to $2 billion. During 1999, Steve Reinemund was named president and COO of PepsiCo. Reinemund had headed up Pizza Hut from 1986 to 1992 then was placed in charge of Frito-Lay. In the latter position, he oversaw a division whose sales increased ten percent per year on average and whose profits doubled. During his tenure, Frito-Lay's share of the U.S. salty snack sector jumped from 40 to 60 percent.

Turning Acquisitive in the Early 21st Century

In October 2000 Enrico announced that he intended to vacate his position as CEO by the end of 2001 and his position as chairman by year-end 2002. Reinemund was named the heir apparent. Also that month, PepsiCo reached an agreement to acquire a majority stake in South Beach Beverage Company, maker of the SoBe brand. Popular with young consumers, the SoBe drink line featured herbal ingredients and was the fastest growing brand in the burgeoning noncarbonated alternative beverage sector.

An even more tempting target soon attracted PepsiCo's attention: the powerhouse Gatorade brand owned by the Quaker Oats Company. Gatorade held an astounding 83.6 percent of the U.S. retail market for sports drinks and was the world leader in that segment with annual sales of about $2 billion. PepsiCo entered into talks with Quaker about acquiring the company for about $14 billion in stock, but by early November the two sides had failed to reach an agreement. Coca-Cola and Groupe Danone quickly came forward to discuss acquiring Quaker. Coke came exceedingly close to signing a $15.75 billion takeover agreement, but the company's board pulled the plug on the deal at the last minute. Danone soon bowed out as well. At that point, PepsiCo reentered the picture, and in early December the firm announced that it agreed to acquire Quaker Oats for $13.4 billion in stock. This appeared to be quite a coup for PepsiCo as it would not only bring on board the valuable Gatorade brand and make PepsiCo the clear leader in the fast-growing noncarbonated beverage category, it would also add Quaker's small but growing snack business, which included granola
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and other bars as well as rice cakes. Quaker's non-snack food brands--which included the flagship Quaker oatmeal, Life and Cap'n Crunch cereals, Rice a Roni, and Aunt Jemima syrup--did not fit as neatly into the PepsiCo portfolio but were highly profitable and could eventually be divested if desired. In conjunction with the acquisition announcement, Enrico said that upon completion of the merger, he and the head of Quaker,

Robert S. Morrison, would become vice-chairmen of PepsiCo, Morrison would also remain chairman, president, and CEO of Quaker, and Reinemund would become chairman and CEO of PepsiCo, thereby accelerating the management transition. At that same time, PepsiCo's CFO, Indra Nooyi, who was the highest ranking Indianborn woman in corporate America, would become president and CFO. It seemed likely that this new management team would take PepsiCo to new heights in the early 21st century and that the company would continue to be a more and more formidable challenger to arch-rival Coca-Cola.

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KEY EXECUTIVES OF PEPSICO

PepsiCo is a company full of strong, talented individuals starting with the company leadership. Get to know the inspiring people helping lead PepsiCo on its 'Performance with Purpose' journey.

1. Indra K. Nooyi

Chairman and CEO, PepsiCo

2. John Compton

CEO, PepsiCo Americas Foods

3. Massimo d'Amore

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CEO, PepsiCo Beverages Americas

4.

CEO, Pepsi Beverages Company

5. Zein Abdalla

ChiefExecutiveOfficer, PepsiCo Europe

6. Saad Abdul-Latif

CEO, PepsiCo Asia, Middle East, Africa

1. Salman Amin

Exec tive Vice President Sales and Marketing, PepsiCo

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2. Jill Beraud

Chief Marketing Officer and President, Joint Ventures, PepsiCo Beverages Americas

3. Rich Beck

Senior Vice President, Global Supply Chain Operations, PepsiCo

4. Neil Campbell

President, Tropicana Beverages North America

5. Albert P. Carey

President and Chief Executive Officer, Frito-Lay North America

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6. Timothy P. Cost

ExecutiveVicePresident, Global Corporate Affairs, PepsiCo

7. Pamela Culpepper

Senior Vice President, Global Diversity and Inclusion Officer, PepsiCo

8. Robert Dixon

Senior Vice President and Chief Information Officer, PepsiCo

9. Richard Goodman

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Executive Vice President, PepsiCo Global Operations

10. Tom Greco

Executive Vice President and Chief Commercial Officer, Pepsi Beverages Company

11. Julie Hamp

Senior Vice President, Chief Communications Officer, PepsiCo

12. Hugh F. Johnston

Chief Financial Officer, PepsiCo

13. Mehmood Khan

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Chief Executive Officer, Global Nutrition Group and Chief Scientific Officer, PepsiCo

14.

Jaya Kumar

President, Global Nutrition Platforms, PepsiCo Global Nutrition Group

15. Luis Montoya

President, Latin America Beverages, PepsiCo

16. Tim Minges

Chairman, PepsiCo China

17.

Sarah Robb OHagan

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Gatorade President North America and Global Chief Marketing Officer, Sports Nutrition

18. Pedro Padierna President, PepsiCo Foods Mexico, Central America & Caribbean

19. Jose Luis Prado

President, Quaker Foods and Snacks North America, PepsiCo

20. Grace Puma

Senior Vice President and Chief Procurement Officer

21. Maura Abeln Smith

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Executive Vice President, Government Affairs, General Counsel and Corporate Secretary, PepsiCo

22. Cynthia M. Trudell

Executive Vice President, Human Resources and Chief Personnel Officer, PepsiCo

23.

Olivier Weber President, South America Foods

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PRODUCT MIX OF PEPSICO

Pepsi - Product
The Pepsi-Cola drink contains basic ingredients found in most other similar drinks including carbonated water, high fructose corn syrup, sugar, colorings, phosphoric acid, caffeine, citric acid and natural flavors. The caffeine free Pepsi-Cola contains the same ingredients but no caffeine. Some of the different and varied brands of Pepsi are as follows:

1. Al l Spor t 2. Aquafina 3. Caffeine-Fr ee Pepsi 4. C r yst al P epsi 5. Di et P epsi 6. Gat or ad e 7. Izze 8. Jazz 9. J ost a 10. Kas 11. Man zani t a S ol 12. Mirinda 13. Mou nt ai n D ew 14. Mou nt ai n D ew AM P 1 5 . Mou n t a i n D e w Li ve Wi r e 16. Mou nt ai n D ew MD X 17. Mug R oot B eer

18. Pepsi 19. Pepsi Blue 20. Pepsi C appu cci n o 21. Pepsi Max 22. Pepsi ONE 23. Pepsi Samba 24. Pepsi Tari k 2 5 . Pe p s i Tw i s t 26. Pr opel Fi t n es s W at er 27. Sierr a Mist 28. Slice 29. SoBe 30. St or m 31. Teem 32. Tr opi can a Pr od uct s 33. Tr opi can a Twi st er

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Pepsi

Pepsi version of dark cola which is the major primary competitor to Coke.

AMP i s an en er gy dr i n k pr od uced an d di st r i but ed by PepsiCo under the

Mou nt ai n D ew s oft dr i n k br and.

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Mou nt ai n

Dew

MDX

is

an

energy

dr i nk manu f act ur ed and di st r i but ed b y PepsiC o under the M ount ai n Dew

br a n d . It w a s i n t r od u c e d i n 2 0 0 5 .

Gat or ad e i s a non - car bon at ed s por t s drink marketed a by Qu aker of Oats

C o m p a n y,

di vi si on

P epsi C o.

Or i gi n al l y mad e f or at hl et es, i t i s now oft en con su med as a sn ack bever age.

7 Up is a brand of a lemon-lime flavored soft drink.

Tr opi can a

Pr odu ct s

is

an

American

c ompan y bas ed i n B r ad ent on, Fl or i d a, USA, largest which is one of the w or l d 's of

pr odu cer s

and

market ers

or a n g e j u i c e . It h a s be e n ow n e d b y P e p s i C o, In c . s i n c e 1 9 9 8 .

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Li pt on Or i gi n al Iced Tea i s a r ead y t o -d r i n k i c e d t e a br a n d s ol d b y Li pt o n t hr ou gh a w or l d wi de par t ner shi p wi t h Pepsi.

Mug Root Beer is a brand name of root beer made by the Pepsi company.

Di et P epsi i s a l ow- cal or i e car bon at ed col a. It was i nt r odu ced i n 1964 as a var i ant of P epsi -C ol a wi t h n o su gar .

Aquafina is a non-carbonated produced by PepsiCo.

bottled

water

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Al l S por t w as a s por t s dr i n k. It i s pr odu ced by P epsi C o.

Mirinda

is

br and

of

s oft

dr i n k.

Mi r i nda i s own ed by P epsi C o.

Pepsi Blue is a soft drink made by PepsiCo and launched in mid-2002.

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Pepsi

C appu cci n o

is

cappu cci n o s oft drin k

fl avor ed

carbonat ed

pr odu ced by P epsi co.

Sl i ce i s a l i ne of fr ui t - fl a vor ed sof t drinks manufactured by PepsiCo and i nt r odu ced i n 1984.

Teem was a l emon -l i me- fl avor ed s of t drink pr odu ced by The P epsi -C ol a

C o m p a n y.

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88

COMPITETIORS
Principal Competitors :
 Borden, Inc.;  Cadbury Schweppes plc;  Campbell Soup Company;  Chiquita Brands International, Inc.;  The Coca-Cola Company;  ConAgra Foods, Inc.;  Cott Corporation;  Groupe Danone;  General Mills, Inc.;  Golden Enterprises, Inc.;  Keebler Foods Company  ; Kraft Foods, Inc.;  Nestl S.A.;  Ocean Spray Cranberries, Inc.;  The Procter & Gamble Company.

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STP-STRATEGY
Market Segmentation
As we know that PepsiCo provides varieties of beverages such as carbonated soft drinks, sport drinks, dairy-based drinks, energy drinks, fruit flavored beverages, ready -to-drink coffees, ready-to-drink tea, mineral water and frozen beverage. These products are marketed under brand as Pepsi, Mountain Dew, Gatorade, Lipton, Starbucks, Tropicana, and so on. With these products, PepsiCo aims to attract different groups of consumers. There are two levels in which Pepsi segments its market:

Demographic Niche marketing

Concentrated Marketing
Despite the large customer base in the Soft Drink industry, Pepsi prefers to segment itself as the beverage choice of the New Generation, Generation Next, or just as the Pepsi Generation. These terms adopted in Pepsis advertising campaigns are what marketers refer to as Generation X, which are profiled to be between the ages of 18 to 29. In addition, Pepsi shifted its focus to the growing American teenage market in the 1990s by forming exclusive contracts with American schools and developing advertising campaigns such as The Next Generation and the Joy of Pepsi, featuring Britney Spears. Pepsi believes that if they can get this market to adopt their product, they could establish a loyal customer in a long run.

Niche Marketing
Pepsi focused on varietal differentiation since 1990 by introducing a string of niche products. To increase volume in order to counter flat coca sales, Pepsi introduced Sierra Mist in 2002-2003 to take the place of 7-up and go head-to-head with Sprite. Pepsi has also tried to boost volume by introducing products that appeal to specific target markets that it currently is not reaching. Pepsi has introduced Code Red and Live Wire, extensions of Mountain Dew, Pepsi One, and Pepsi Blue. Finally, Pepsi is countering declining sales of carbonated drinks through the marketing and distribution of Starbucks ready to drink
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products, and the acquisition of SOBE and Gatorade. The success of Pepsis Mountain Dew Code Red launched in 2001 was the most successful soft drink innovation in 20 years and has spurred even more niche product introductions for PepsiCo as well as other competitors.

Bases of Segmentation:
Demographic
In focusing on the Pepsi-Cola beverage product, PepsiCo has retained a long history of concentrating on youth as its main target market Generation Next! It has spent billions of dollars in trying to woo the young and nearly young, implying that Coca -Cola is for the older generation. The reason why Pepsi-Cola has fiercely targeted this market is because it is the largest amongst its users. Market segment profiles have shown that the majority of carbonated beverage drinkers are youth and middle age people. Also, Pepsi continually targets the college market in which they spend huge amounts of money to compete with Coca Cola in acquiring contracts with universities (ie: CSUF) to have sold representation of their product distribution. Pepsis use this behaviorist segmentation has been a key to the companys success.

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Market Targeting
Pepsi customers are mostly Teenagers and Young Adults between the ages of 14 to 30. It also targets at Schools, Colleges, Universities, Homes, Restaurants, Hotels, and Stores.

Market Positioning
PepsiCo plans to further create positions that will give products the greatest advantage in their target markets. Pepsi has been positioned based on the process of positioning by direct comparison and have positioned their products to benefit their target marke

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93

Market positioning

94

SWOT Analysis PepsiCo

Strengths
Branding - One of PepsiCos top brands is of course Pepsi, one of the most recognized brands of the world, ranked according to Interbrand. As of 2008 it ranked 26th amongst top 100 global brands. Pepsi generates more than $15,000 million of annual sales. Pepsi is joined in broad recognition by such PepsiCo brands as Diet Pepsi, Gatorade Mountain Dew, Thirst Quencher, Lays Potato Chips, Lipton Teas (PepsiCo/Unilever Partnership), Tropicana Beverages, Fritos Corn, Tostitos Tortilla Chips, Doritos Tortilla Chips, Aquafina Bottled Water, Cheetos Cheese Flavored Snacks, Quaker Foods and Snacks, Ruffles Potato Chips, Mirinda, Tostitos Tortilla Chips, and Sierra Mist. The strength of these brands is evident in PepsiCos presence in over 200 countries. The company has the largest market share in the US beverage at 39%, and snack food market at 25%. Such brand dominance insures loyalty and repetitive sales which contributes to over $15 million in annual sales for the company

Diversification - PepsiCos diversification is obvious in that the fact that each of its top 18 brands generates annual sales of over $1,000 million. PepsiCos arsenal also includes ready-to-drink teas, juice drinks, bottled water, as well as breakfast cereals, cakes and cake mixes.This broad product base plus a multi-channel distribution system serve to help insulate PepsiCo from shifting business climates.

Distribution - The company delivers its products directly from manufacturing plants and warehouses to customer warehouses and retail stores. This is part of a three pronged approach which also includes employees making direct store deliveries of snacks and beverages and the use of third party distribution services.

Weaknesses
Overdependence on Wal-Mart - Sales to Wal-Mart represent approximately 12% of PepsiCos total net revenue. Wal-Mart is PepsiCos largest customer. As a result PepsiCos fortunes are influenced by the business strategy of Wal-Mart specifically

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its emphasis on private-label sales which produce a higher profit margin than national brands. Wal-Marts low price themes put pressure on PepsiCo to hold down prices. Overdependence on US Markets - Despite its international presence, 52% of its revenues originate in the US. This concentration does leave PepsiCo somewhat vulnerable to the impact of changing economic conditions, and labor strikes. Large US customers could exploit PepsiCos lack of bargaining power and negatively impact its revenues. Low Productivity - In 2008 PepsiCo had approximately 198,000 employees. Its revenue per employee was $219,439, which was lower that its competitors. This may indicate comparatively low productivity on the part of PepsiCo employees.

Image Damage Due to Product Recall - Recently (2008) salmonella contamination forced PepsiCo to pull Aunt Jemima pancake and waffle mix from retail shelves. This followed incidents of exploding Diet Pepsi cans in 2007. Such occurrences damage company image and reduce consumer confidence in PepsiCo products.

Opportunities
Broadening of Product Base - PepsiCo is seeking to address one of its potential weaknesses; dependency on US markets by acquiring Russias leading Juice Company, Lebedyansky, and V Wwater in the United Kingdom. It continues to broaden its product base by introducing TrueNorth Nut Snacks and increasing its Lipton Tea venture with Unilever. These recent initiatives will enable PepsiCo to adjust to the changing lifestyles of its consumers.

International Expansion - PepsiCo is in the midst of making a $1, 000 million investment in China, and a $500 million investment in India. Both initiatives are part of its expansion into international markets and a lessening of its dependence on US sales. In addition the company plans on major capital initiatives in Brazil and Mexico.

Growing Savory Snack and Bottled Water market in US - PepsiCo is positioned well to capitalize on the growing bottle water market which is projected to be worth over $24 million by 2012. Products such as Aquafina, and Propel are well established products and in a position to ride the upward crest.PepsiCo products such as, Doritos

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tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, Fritos corn chips, Ruffles potato chips, Sun Chips multigrain snacks, Rold Gold pretzels, Santitas are also benefiting from a growing savory snack market which is projected to grow as much as 27% by 2013, representing an increase of $28 million.

Threats
Decline in Carbonated Drink Sales - Soft drink sales are projected to decline by as much as 2.7% by 2012, down $ 63,459 million in value. PepsiCo is in the process of diversification, but is likely to feel the impact of the projected decline.

Potential Negative Impact of Government Regulations - It is anticipated that government initiatives related to environmental, health and safety may have the potential to negatively impact PepsiCo. For example, manufacturing, marketing, and distribution of food products may be altered as a result of state, federal or local dictates. Preliminary studies on acrylamide seem to suggest that it may cause cancer in laboratory animals when consumed in significant amounts. If the company has to comply with a related regulation and add warning labels or place warnings in certain locations where its products are sold, a negative impact may result for PepsiCo.

Intense Competition - The Coca-Cola Company is PepsiCos primary competitors. But others include Nestl, Groupe Danone and Kraft Foods. Intense competition may influence pricing, advertising, sales promotion initiatives undertaken by PepsiCo. Resently Coca-Cola passed PepsiCo in Juice sales. Potential Disruption Due to Labor Unrest - Based upon recent history, PepsiCo may be vulnerable to strikes and other labor disputes. In 2008 a strike in India shut down production for nearly an entire month. This disrupted both manufacturing and distribution.

Conclusion
Pepsi has been successful in generating profits in this extremely rivalrous industry. What the company should do now is employ a strategy that now only addresses its own deficiencies in an effort to grow market share, but one that will increase the overall size of the pie. This strategy, in the end, will allow Pepsi to grow and sustain above-average returns.

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Balance Sheet for PEPSICO INC. (PEP)

Assets [+] Dollars

in Millions of

12/2010 12/2006

12/2009

12/2008

12/2007

Cas and Equivalents 1,651

5,943

3,943

2,064

910

Restrictable Cas -

Marketable Securities 1,171 Receivables 3,725 Inventories 1,926 Prepaid Expenses 657

Current Deferred Income Taxes Other Current Assets Total Current Assets 9,130 Gross Fixed Assets 19,058 -

Accumulated Depreciation(13,983) (9,371) Net Fixed Assets 9,687 19,058

426

192

213

1,571

6,323

4,624

4,683

4,389

3,372

2,618

2,522

2,290

1,505

1,194

1,324

991

17,569

12,571

10,806

10,151

33,041

24,912

22,552

21,896

(12,241)

(10,889)

(10,668)

12,671

11,663

11,228

98

Intangibles 1,849 Cost in Excess 4,594

13,808

2,623

1,128

2,044

14,661

6,534

5,124

5,169

Non-Current Deferred Income Taxes Other Non-Current Assets 4,670 Total Non-Current Assets 20,800 Total Assets 29,930 3,057

5,449

7,273

6,036

50,584

27,277

25,188

24,477

68,153

39,848

35,994

34,628

Liabilities [+]

in Millions of Dollars

12/2010 12/2006

12/2009

12/2008

12/2007

Accounts Payable 2,102 Short Term Debt 274 Notes Payable Accrued Expenses Accrued Liabilities 2,587 Deferred Revenues

10,923

8,127

8,273

2,562

4,898

464

369

2,894

145 8,787 7,858

2,297 7,753 4,203

1,897 6,860 2,550

Current Deferred Income Taxes Other Current Liabilities 71 Total Current Liabilities 15,892 Long Term Debt 19,999

165 8,756 7,400

99

Deferred Income Tax

4,057

659 6,620 5,487 638 -

226 6,541 476 -

646 4,792 -

528 4,624 -

Other Non-Current Liabilities Minority Interest 312

Capital Lease Obligations-

Preferred Securities of Subsidiary Trust -

Preferred Equity Outside Shareholders' Equity Total Non-Current Liabilities 7,623 Total Liabilities 14,483 30,988 14,184

15,101

(91) 9,550

(79)

46,880 22,940

23,888

17,303

Preferred Shareholder's Equity 41

41

41

12,065

17,325

Common Shareholder's Equity 21,232 16,867 15,447 Total Equity 15,447 34,628 29,930

21,273 16,908 12,106 Total Liabilities & Shareholder's Equity68,153

17,325 39,84835,994

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CHAPTER 3 COMPANY PROFILE

101

3. NESTLE COMPANY

102

PROFILE OF THE COMPANY

Nestl with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestl and is today the world's biggest food and beverage company. Sales at the end of 2004 were CHF 87 bn, with a net profit of CHF 6.7 bn. We employ around 247,000 people and have factories or operations in almost every country in the world.

The Company's strategy is guided by several fundamental principles. Nestl's existing products grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential is never sacrificed for short-term performance. The Company's priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives.

BACKGROUND
Nestle was promoted by Nestle Alimentana, Switzerland, a wholly owned subsidiary of Nestle Holdings Ltd., Nassau, Bahama Islands. Nestle is one of the oldest food MNC operating in India, with a presence of over a century. For a long time, Nestle Indias operations were restricted to importing and trading of condensed milk and infant food. Over the years, the Company expanded its product range with new products in instant coffee, noodles, sauces, pickles, culinary aids, chocolates and confectionery, dairy products and mineral water. Nestle was incorporated as a limited company in 1959. In 1978, the Company issued shares to the Indian public to reduce its foreign holdings to 40%. Its name was changed from Foods Specialties Ltd. to the current name in 1981.The parent held 51% stake in the company as at 2000 end. It has FIPB approval to hike stake by 10% and has been gradually acquiring shares from the open market. Parent stake in the company as at 2001 end stood at 53.8%. The parent plans to continue hiking stake through open market purchases. Nestle SA , the worlds leading food manufacturer

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and the market leader in both coffee and mineral water, produces a wind range of products including prepared dishes and cooking aids, milk-based products, cereals, instant coffee, pharmaceuticals and baby foods. Nestle SA is a publicly owned company, with subsidiaries across the world. It website addresses in 104 countries. It is also the world largest food and beverage company with $71 billion in annual sales and almost 230,000 employees around the world. It markets some 8000 brands that include instant coffee. Remarkably, its products are sold in every country in the world, including in North Korea. Nestle coat of arms, the birds nest, which refers to his name, has become a symbol for the products being a safe care for their consumer product safety and quality. Research and development based innovation capacity and strong brands are priority for nestle Nestle India Ltd, 51% subsidiary of Nestle SA, is among the leading branded food player in the country. It has a broad based presence in the foods sector with leading market shares in instant coffee, infant foods, milk products and noodles. It has also strengthened its presence in chocolates, confectioneries and other semi processed food products during the last few years. The company has launched Dairy Products like UHT Milk, Butter and Curd and also ventured into the mineral water segment in 2001. Nestles leading brands include Cerelac, Nestum, Nescafe, Maggie, Kitkat, Munch and Pure Life.

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HISTORY OF NESTLE
Nestl began in Switzerland in the mid 1860s when founder Henri Nestl created one of the first baby formulas. Henri realized the need for a healthy and economical product to serve as an alternative for mothers who could not breastfeed their babies. Mothers who were unable to breastfeed often lost their infants to malnutrition. Henris product was a carefully formulated mixture of cows milk, flour and sugar. Nestls first product was called Farine Lacte (cornflour gruel in French) Henri Nestl. The product was first used on a premature baby who could not tolerate his mothers milk or other alternative products of that time. Doctors gave up on treating the infant. Miraculously the baby tolerated Henris new formula and it provided the nourishment that saved his life. Within a few years the first Nestl product was marketed in Europe. In 1874 the Nestl Company was purchased by Jules Monnerat. Nestl developed its own condensed milk to contend with its competitor, the Anglo-Swiss Condensed Milk Company. The Anglo-Swiss Condensed Milk Company made products like cheese and instant formulas. The two companies merged in 1905, the year after Nestl added chocolate to its line of foods. The newly formed Nestl and Anglo-Swiss Milk Company had factories in the United States, Britain, Spain and Germany. Soon the company was full-scale manufacturing in Australia with warehouses in Singapore, Hong Kong and Bombay. Most production still took place in Europe. The start of World War I made it difficult for Nestl to buy raw ingredients and distribute products. Fresh milk was scarce in Europe, and factories had to sell milk for the public need instead of using it as an ingredient in foods. Nestl purchased several factories in the U.S. to keep up with the increasing demand for condensed milk and dairy products via government contracts. The companys production doubled by the end of the war. When fresh milk became available again after the war, Nestl suffered and slipped into debt. The price of ingredients was increasing, the economy has slowed and exchange rates deteriorated because of the war. An expert banker helped Nestl find ways to reduce its debt. By the 1920s Nestl was creating new chocolate and powdered beverage products. Adding to the product line

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once again, Nestl developed Nescaf in the 1930s and Nestea followed. Nescaf, a soluble powder, revolutionized coffee drinking and became an instant hit. With the onset of the Second World War, profits plummeted. Switzerland was neutral in the war and became increasingly isolated in Europe. Many of Nestls executive officers were transferred to offices in the U.S. Because of distribution problems in Europe and Asia, Nestl opened factories in developing countries in Latin America. Production increased dramatically after America entered the war. Nescaf became a main beverage for the American servicemen in Europe and Asia. Total sales increased by $125 million from 1938 to 1945. Nestl continued to prosper, merging with Alimentana S.A., a company that manufactured soups and seasonings, in 1947. In the coming years, Nestl acquired Crosse & Blackwell, Findus frozen foods, Libbys fruit juices, and Stouffers frozen foods. Nescaf instant coffee sales quadrupled from 1960 to 1974, and the new technology of freeze-drying allowed the company to create a new kind of instant coffee, which they named Tasters Choice. Expanding its product line outside of the food market, Nestl became a major stockholder in LOral cosmetics in 1974. Soon after the company suffered with increasing oil prices and the slowing growth in industrialized countries. Foreign exchange rates decreased, in turn reducing the value of sterling, the pound, dollar and franc. Prices of coffee beans and cocoa rose radically, presenting further problems for Nestl. The company decided to venture into the pharmaceutical industry by acquiring Alcon Laboratories, Inc. While trying to deal with unstable economic conditions and exploring its new ventures, Nestl faced the crisis of an international boycott. Many organized groups began boycotting all of Nestls products because they disapproved of Nestl marketing its baby formula in developing countries. Problems like illiteracy and poverty caused some mothers to use less formula than recommended. In a watered down formula, vital nutrients are lessoned. Contaminated water presented another problem, since the formulas had to be mixed with water. The organizations argued that the misuse of formula resulted in the malnutrition or death of many infants in developing countries.

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According to Nestl the World Health Organization never made statements tying infant death or malnutrition with baby formulas. The company didnt deny the superiority of breastfeeding and agreed that substituting breast milk for other substances could be very dangerous. Nestl explained that breastfeeding and nonbreastfeeding mothers in developing countries often gave their babies whole cows milk, tea, cornstarch, rice water or a mix of flour and water. These alternatives were very unhealthy and a nutritional baby formula was a better choice. Nestl says that it has never discouraged breastfeeding when it was possible. Nestl agreed to follow the International Code in developing countries in 1984, and the boycott was suspended. It resumed several years later when the organizations believed Nestl was sending free or low cost baby formulas to developing countries. Nestl said it only sent formula to countries that allow donations for orphans, multiple births, and babies with no access to breast milk. The company has stopped all public advertising for formula in developing countries for almost 20 years. The boycott continues to some extent to this day without satisfactory resolution. By the 1980s Nestl had a new Chief Executive Officer. The company focused on improving its financial situation and continuing to expand. In the one of the largest takeovers at that time, Nestl bought Carnation for $3 billion and parted with any unprofitable businesses. International trade barriers diminished in the 1990s, opening trade with parts of Europe and China. In the 1990s Nestl acquired San Pellegrino, and Spillers Petfoods of the UK. With the acquisition of Ralston Purina in 2002, the Nestl-owned pet care businesses joined to form the industry leader Nestl Purina PetCare. The leading in the food industry, Nestl brings in $81 billion in overall sales and has 470 factories around the world. Nestl will continue to grow, introduce new products and renovate existing ones. The companys mission is to focus on long-term potential over short-term performance

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KEY EXECUTIVES OF NESTLE

Board Members
Name (Connections) William Stiritz Franklin Krum Richard Liddy Katherine Ortega Ronald Thompson Type of Board Primary Company Members ----Agribrands International, Inc. Nestle Purina PetCare Company MetLife, Inc. The Kroger Co. Teachers Insurance and Annuity -Association College Retirement Equities Fund ------Beverly Inc Boeing Co. Nestle Purina PetCare Company Emerson Electric Co. Ralcorp Holdings Inc. Boeing Co. Enterprises-Michigan,

David Banks John Biggs Donald Danforth Jr. David Farrell M. Ingram John McDonnell

Name W. McGinnis James Elsesser Terence E. Block R. Patrick

Title Chief Executive Officer, President and Director Chief Financial Treasurer President of Nestl Purina Pet Food-North America Officer, Vice President and

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Name

Title and Chief Operating Officer of North American Pet Foods

Joseph Sivewright Robert C. Watt Luis Cantarell

R.

President of Nestle Purina PetCare-Latin America & Caribbean President - Golden Products Division and executive officer Executive Vice President

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PRODUCT MIX Product Line width

Nestle product consist of 6 main aspect which is beverage, milk, prepared food, ice cream, cereals and chocolates. There are varieties of each product lines for each type of products. They also will upgrade their product lines through the changing of the lifestyle form time to time.

Brands of Nestle
Kit Kat Nescafe Nestle Milo Maggi Nestle water Nido Nestle milk pack Nestle cerelac Friskies Nestle yogurt Nestle pudina raita Nestle zeera raita Nestle flavors cream Nestle rice Nestle frost Polo Breakfast cereals Lactogen Milkpack desi ghee

Coffee:
Nescafe, Gold Blend, Blend 37, Alta Rica, Cap Colombie, Cappuccino, Decaff, Fine Blend.

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Dairy Products:
Carnation, Chambourcy, Coffee-Mate, Fussells, Ideal, Milkmaid, Tip-Top, Bonjour, Chamby, Crme Vienna, Darlky, Flanby, Fulcreem Custard, Hippopota, Jacky, Kremly, Le Grande, Nouvelle, Robot.

Confectionery & Snacks: KitKat, Rowntree, Aero, After Eights, Lyons Maid Ice-Cream,
Polo, Smarties, Animal Bar, Baci Chocolate, Black Magic, Blue Riband, Breakaway, Cabana, Caramac, Caramel Wafer, Cello, Creamola, Dairy Crunch, Drifter, Eclipse, Good News, Festival, Fizzy Jerkz, Fruit Pastilles, Foxs Glacier Mints, Henri Nestle Collection, Jellytots, Karima, Lion bar, Matchmakers, Milky bar, Montego, Munchies, Novo, Quality Street, Rolo, RPC, Savana, Secret, Toffee Crisp, Toffo, Tooty Frooties, Walnut Whip, Weekend, Willy Wonka, Yorkie.

Seasonings :
British Shoyu, British Vinegars, Cook-in-the-Pot, Dufrais, Sarsons.

Mineral Water: Perrier, Ashbourne, Contrexeville, Buxton, Vittel, Vittelloise.

Other drinks:
Milo, Build-up, Caro, Elevenses, Flo-Mix, Libbys juices, Mix-O-Choc, Moonshine, Nescore,

Nesfit,

Nesquick,

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Processed Meals:
Findus, Buitoni Pasta, Crosse & Blackwell, Maggi, Alphabetti, Bonne Cuisine, Dish-of-theDay, Eskimo, Four Seasons, Healthy Balance, Lean Cuisine, Pasta Choice, Rice & Things, Scrunchies, Waistline.

Spreads & Pickles:

Branston Pickle, Gales Honey, Holgates Honey, Pan Yan, Sun-Pat, Tartex Vegetable Pate.

Cereals:
Shredded Wheat, Shreddies, Cheerios, Cinnamon Toast Crunch, Cocoa Puffs, Crisp Rice, Energen Wheatflakes, Force, Golden Grahams, Honey Nut Cheerios, Lucky Charm, Team, Roberstons cornflakes, Sunny Jimj Wheatflakes.

112

COMPITETIORS
Principal Competitors :

 Borden, Inc.;  Cadbury Schweppes plc;  Campbell Soup Company;  Chiquita Brands International, Inc.;  The Coca-Cola Company;  ConAgra Foods, Inc.;  Cott Corporation;  Groupe Danone;  General Mills, Inc.;  Golden Enterprises, Inc.;  Keebler Foods Company  ; Kraft Foods, Inc.  Ocean Spray Cranberries, Inc.;  The Procter & Gamble Company.

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STP STRATEGY
Segmented and Target Market
A market segment consists of a group of customers who share a similar set ofwants. The marketer does not create the segments; the marketers task is to identify the
segments and decide which one (s) to target. Segment marketing offers several benefits over mass marketing. The company can create a more fine-tuned product or service offering and price it appropriately for the target segment. The company can more easily select the best distribution and communications channels, and it will also have a clearer picture of its competitors, which are the companies going after the same segment. Our market segment is based on our observation; analysis as well as we is in Nestle shoes. The customers can be classified according to the following variables:

1. Geographic Segmentation :

Regions: Commonly people prefer to drink Milo throughout the year. But Nestle can segment
the market on the basis of season. The consumption of cold Milo goes down during the rainy season as people prefer to have hot Milo. In hotter regions the consumption pattern doesnt change much.

Cities: Consumption of Milo is more in the cities as compared to the villages due to various
factors such as income and education level. Nestle should focus more on making Milo available in the every places where people are willing and able to buy.

2. Demographic Segmentation:
Age: Nestle can easily target various age groups. The most important of these groups are
children and old people. For children it can introduce Milo with additional nutritional contents such as vitamins and minerals. For older people it already has clinical nutrition. It just needs to get its product known among these people.

Gender : It will be very beneficial to target women as they usually shop for their family. If
they are convinced that the Milo will be good for their families, they will purchase.

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Income and occupation: People will buy Milo when they have enough monetary resources.
Nestle should target people in the higher income groups. People with blue collar jobs can be targeted by telling them that the Milo will help them in their daily routine. Life cycle stage can also be important because families with younger kids will want to buy nestle

3. Psychographic segmentation:

Social class and life style: People belonging to the higher social classes tend to spend more
on luxuries as compared to people in the lower classes. Such people can be easily targeted as they are very health conscious. Nestle can urge these people to buy Milo which is rich in nutrition.

Personality: People who are outdoorsy and are involved in sports can also be targeted by
tagging the brand with some sport celebrity.

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Product positioning
Having decided its corporate objectives and strategy, Nestl can set marketing objectives for each of its product, in this case an individual product which is Milo. The primary objective for Milo is to maintain its position as the Malaysias number one selling chocolate malt drink brand. In order to achieve this, Nestl has to develop a marketing strategy that will take into account all the elements of the marketing mix. This will involve individual strategies for pricing, product development, promotion and distribution. Since Nestle Milo is an established brand name, these strategies must be flexible and relevant to each new generation of consumers, but at the same time, great care must be taken not to damage the perceptions of the product built up over decades of marketing. Having decided its corporate objectives and strategy, Nestl can set marketing objectives for each of its product, in this case an individual product which is Milo. The primary objective for Nestle is to maintain its position as the number one selling chocolate drink brand. In order to achieve this, Nestl has to develop a marketing strategy that will take into account all the elements of the marketing mix. This will involve individual strategies for pricing, product development, promotion and distribution. Since Nestle Milo is an established brand name, these strategies must be flexible and relevant to each new generation of consumers, but at the same time, great carem must be taken not to damage the perceptions of the product built up over decades of marketing.

116

PEST Analysis
We are going to produce a PEST analysis to find out what external influences may be affecting the Nestle product and to what extent to which customers decide to buy them. The purpose of the PEST analysis is to analyze the organization (Nestle ) operates and to identify how it may influence marketing decisions. A PEST analysis analyses the external environment in which an organization operates and identifies how it should influence marketing decisions.

The initials P.E.S.T stand for: Political Economical Strengths Threats

Political Factors The actions of governments can have major effects on business and markets, including creating or reducing demand for particular products and services.

Economical Factors Consumer spending may be controlled by a range of economic factors such as income levels, inflation, taxes, unemployment, exchange rates and mortgage rates.

Socia l Factors Social trends are important because they have a direct influence on the demand for particular types of product . Technological Factors Development in technology gives rise to new products and market opportunities, e.g. the rapid growing use of computerized reservations systems.

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Nestle SWOT Analysis

Nestle, headquarters in Switzerland, was founded by Henri Nestle in 1866. It is renowned as the worlds leading nutrition and health based company. Nestle grows is product line through innovation as well as renovation and maintains a balance on its geo-environmental activities and product lines. They opt for long term performance rather than short term goals. The Company prioritizes in bringing the most relevant products to the consumers according to their needs that will prove valuable throughout their life.

Strengths:
Globally recognized as one of the largest and powerful food producers, covering almost every country (factories and plants). Employs approximately 280,000 people globally. Powerful brand positioning in the consumers mind. It has a vastly diversified product portfolio containing approximately 6000 brands (beverages, ice creams, frozen food items, chocolates and biscuits, pet care nutrition items, etc.) It has established joint ventures with giants like Coca Cola, General Mills and LOreal that are helpful in providing knowledge on different technological aspects. Consistently ranked as largest bottled water corporation that operates in an environmental friendly manner. Top 50 list of Fortunes Americas Most Admired Food Companies, and ranked on top on Consumer Food Products. Strong internal growth and emphasis on innovation internally. Strong cultural environment, that acts as a loyalty carrier for the employees.

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 Nestle has taken a visionary step as being one of the many companies that represent and encourage globalization that has also become an identity for its logo. Quality is a vital element regarding nestle products. Largest consumer products organization that operates globally. It also sells professional brands to different customers such as colleges, hotels, restaurants etc. Powerful marketer, and never seizes any opportunity to embed the brand image in the mind of the consumer. The quality of the Nestle products embeds an element of trust in the mind of the consumer that makes Nestle one of the powerful brands to be followed. Produces low cost products that give them an edge to their competitors. It also has low operating costs. Globally, biggest ice-cream producer, having a market share of approximately 17.5% (2006). The name Nestle also visualizes the high standard and quality of the product. Customer base loyalty for Nestle is very vast and powerful. The decentralized culture in the organization encourages employees. It has a dynamic and innovative approach when it comes to new trends regarding the technology.

Weaknesses:
Hovering over the stats of 2008, the food industry grew 8.9% but Nestle lacked the potential to raise their sales in the organic food division that lay flat.

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 Regulators like FDA and AMA (American Medical Association) are pressing on the firm for removing tags that hold no ground such as low cholesterol or heart healthy. Parents have also reported diabetic epidemic due to the consumption of such goods, in children especially. Promoting infant milk products comparing to breastfeeding. Slaves in African countries that are working under it. It holds up a negative effect regarding the whole brand. Retailers do not get to set high margins to indulge more in sales. Logistics cost is quite high. Many products are not understandable in different countries. It did not make much of an impact in France with their LC-1 (food commodity). Coordination between country specific plants with the Center, due to which some plants are running exceptionally smooth while operations in other countries lack effectiveness. Transportation as well as storage (proper warehousing) problems. Supply Chain having a complex stature (India plant transitional traceability). The immense diversification portfolio of the firm makes it impossible to run every division smoothly. Russia being an unstable market for Nestle which cuts a big chunk from Nestles bite. It is also perceived that Nestle puts profit first.

Opportunities:
Due to the high intensity of the health conscious awareness in the society, more health based products are required especially with incompromisable quality.

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 Can go into the anti-allergy products that are very common, such as peanut free or gluten free products. They can also invest in snacks that would further diversify its product portfolio. Provide incentives to the retailers to increase sales volume. Open cafes that would exclusively provide Nestle products. LC-1 having the opportunity of having a greater impact in Germany (2 years had them go for 60% of the market share), and being the established market leader, they can establish more brands in the market. Middle class share in most of the economies are growing much larger. Nestle India may hold the position of being the export hub due to the low cost of labour comparatively to developed countries. In Asian countries like India, Pakistan, Bangladesh; consumers are mostly price conscious rather than health conscious. Nestle has an opportunity to have extensive strategies implemented to gain the market in such countries. Developing countries have a higher rate of GDP than those of developing countries, Nestle should enter in such markets as well. Recession has created such an impact that the market is struggling and has almost got out of that recession that will surely increase the cycle of cash flow which will be profitable for Nestle to cash in on such a time.

Threats:
Contamination of products should be regarded strictly (Cookie Dough, March 2009). The company has a not so pretty history with the FDA. Pet Food contamination 2007 (imported from China, the vegetables contained rat poison).

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 Inflation rise is giving birth to high prices. Raw chocolate prices are jumping, along with the Dairy costs; which leaves heavy cuts in the margin in order to make the customers brand loyal. They have also shrink the packaging which is not really noticeable, so the customers are paying the same amount for a lesser product. Competitors like Cadbury Schweppes, Hersheys, Quaker, Heinz, Del Monte, Kelloggs, and Kraft Foods are also well established. Its a tough market with a tougher competition for gaining market share. Market is quite mature and the competitors specialize in a certain product that can hit hard on Nestle. (Yogurt Market US: General Mills) In the Indian market, fresh food is preferred than ready-to-eat meals. In still developing countries as well as underdeveloped countries, Nestle will face a large competition in market both domestic and unorganized sectors. Poverty sector in developing countries is also a lacking that must be watched over for. Malnutrition and obesity are yet another burden faced by the developing countries.

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FINANCIAL

ANALYSIS

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CHAPTER 4 COMPANY PROFILE

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Cadbury Schweppes plc:

Company Profile
Thi il hensi e anal sis of the organi ation, its business segments, and competitors. t anal es the business and marketing strategies adopted by the company, to gain a competiti e edge in the industry. The profile also evaluates the strengths of the company and the opportunities present in the market. This profile is of immense help to management consultants, analysts, market research organi ations and corporate advisors. Company Analysis- t involves analysis of the company at three levels segments, organi ational structure and ownership composition. Both business and geographic segments are analyzed alongwith their recent financial performance. t further discusses the major subsidiaries of the company and the recent merger & acquisitions . Business Developments-This section examines the significant developments that have taken place in the company. t is a form of news analysis where the most critical company news is discussed.Cadbury plc is a British confectionery company, the industry s
second-largest globally after the combined Mars-Wrigley Headquartered in Cadbury House in the Uxbridge Business Park in Uxbridge, London Borough of Hillingdon, England and formerly listed on the London Stock Exchange, Cadbury was controversially acquired by Kraft Foods in February 2010. After integration the combined Cadbury and Kraft companies became the largest confectionery company in the world. The company was a constant constituent of the FTSE 100 from the index s 1984 inception until its 2010 takeover.

Dr Pepper Snapple Group

Dr Pepper Snapple Group Inc. (formerly Cadbury Schweppes Americas Beverages) is an American soft drink company, based in Plano, Texas. t was spun off from Britain's Cadbury Schweppes, on May 5, 2008, with trading in its shares starting on May 7, 2008. Cadbury Schweppes plc became Cadbury plc on May 5, 2008

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EARLY HISTORY

In 1824, John Cadbury began selling tea, coffee, and drinking chocolate, which he produced himself, at Bull Street in Birmingham, England. John Cadbury later moved into the production of a variety of Cocoas and Drinking Chocolates being manufactured from a factory in Bridge Street, supplying mainly to the wealthy due to the high cost of manufacture at this time. During this time a partnership was struck between John Cadbury and his brother Benjamin. At this time the company was known as 'Cadbury Brothers of Birmingham'. The two brothers opened an office in London and in 1854 received the Royal Warrant as manufacturers of chocolate and cocoa to Queen Victoria. Around this time in the 1850s the industry received a much needed boost with the reduction in high import taxes on cocoa; this allowed chocolate to become more affordable to everyone. Due to the popularity of a new expanded product line, including the very popular Cadbury's Cocoa Essence, the company's success led to the decision in 1873 to cease the trading of tea. Around this time, master confectioner Frederic Kinchelman was appointed to share his recipe and production secrets with Cadbury, which led to an assortment of various chocolate covered items. Having taken over the business in 1861, John Cadbury's sons Richard and George decided in 1878 that they needed to find new premises. Requiring better transport access for milk that was inward shipped by canal, and cocoa that was brought in by rail from London, Southampton and Liverpool docks, the Cadburys started looking for a new greenfield site. Noticing the development of the Birmingham West Suburban Railway south along the path of the Worcester and Birmingham Canal, in 1878 they acquired the Bournbrook estate, comprising 14.5 acres (5.9 ha) of countryside 5 miles (8.0 km) south of the outskirts of Birmingham. Located right next to the new Stirchley Road railway station, itself directly opposite the canal, they renamed the Bournbrook estate to Bournville and opened the Bournville factory in 1879.

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In 1893, George Cadbury bought 120acres (49 ha) of land close to the works and planned, at his own expense, a model village which would 'alleviate the evils of modern more cramped living conditions'. By 1900 the estate included 313 cottages and houses set on 330 acres (130 ha) of land. As the Cadbury family were uakers there were no pubs in the estate; in fact, it was their to sell tea, coffee and cocoa as alternatives to alcohol. 1900 to 1950 In 1905, Cadbury's launched its Dairy Milk bar, with a higher proportion of milk than previous chocolate bars, and it became the company's best selling product by 1913. Fruit and Nut was introduced as part of the Dairy Milk line in 1928, soon followed by Whole Nut in 1933. By this point, Cadbury's was the brand leader in the United Kingdom. These were accompanied by several other products: Flake (1920), Cream [9] filled eggs (1923), Crunchie (1929) and Roses (1938). Cadbury's Milk Tray was

uaker beliefs that first led them

first produced in 1915 and continued in production throughout the remainder of the First World War. More than 2,000 of Cadbury's male employees join the Armed ed Forces and to support the war effort, Cadbury provided clothing, books and chocolate to soldiers. After the war, the Bournville factory was redeveloped and mass production began in earnest. In 1918, Cadbury opened their first overseas factoryin Hobart, Tasmania and in 1919 undertook a merger with J. S. Fry & Sons, another chocolate manufacturer, resulting in the integration of well known brands such as Fry's Chocolate Cream and Fry's Turkish Delight.[6] During World War II, parts of the Bournville factory were turned over to war work, producing milling machines and seats for fighter aircraft. Workers ploughed football fields to plant crops. As chocolate was regarded as an essential food, it was placed under government supervision for the entire war. The wartime rationing of chocolate ended in 1949, and normal production resumed. Cadbury subsequently built new factories and had an increasing demand for their products. Merger with Schweppes

The Cadbury Schweppes logo used until the demerger in 2008

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Cadbury merged with drinks company Schweppes to form Cadbury Schweppes in 1969. Cadbury Schweppes went on to acquire Sunkist, Canada Dry, Typhoo Tea and more. In the US, Schweppes Beverages was created and the manufacture of Cadbury confectionery brands were licensed to Hershey's. Snapple, Mistic and Stewart's (formerly Cable Car Beverage) were sold by Triarc to Cadbury Schweppes in 2000 for $1.45 billion. In October of that same year, Cadbury Schweppes purchased Royal Crown from Triarc. Demerger In March 2007, it was revealed that Cadbury Schweppes was planning to split its business into two separate entities: one focusing on its main chocolate and confectionery market; the other on its US drinks business. The demerger took effect on 2 May 2008, with the drinks business becoming Dr. Pepper Snapple Group Inc. In December 2008 it was announced that Cadbury was to sell its Australian beverage unit to Asahi Breweries. Recent developments In October 2007, Cadbury announced the closure of the Somerdale Factory, Keynsham, formerly part of Fry's. Between 500 and 700 jobs were affected by this change. Production transferred to other plants in England and Poland. In 2008 Monkhill Confectionery, the Own Label trading division of Cadbury Trebor Bassett was sold to Tangerine Confectionery for 58million cash. This sale included factories at Pontefract, Cleckheaton and York and a distribution centre near Chesterfield, and the transfer of around 800 employees. In mid-2009 Cadbury replaced some of the cocoa butter in their non-UK chocolate products with palm oil. Despite stating this was a response to consumer demand to improve taste and texture, there was no "new improved recipe" claim placed on New Zealand labels. Consumer backlash was significant from environmentalists and chocolate lovers. By August 2009, the company announced that it was reverting to the

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use of cocoa butter in New Zealand. In addition, they would source cocoa beans through Fair Trade channels. In January 2010 prospective buyer Kraft pledged to honour Cadbury's commitment. Kraft Foods takeover On 7 September 2009 Kraft Foods made a 10.2 billion (US$16.2 billion) indicative takeover bid for Cadbury. The offer was rejected, with Cadbury stating that it undervalued the company. Kraft launched a formal, hostile bid for Cadbury valuing the firm at 9.8 billion on 9 November 2009. Business Secretary Peter Mandelson warned Kraft not to try to "make a quick buck" from the acquisition of Cadbury. On 19 January 2010, it was announced that Cadbury and Kraft Foods had reached a deal and that Kraft would purchase Cadbury for 8.40 per share, valuing Cadbury at 11.5bn (US$18.9bn). Kraft, which issued a statement stating that the deal will create a "global confectionery leader", had to borrow 7 billion (US$11.5bn) in order to finance the takeover. The Hershey Company, based in Pennsylvania, manufactures and distributes Cadbury-branded chocolate (but not its other confectionery) in the United States and has been reported to share Cadbury's "ethos". Hershey had expressed an interest in buying Cadbury because it would broaden its access to faster-growing international markets. But on 22 January 2010, Hershey announced that it would not counter Kraft's final offer. The acquisition of Cadbury faced widespread disapproval from the British public, as well as groups and organisations including trade union Unite, who fought against the acquisition of the company which, according to Prime Minister Gordon Brown, was very important to the British economy. Unite estimated that a takeover by Kraft could put 30,000 jobs "at risk", and UK shareholders protested over the Mergers and Acquisitions advisory fees charged by banks. Cadbury's M&A advisers were UBS, Goldman Sachs and Morgan Stanley. Controversially, RBS, a bank 84% owned by the United Kingdom Government, funded the Kraft takeover. On 2 February 2010, Kraft secured over 71% of Cadbury's shares thus finalising the deal. Kraft had needed to reach 75% of the shares in order to be able to delist Cadbury

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from the stock market and fully integrate it as part of Kraft. This was achieved on 5 February 2010, and the company announced that Cadbury shares would be de-listed on 8 March 2010. On 3 February 2010, the Chairman Roger Carr, chief executive Todd Stitzer and chief financial officer Andrew Bonfield all announced their resignations. Stitzer had worked at the company for 27 years. On 9 February 2010, Kraft announced that they were planning to close the Somerdale Factory, Keynsham, with the loss of 400 jobs. The management explained that existing plans to move production to Poland were too advanced to be realistically reversed, though assurances had been given regarding sustaining the plant. Staff at Keynsham criticised this move, suggesting that they felt betrayed and as if they have been "sacked twice". On 22 April 2010, Phil Rumbol, the man behind the famous Gorilla advertisement, announced his plans to leave the Cadbury company in July following Kraft's takeover. In June 2010 the Polish division, Cadbury-Wedel, was sold to Lotte of Japan. The European Commission made the sale a condition of the Kraft takeover. As part of the deal Kraft will keep the Cadbury, Hall's and other brands along with two plants in Skarbimierz. Lotte will take over the plant in Warsaw along with the E Wedel brand. The firm was known as "Cadbury Schweppes plc" from 1969 until a May 2008 demerger, in which its global confectionery business was separated from its U.S. beverage unit, which has been renamed Dr Pepper Snapple Group. Type Subsidiary of Kraft Foods Industry Confectionery Founded 1824 Headquarters Uxbridge, London, United Kingdom Products See list of Cadbury products Revenue GB5,384 million (2008) Operating income GB388 million (2008) Net income GB364 million (2008) Employees 71,657 (2008) Parent Kraft Foods Website Cadbury.co.uk

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KEY EXECUTIVES
Cadbury India Ltd Board Of Directors Chairman Managing Director C Y Pal Anand Kripalu Harsh Mariwala Radhakrishnan Meno Director Suresh Talwar Atul Bhatia V Chandramouli Director (Finance & Commer.) Director Executive Director Sunil NarayanSundararaman Company Secretary Barkha Bordia Rajesh Garg Jaiboy Phillips Rajesh Ramanathan Sethi

Chairman: Sanders President, CEO, and Director: EVP and CFO: Larry D. Young Martin M. (Marty) Ellen

Wayne R.

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PRODUCT MIX
y y y y y y y

Cool Ridge Spring Water (Australia) Coolah Energy Country Time Cream Soda (Hong Kong, Macau, South Africa) Crush Deja Blue Diet RC Cola--sold in a few markets, this is a completely separate line from Diet Rite, in that it is more related to RC Cola in taste. Diet Rite dnL Dr Pepper Ginger ale Gini' Grapefruit Soda (Hong Kong) Granadilla Twist (South Africa) Hawaiian Punch Hires Root Beer IBC Root Beer Lemon Twist; mineral water and mineral soft drink in Mexico Quinine Tonic water Raging Cow Red Fusion (discontinued) R.C. Cola Ricql s

y y y

y y y y y y y y y y y y y y y

Russchian Schweppes

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y y y y y y y y y y y y y y y

Slush Puppie Snapple Solo Sparberry (South Africa)

Squirt Stewart's Soda Sundrop Sunkist Tahiti Treat TriNa, soft drinks and ice-teas in Spain Vernor's ? ginger ale Welch's Wink Yoo-Hoo

Other products
y y y

Bournville Cocoa Drinking Chocolate powder See also Cadbury Adams products: this subsidiary produces several brands of gum, breath mints, and cough drops.

y y

Dr Pepper/Seven Up Nantucket Nectars

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COMPETITORS

Principal Competitors:
 The Coca-Cola Company (U.S.A.)  Mars, Incorporated (U.S.A.)  PepsiCo, Inc. (U.S.A.)  Hansen Natural Corporation (hans)  Kraft Foods, Inc.;  Nestl S.A.;  Ocean Spray Cranberries, Inc.;  The Procter & Gamble Company.

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STP STRATEGY

Product Segmentation Strategy:

A mass market product targets the entire world as one segment.

A market segmentation strategy is a method of creating products specifically for target markets. Product segmentation strategy refers to the design of the product itself. A company performs a product differentiation strategy to distinguish a product in one market segment from competitors' products, as well as its own products available in other market segments. According to the University of North Carolina, product differentiation includes emphasizing product differences as well as designing product differences.

Mass Market

A mass market strategy is one type of product segmentation strategy. Soft drinks, such as Coca Cola, Pepsi and Dr. Pepper, are sold to a global market. There is no difference between the soda cans and bottles available in different geographic locations, or very little. The benefit of this strategy is that the company receives great

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economy of scale advantages since its factories are manufacturing the same product with the same materials.

Large Segment

Large segment strategies are slightly more specific. These require a significant investment to compete successfully in every available market at the same time. A company can specialize in making one type of product, such as compact cars, sedans, motorcycles or trucks. This can also allow a company to eliminate an unprofitable segment or target the segment where it has the greatest advantage.

Adjacent Segment

An adjacent segmentation strategy allows the company to consistently grow its market. Toyota initially targeted subcompact cars as these vehicles are small and cheaper to make. Using an adjacent segmentation strategy, Toyota could then switch to a slightly larger car, such as a station wagon. Following the example, it is easier for Toyota to make products that are slightly different rather than making subcompacts then picking large luxury sedans as its second expansion market.

Multi-segment

A multi-segment strategy applies when a company targets more than one segment. A manufacturer, such as Dow Chemical, can make many brands of detergent, changing the concentration and ingredients for each specific market. The company runs a separate advertising campaign for each product, and customers may not even know that products in different sectors are made by the same company. Some companies intentionally use this method to protect the reputation of their higher end brands.

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Niche
Niche marketing is another strategy. According to the City University of New York, this is one of the most effective methods for a smaller firm, such as Snapple, to compete with larger competitors, such as Coca Cola. The niche contains a small fraction of the market although a niche where the company can sell high end products compensates for this factor. Sub Zero refrigerators have 70 percent of the high end market even though they only have 2 percent of the overall refrigerator market, according to Duke University.

STP Of Cadbury
The STP strategy: In Indian markets, Cadbury India has managed its markets very well and is constantly improvising on the product offerings to different market segments. First step in the STP strategy would be to see how product is perceived in the markets. it clearly shows how Cadbury is successfully eliminating the doubts and myths of eating chocolates. A history about chocolates and related information about the product is also presented in the website. Next step will be segmenting the markets based on the gender, income, zones or areas, consumer attitude and buying process and any other basis that is feasible in the chocolate market. After the segments are recognized, provide such product offerings to these markets that benefit the consumer groups as well as helps to frame and design the marketing strategies. Cadbury s product offerings are mostly based on the production capacity, pricing of the various packs, packaging designs, storage facilities at the outlets, occasional and situational demands, celebrity endorsements and many other factors. Targeting the market segments, will be considered as the next important step. Unless markets are targeted with the product offerings, very few will buy the product. Therefore, Cadbury India has distinguished its product offerings to specific class of

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consumer groups. For example, Cadbury Temptations and Bourneville are meant for higher end consumer groups who are willing to pay more for the dark chocolates. More recently, Cadbury has introduced SILK as a product offering and targets anyone who can t resist chocolate. Cadbury SILK is only another product item in the CDM product line.The immediate step that would follow Targeting is Positioning the product offerings in the minds of consumers. After the Worm Controversy in October 2003, Cadbury faced lot of consumer grievances, enquiries, questions were raised on production quality, packaging, storage and even resulted into low sales with a halt in the production. However, Cadbury slowly emerged victorious and overcame the Worm issue by proving to be more committed towards consumers. The Management invested time, energy and money into packaging process, technology and even distribution. The company website even displays a false rumour alert to notify people about any wrongly given publicity or unreliable news. Consumer Service cell is also in place for consumer to address their queries, experiences and doubts over the products. Several ad campaigns were lined up consisting of many wonderful themes and taglines. Amitabh Bachchan undoubtedly raised the consumer's confidence and their chocolate eating habits. Some of the successful promotional methods are as below: Sponsoring the Quiz contests such as Bournvita Quiz contests hosted by Derek O Brien and Bournvita Confidence Academy shows. Advertising with themes such as Kuchh Khaas Hai, Pappu Pass Ho Gaya, Meetha Hai Khana, Aaj Pehli tarik hai, ARREY ad for Five Star Crunchy, Pet Puja ad for Perk, and Boonville's classic ad, Colourful Pandas for Gems ads and many others on the list. Offering several variants in the existing product lines such as Silk, Fruit & Nuts in Dairy Milk and Five Star, Fruity Gems in Gems, Glucose energy Perk; Bournvita little champs for children and such other versions in the products Launching new product ranges such as Bubbaloo bubble gum. Offering festival packs for Diwali, Raksha Bandhan and other special occasions; Offering different packs at different prices for different purchase situations and distributing them evenly. Constantly

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assuring consumers about the quality aspects in the products and anything associated with it. Cadbury Company with its effective marketing and an accurate STP strategy has ruled over consumer's taste buds and as for the company, it was always A Sweet Success Story that continues.

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SWOT ANALYSIS
Strengths: Strong brand names like Cadbury Dairy Milk, Five star and Eclairs. Rich product mix. Support from the parent Cadbury Schweppes.

Weaknesses: Lack of launch of new brands in Chocolates segment . Opportunities: The Indian market and more specifically the urban areas where the penetration of Chocolates is low can be developed as a future market through affordability and availability. Using information and technology to bring efficiency in logistics and distribution.

Threats: Stiff competition in Confectionery segment. The company has large exposure to foreign currency exchange rate risk, mainly on account of imported cocoa beans and cocoa butter in US Dollar and Pound Sterling.

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Dr Pepper Snapple Group Inc. (formerly Cadbury Schweppes Americas Beverages) is an American soft drink company, which was spun off from Britain's Cadbury Schweppes, on May 5, 2008, with trading in its shares starting on May 7, 2008. Cadbury Schweppes plc became Cadbury plc on May 5, 2008.

Strengths
Lack of capital constraints (availability of large free cash flow) Strong market position Solid brand portfolio Strong revenue growth Economies of scale Broader product line Popular brand of p0p

Weaknesses
Concentrated in North America (US, Canada, Mexico), where almost 70% of revenues come from Health Craze will hurt soft drink sales

Opportunities
Acquisitions & alliances Bottled water growth Hispanic growth in the US and Pepsi's ability to meet their tastes with current product lines (i.e., Sabritas chips) Growth in emerging markets

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Growing consumer health consciousness will help Pepsi as it is already a leader in non-carbonated drinks with brands Gatorade, Aquafina, Lipton; and also with healthy food brands such as Quaker oats.

Threats
Declining economy/recession Sluggish growth of carbonated drinks Coca-Cola & other smaller, more nimble operators Commodity price increases, fluctuating oil prices effect production and distribution (gas, plastic)

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FINANCIAL ANALYS
BALANCE SHEET

Dr Pepper Snapple Group, Inc. Income Statement Revenue Cost of Goods Sold Gross Profit Gross Profit Margin SG&A Expense Depreciation & Amortization Operating Income Operating Margin Nonoperating Income Nonoperating Expenses Income Before Taxes Income Taxes Net Income After Taxes Continuing Operations Discontinued Operations Total Operations Total Net Income Net Profit Margin Diluted EPS from Total Net Income Dividends per Share 10-Dec
5,636.00 2,243.00 3,393.00 60.20% 2,233.00 127 1,025.00 18.20% -79 -125 821 294 527 528 -528 528 9.40% 2.17 0.9

9-Dec
5,531.00 2,234.00 3,297.00 59.60% 2,135.00 117 1,085.00 19.60% 22 -239 868 315 553 555 -555 555 10% 2.17 --

8-Dec
5,710.00 2,590.00 3,120.00 54.60% 2,075.00 113 -168 -2.90% -1,023.00 --375 -61 -314 -312 --312 -312 -5.50% -1.23 --

All amounts in millions of US Dollars except per share amounts.

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Dr Pepper Snapple Group, Inc. Balance SheetAssets Current Assets Cash Net Receivables Inventories Other Current Assets Total Current Assets Net Fixed Assets Other Noncurrent Assets Total Assets Liabilities
Current Liabilities Accounts Payable Short-Term Debt Other Current Liabilities Total Current Liabilities Long-Term Debt Other Noncurrent Liabilities Total Liabilities Shareholder's Equity Preferred Stock Equity Common Stock Equity Total Equity Shares Outstanding (thou.)

10-Dec

9-Dec

8-Dec

315 571 244 179 1,309.00 1,168.00 6,382.00 8,859.00

280 572 262 165 1,279.00 1,109.00 6,388.00 8,776.00

214 583 263 177 1,237.00 990 6,411.00 8,638.00

10-Dec
-404 934 1,338.00 1,687.00 3,375.00 6,400.00

9-Dec
252 -602 854 2,960.00 1,775.00 5,589.00

8-Dec
234 5 562 801 3,522.00 1,708.00 6,031.00

0 2,459.00 2,459.00

0 3,187.00 3,187.00

-2,607.00 2,607.00

######## ######## ########

All amounts in millions of US Dollars except per share amount

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CHAPTER 5 COMPANY PROFILE

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NATIONAL BEVEARAGES

COMPANY PROFILE:
OVER VIE W

National Beverage Corp. develops, manufactures, markets and distributes a complete portfolio of quality beverage products throughout the United States. Incorporated in Delaware in 1985, National Beverage Corp. is a holding company for various operating subsidiaries. When used in this report, the terms we, us, our, Company and National Beverage mean National Beverage Corp. and its subsidiaries. Our lines of multiflavored soft drinks, including those of our flagship brands, Shasta and Faygo, emphasize distinctive flavor variety. In addition, we offer an assortment of premium beverages geared to the health-conscious consumer, including Everfresh, Home Juice, and Mr. Pure 100% juice and juice-based products; and LaCroix, Mt. Shasta, Crystal Bay and ClearFruit flavored and spring water products. We also produce specialty products, including Rip It, an energy drink geared toward young consumers, Ohana fruit-flavored drinks and St. Nicks holiday soft drinks. Substantially all of our brands are produced in 14 manufacturing facilities that are strategically located in major metropolitan markets throughout the continental United States. To a lesser extent, we develop and produce soft drinks for retail grocery chains, warehouse clubs, massmerchandisers and wholesalers (allied brands) as well as soft drinks for other beverage companies. Our strategy emphasizes the growth of our products by offering a branded beverage portfolio of proprietary flavors; by supporting the franchise value of regional brands and expanding

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those brands with new packaging and broader demographic emphasis; by developing and acquiring innovative products tailored toward healthy lifestyles; and by appealing to the qualityprice expectations of the family consumer. We believe that the regional share dynamics of our brands perpetuate consumer loyalty within local regional markets, resulting in more retailersponsored promotional activities. Over the last several years, we have focused on increasing penetration of our brands in the convenience channel through Company-owned and independent distributors. The convenience channel is composed of convenience stores, gas stations and other smaller up-and-down-the-street accounts. Because of the higher retail prices and margins that typically prevail, we have undertaken specific measures to expand distribution in this channel. These include development of products specifically targeted to this market, such as ClearFruit, Everfresh, Mr. Pure, Crystal Bay, and Rip It. Additionally, we have created proprietary and specialized packaging for these products with distinctive graphics. We intend to continue our focus on enhancing growth in the convenience channel through both specialized packaging and innovative product development. Beverage industry sales are seasonal with the highest volume typically realized during the summer months. Additionally, our operating results are subject to numerous factors, including fluctuations in the costs of raw materials, changes in consumer preference for beverage products and competitive pricing in the marketplace. National Beverage Corp. (National Beverage), incorporated in 1985, develops, manufactures, markets and distributes a portfolio of beverage products throughout the United States. The Company develops and sells flavored beverage products, which includes a range of flavored soft drinks, juices, waters and energy drinks. Its brands include Shasta and Faygo, each of which has over 50 flavor varieties. The Company also offers a range of flavored beverage products for the health-conscious consumers, which includes Everfresh, Home Juice and Mr. Pure 100% juice and juice-based products; LaCroix, Crystal Bay and ClearFruit flavored, sparkling and spring water products, and ASante waters. In addition, the Company produces and markets Rip It energy drinks, Ohana fruit-flavored drinks and St. Nicks holiday soft drinks, as well as powder beverage enhancers sold under the NutraFizz brand name. Substantially all of its brands are produced in 12 manufacturing facilities that are located in metropolitan markets throughout the continental United States. It also develops and produces soft drinks for certain retailers and beverage companies.

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Shasta and Faygo, the Companys soft drink brands, are manufactured and marketed throughout the United States. Its Shasta brand includes a range of flavors of carbonated soft drinks, as well as various water products. Faygo products are primarily distributed east of the Mississippi River and include a multi-flavored product line. National Beverage also produces and markets other brands of soft drinks, juices, waters and other beverages, including Ritz, Big Shot, Everfresh, Mr. Pure, LaCroix, Crystal Bay, Ohana, Rip It , Mega Sport and ASante.

The Company delivers its products through three distribution channels: take-home, convenience and food-service. The take-home distribution channel consists of national and regional grocery stores, warehouse clubs, mass-merchandisers, wholesalers and dollar stores. It distributes its products to this channel through the warehouse distribution system and the direct-store delivery system. Under the warehouse distribution system, products are shipped from the Companys manufacturing facilities to the retailers centralized distribution centers and then distributed by the retailer to each of its outlet locations with other goods. Products sold through the direct-store delivery system are distributed directly to the customers retail outlets by its direct-store delivery fleet and by independent distributors. The Company also distributes its products to the convenience channel through its own direct-store delivery fleet and those of independent distributors. Its Company-owned direct-store distribution systems service certain schools and other institutions. The Companys take-home, convenience and food-service operations use vending machines and glass-door coolers as marketing and promotional tools for its brands.

The Company competes with PepsiCo, Inc. and The Coca-Cola Company /

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History of National Beverage Corp.

Company History: A leading second-tier beverage company, National Beverage Corp. develops, produces, and sells branded soft drinks, juice products, and bottled water, distributing its products nationwide from 14 manufacturing facilities scattered throughout the United States. National Beverage acquired its first branded soft drink, Shasta, in 1985 and added Faygo, a regional brand, in 1987. With these two brands, the company began developing a diversity of flavored beverages, supplying its products to retail grocery chains, warehouse clubs, food service outlets, convenience stores, and vending machines. Other branded beverage products were added in later years, including Big Shot, a regional soft drink, Everfresh juice products, LaCROIX carbonated and still water, Sant sparkling mineral water, Body Works, an isotonic sports drink, and Spree, an all-natural, carbonated soft drink. Unlike many of its competitors, National Beverage manufactures its own beverage products instead of contracting production to other bottlers. The operation of its own bottling plants allows the company to perform bottling services for private label brands, giving it an important secondary source of income. During the late 1990s, National Beverage was 77 percent-owned by its founder and chief executive officer, Nick A. Caporella.

Origins Few companies in the history of business were created for the reasons that gave birth to National Beverage. At its founding, the company served as a mechanism to resolve an acrimonious struggle between two corporate barons, beginning as a hollow corporate shell whose sole purpose was to rid another company of an unwanted suitor. The dispute that eventually spawned National Beverage had its roots in the late 1970s, when a Fort Lauderdale company named Burnup & Sims Inc. was thriving as an installer of cable television and telecommunications systems. Headed by a Pennsylvania coal miner's son named Nick Caporella, the company was performing phenomenally well, demonstrating a level of profitability that delighted Wall Street and one investor, Miami financier Victor Posner, in particular. Posner watched Burnup & Sims's earnings nearly triple between 1978 and 1981 and decided to secure
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a piece of the rising profits. Posner began buying shares in Burnup & Sims, accumulating a sufficiently sized stake in the company to suggest to Caporella that a hostile takeover was imminent. Caporella was adamantly opposed to any interference or involvement on Posner's part and, as events unfolded, he displayed remarkable perseverance and ingenuity in parrying what he perceived as an assault by Posner. At first, as Posner's holding in Burnup & Sims gradually increased, it appeared Caporella was unwilling to fight. In 1982, when Posner's stake eclipsed 29 percent, Caporella quit in disgust, vacating his chief executive position at Burnup & Sims and taking 17 executives with him. The cable television and telecommunications company kept its doors open with no one inside to run the company, but, at the urging of Burnup & Sims's board of directors, Caporella returned after a month and obtained a temporary federal restraining order to bar Posner from interfering with the company's business. The restraining order, however, was only a temporary measure. Caporella wanted to achieve more than keeping Posner at arm's distance; he wanted to eliminate all of Posner's influence. From Caporella's perspective, Burnup & Sims's survival depended on Posner's removal from any association with the company. When Burnup & Sims's earnings collapsed in 1982, Caporella complained, "Our operating subsidiary presidents stopped working. They felt humiliated." At fault, according to Caporella, was Posner, a "dark cloud" that threateningly loomed over Burnup & Sims's headquarters. For the solution to his problem, Caporella searched for a white knight--a company willing to buy Burnup & Sims and thereby thwart Posner's threatening advances. He found no company willing to take on the role of Burnup & Sims's savior, but his search did lead to an effective, if somewhat confusing, solution. As Posner's percentage crept up to 43 percent, Caporella decided to create his own white knight and use his newly formed company to dilute Posner's ownership percentage in Burnup & Sims. National Beverage Corp. would be Caporella's white knight. Through a partnership controlled by Caporella, National Beverage Corp. was formed in 1985. The partnership retained 55 percent ownership of the new company and sold 40 percent to Burnup & Sims for $38.2 million plus 1.8 million in new Burnup & Sims shares. The shuffle of stock put the new Burnup & Sims stock under Caporella's personal control and consequently watered down Posner's Burnup & Sims holding

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from 43 percent to roughly 35 percent. The strategy worked, but its execution also created the need to put National Beverage into business. To fulfill the second part of his plan, Caporella had his new corporate shell acquire Shasta Beverages from Sara Lee Corporation. National Beverage paid $40 million for the soda subsidiary plus the 1.8 million Burnup & Sims shares. After this second flurry of transactions, National Beverage was a going enterprise, its existence tied to Burnup & Sims in what outside observers described as a sister-tosister relationship. Caporella, now with two companies under his control, was pleased by the results, but Posner still controlled 35 percent of Burnup & Sims&mdasho much in Caporella's view. He performed another securities trick, selling another 5.2 million new Burnup & Sims shares to National Beverage in June 1986, which further diluted Posner's stake to 23 percent. Caporella was overjoyed by the accomplishment, declaring, "It's like being reborn." Posner, however, did not make his full retreat until 1988 when Cincinnati financier Carl Lindner purchased Posner's shares and transferred them to Burnup & Sims. Caporella by this point had already turned his attention to National Beverage, deciding to rethink his operating strategy for Burnup & Sims while he worked to expand his new company. Intending to use Shasta as a foundation, Caporella aimed for a lofty objective, vowing to develop National Beverage into a $1 billion beverage company.

1987 Acquisition of Faygo Caporella's bid to develop a billion-dollar beverage company began with Shasta, a national brand that was first sold in 1889. To broaden National Beverage's distribution coverage, Caporella next added Faygo, a popular carbonated beverage in the Midwest, acquiring the regional brand in 1987 from Tree Sweet Products Corp. The acquisition of Faygo, which first appeared in 1907, and Shasta also gave National Beverage 12 bottling plants scattered throughout the United States, each located near major markets. As the company moved forward, it used its bottling facilities to bottle its own drinks and to bottle private-label brands. The use of its own bottling plants--a luxury not all beverage companies enjoyed&mdash ovided National Beverage with an important secondary source of income, as grocery chains turned to National Beverage

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for the production of their private-label brands and smaller, regional beverage companies contracted National Beverage to bottle their brands. With Shasta and Faygo, Caporella controlled a beverage company with annual revenues in excess of $300 million, a total far below the billions collected by National Beverage's giant rivals, The Coca-Cola Company and Pepsi-Cola Company. The presence of these two conglomerates, whose corporate reach extended around the globe, dictated to a large degree the strategy employed by Caporella. Coca-Cola and Pepsi controlled an overwhelming share of the U.S. market, each holding such a dominant and entrenched position that they were, in effect, only in competition with one another. Second tier beverage companies like National Beverage could not realistically hope to usurp either of the two giants, which Caporella realized. He was determined to avoid a direct battle for national market share against either of the beverage industry's behemoths, and instead sought to carve a niche for National Beverage as a producer of flavored sodas By the end of the 1980s, National Beverage was filling and labeling 1.5 million cans of soft drinks in its packaging plants and marketing these beverages in a rainbow of flavors. Financially the company was doing well, particularly in light of the weakened state both Shasta and Faygo were in prior to their purchase. Financial health, however, was not the only concern National Beverage faced during the late 1980s. A nagging issue, and one that drained National Beverage's financial strength, was the company's relationship with Burnup & Sims. In the aftermath of the struggle between Posner and Caporella, Burnup & Sims and National Beverage emerged as two companies woven tightly together. The transfer of stock from both Caporella-managed companies left Burnup & Sims owning 42.1 percent of National Beverage and made National Beverage a 55.6 percent owner of Burnup & Sims. Shareholders and outside observers had expected the two companies to be disentangled shortly after Posner sold the last of his shares in 1988, but it was not until April 1990 that a plan was announced for the separation of the companies. Although the unusually close relationship between the two companies had certain advantages for National Beverage, such as the use of Burnup & Sims's capital for expansion, the union created its own particular problems. Cross-management of the two companies had proven costly and intercompany debt also hobbled National Beverage's progress, making some resolution to the situation a necessity.
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National Beverage a Separate Company for the 1990s According to the plan first revealed in April 1990, National Beverage was to be spun off as a separate company and its stock offered for sale to the public. The longawaited deal occurred in September 1991, but its completion only added fuel to yet another nagging issue. In the September 1991 attempt to separate the companies, National Beverage's ownership in Burnup & Sims was only reduced from 55 percent to 36 percent and only 23 percent of National Beverage was sold to the public, which prompted most institutional investors to shun the beverage company's stock. When the dust had settled, Caporella ended up owning 77 percent of National Beverage, making his original $1.6 million investment in National Beverage worth $38 million. Additionally, Caporella's $900,000-a-year salary was paid by Burnup & Sims, by the company some believed had been weakened in order to strengthen National Beverage. To make the situation more distasteful to some, Caporella received one percent of National Beverage's revenues to run the company, a salary that amounted to $3 million following the 1991 public offering. One Burnup & Sims shareholder had had enough, and filed a lawsuit against Caporella, charging that Burnup & Sims shareholders had suffered financially from Caporella's dealings. "He's Victor Posner's twin," railed the disgruntled shareholder, a Miami insurance agent named Albert Hahn who held 50,000 shares of Burnup & Sims stock. Caporella fought back, explaining, "If it wasn't for me, my cash, and my idea, we [Burnup & Sims shareholders] would have been left to the ruin and rape of Victor Posner. I took the gamble and bought a losing company [Shasta] with a dying brand. I would like to have the recognition of a doctor who performed an operation and saved a patient." As had been the case since National Beverage's formation, publicly waged disputes attracted the bulk of attention, diverting it away from the day-to-day operations of the beverage company. Although the company's stock was not performing well because of the contentious squabbles punctuating its history, the company itself was making some headway. Amid the rancor surrounding him, Caporella was still intent on fashioning National Beverage into an industry heavyweight, declaring in 1992, "I am going to have a humongous big beverage company some day." At the time, National Beverage ranked as the sixth largest beverage company in the United States, but because of the enormous power wielded by Pepsi and Coca-Cola, sixth largest in the United States translated to a mere 1.7 percent national market share. Nevertheless, the
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company had flowered into a flavored-soda maker and added several brands to its portfolio since the 1987 acquisition of Faygo. Spree, an all-natural, carbonated soft drink, joined the company's fold by the beginning of the 1990s, and was followed by the acquisition of Big Shot, a regional, multiflavored soft drink line established in 1935. By 1992, the company was producing 108 flavors and 34 product lines, marketing more beverage flavors than any other beverage company in the world. Meanwhile, National Beverage's private-label bottling business had received a tremendous boost in 1991 when the U.S. Navy contracted the company to produce the Navy's own private-label brand of soft drinks called "Sea."

By the mid-1990s, National Beverage had increased its stature within the U.S. beverage industry, becoming the nation's fifth largest producer in 1996. By this point, the company had diversified into the production and sale of teas, bottled water, and juice products, adding to the scores of soft drink flavors it produced. The company's diversification into non-carbonated beverages gained its greatest momentum from two acquisitions completed in the mid-1990s, the purchase of WinterBrook Corp. and Everfresh Beverages Inc. WinterBrook, a Bellevue, Washington-based company, operated as the holding company for three brands, Cascadia, WinterBrook Clear, and LaCROIX, a brand of carbonated and still water. LaCROIX was the most important addition to National Beverage, giving the company a branded water beverage that ranked as a top seller in several Midwestern markets and enjoyed a noticeable presence on airline beverage carts. The acquisition of Everfresh moved the company solidly into the juice production business, helping Caporella to shape National Beverage into what he described as "a total beverage company." By 1998, sales had surpassed $400 million, far below the $1 billion goal Caporella had been aiming for during the previous decade. Although the late 1990s did not see Caporella sitting atop the "humongous big beverage company" he was hoping to create some day, National Beverage was enjoying annual sales growth of roughly 10 percent as it prepared for the 21st century. With this encouraging growth propelling it forward, and a consistent record of profitability supporting it, National Beverage and its growing roster of brands appeared solidly positioned for the years ahead.

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Principal Subsidiaries: BevCo Sales, Inc.; Big Shot Beverage Co.; Everfresh Beverages, Inc.; Faygo Beverages, Inc.; LaCROIX Beverages, Inc.; National BevPak; National Retail Brands, Inc.; PACO, Inc.; PETCO, Inc.; Shasta West, Inc.; Shasta Beverages, Inc.; Shasta Beverages International, Inc.; Shasta Food Services; Shasta Military Sales; Shasta Midwest, Inc.; Shasta Northwest, Inc.; Shasta Sales, Inc.; Shasta Sweetener Corp.; Shasta USA; Shasta Vending; Winnsboro Beverage Packers, Inc.

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KEY EXECUTIVES
Name Title

Nick A. Caporella Chairman, Chief Executive Officer, Chairman of Strategic Planning Committee and Member of Nominating Committee Joseph G. Caporella Stock Option Committee George R. Bracken President of Finance Edward F. Knecht Dean A. McCoy President Executive Vice President of Procurement Chief Accounting Officer and Senior Vice Principal Financial Officer and Senior Vice President, Director and Member of Compensation &

Board Members - NATIONAL BEVERAGE CORP (FIZZ) Name Nick A. Caporella Joseph G. Caporella Joseph P. Klock Jr. Samuel C. Hathorn Jr. Cecil D. Conlee Primary Company National Beverage Corp. National Beverage Corp. National Beverage Corp. National Beverage Corp. Oxford Industries Inc.

EXECUTIVE COMMITTEES* - NATIONAL BEVERAGE CORP (FIZZ) Committee Name Audit Committee Compensation Committee Chairperson Samuel C. Hathorn Jr. Cecil D. Conlee

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PRODUCT MIX

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TOP COMPETITORS
Company: The Coca-Cola Company Pepsico, Inc. Dr Pepper Snapple Group, In Groupe Danone Water Divisio Nestl Waters Private ITO EN, LTD. Private Red Bull GmbH Cott Corporation Britvic Plc Ocean Spray Cranberries, Inc. Nestl Diageo plc Heineken SABMiller plc Anheuser-Busch InBev Suntory International Corp. Kraft Foods Inc. Pernod Ricard SA Molson Coors Brewing Company Grupo Modelo, Constellation Brands Inc
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STP STRATEGY
SEGMENTATION STRATEGY NATIONAL BEVEARAGES
NATIONAL BEVERAGE CORP serves its products using mass marketing technique, which obviously falls in undifferentiated marketing, and undifferentiated marketing means no segmentation, but there are minor factors on which we can say that the NATIONAL BEVERAGE CORP segments its products and then targets the customers somehow. These factors are as follows.

GEOGRAPHIC SEGMENTATION

INTERNATIONALLY NATIONAL BEVERAGE CORP segments its products country wise and region wise, here the most important thing is the taste and the quality, it varies according to the taste and the income level of the people in that country, and i.e. Third world counties are given low quality taste. NATIONAL BEVERAGE CORP Company tries to satisfy the needs of a whole line of different people. They have drinks that target different, age groups, ethnic groups, sexes, lifestyles, etc. There are some of the different brands: Oasis This is a juice made for the younger working adults, 20-30. It is available in berry, lemon and orange tangerine. This drink is most popular in Britain and Ireland. Minute Maid Minute Maid targets kids and adults, ages 1-10 and 40+. This drink is conveniently packaged to take with you on the go anywhere. The health check is part of the reason for the wide target market, parents want their kids to be healthy and so knowing that this product is accepted by such a well known respected company pleases the parents and gives them a sense of relief.

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Powerade Powerade is a sports drink. It is designed with a great taste and is also thirst quenching. It is made for athletes of all ages, sexes and sports, but they would target this drink at teens and young adults, ages 13- 27. This drink is sold in many places but mostly over North America. Aquarius Aquarius is a sports drink, enjoyed by people who have healthy lifestyles. It is made for athletes of all ages, sexes and sports, but they would target this drink at teens and young adults, ages 13- 27. This produce is very well known in Europe. Particularly in France, Norway, Spain. But it is still known all over. It became even more successful when it became the official drink of the Olympic games in Barcelona in 1992. Full Throttle This is an energy drink. It is designed for athletes both male and female but particularly males, of ages 14-25. As we can see by looking at a select few of NATIONAL BEVERAGE CORP drinks they have a wide variety of drinks to satisfy everyones needs.

CLIMATIC Weather is the third major factor in effecting the NATIONAL BEVERAGE CORP selling. In NATIONAL BEVERAGE CORP marketing, main idea is to serve it cold, so we can say that, they focus more on hot areas of the world, i.e. middle east etc and there sale increase in summer. This is underdeveloped market so the NATIONAL BEVERAGE CORP consumption in summers is 60% and in winters is 40%.. It is a source of refreshment when a person is thirsty due to the hot weather. LOCALLY In Pakistan the NATIONAL BEVERAGE CORP segments more in urban and

suburban areas as compare to rural. 35 % population resides in urban areas and 65% population lives in rural areas in Pakistan. NATIONAL BEVERAGE CORP is focusing on urban areas as people there are more inclined towards such beverage while people in rural areas are more inclined drinking lassi and desi drinks.

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DEMOGRAPHIC SEGMENTATION

AGE Internationally NATIONAL BEVERAGE CORP has segments the small children introducing tastes like vanilla, lime and cherry, they focus children from 4-12. specifically target more young people than older. GENDER NATIONAL BEVERAGE CORP targets both genders with its wide variety of drinks. This market is relatively large and is open to both genders, thereby allowing greater product diversification.

FAMILY TYPE NATIONAL BEVERAGE CORP introduces its economy pack, and thats how they focus family and groups.

INCOME NATIONAL BEVERAGE CORP segments different income levels by packaging. Like for small income people it has small returnable glass bottle, for middle people it has non returnable bottle and for higher income people it has NATIONAL BEVERAGE CORP tin.

PSYCHOGRAPHICS SEGMENTATION All psychographics variables the social class, lifestyle, occupation, level of education and personality, NATIONAL BEVERAGE CORP segments everyone, but again it is their packaging which is different for different consumers.

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LEVEL OF EDUCATION A company has to make promotional strategies keeping in view the customer level. If the percentage of education is high in a country then through advertisements people can be made well aware of their product and can convey their message easily. Promotion and education has a direct relationship.

BEHAVIORAL SEGMENTATION It is how people perceive a specific product, in short psychological analysis of a product. NATIONAL BEVERAGE CORP all over the world is recognized as a quality drink and therefore people drink it without any hesitation whenever they are thirsty or otherwise. So marketers of NATIONAL BEVERAGE CORP have made it a drink for all people and for diabetic people they introduced .

OCCASIONS A very special occasion for the people of Pakistan Ramzan, people emphasis on enjoying NATIONAL BEVERAGE CORP at Iftar and then on Eid with friends & family with super price off promotion.

BENEFITS SOUGHT Sometimes, for the promotion strategy of , NATIONAL BEVERAGE CORP Company introduce prizes in the top cover. So they segment people by benefit sought, i.e. by giving them prizes.

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PEST ANALYSIS
We are going to produce a PEST analysis to find out what external influences may be affecting the National bevearages product and to what extent to which customers decide to buy them. The purpose of the PEST analysis is to analyze the organization (National bevearages ) operates and to identify how it may influence marketing decisions. A PEST analysis analyses the external environment in which an organization operates and identifies how it should influence marketing decisions. The initials P.E.S.T stand for: Political Economical Strengths Threats

Political Factors The actions of governments can have major effects on business and markets, including creating or reducing demand for particular products and services.

Economical Factors Consumer spending may be controlled by a range of economic factors such as income levels, inflation, taxes, unemployment, exchange rates and mortgage rates.

Socia l Factors Social trends are important because they have a direct influence on the demand for particular types of product . Technological Factors

Development in technology gives rise to new products and market opportunities, e.g. the rapid growing use of computerized reservations systems.

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FINANCIAL ANALYSIS
BALANCE SHEET NATIONAL BEVERAGE CORP Balance Sheet Data | Quarterly Data Period Ending Assets Cash and Short Term Investments Net Receivables Total Inventories Progress Payments & Others Prepaid Expenses Other Current Assets Current Assets Total Long Term Receivables Investment in Unconsolidated Subsidiaries Other Investments Property, Plant & Equipment Net Property, Plant & Equipment Gross Accumulated Depreciation Other Assets Deferred Charges Tangible Other Assets Intangible Other Assets Total Assets Liabilities Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities Total 0 8.19 M 0 6.65 M 0 5.06 M 0 4.43 M 72.57 M 53.83 M 34.67 M 0 3.55 M 164.62 M 0 0 53.40 M 182.22 M 128.82 M 22.34 M 7.58 M 14.76 M 240.36 M 84.14 M 53.74 M 39.61 M 0 8.81 M 186.30 M 0 0 56.14 M 177.91 M 121.77 M 23.24 M 8.23 M 15.01 M 265.68 M 54.50 M 49.19 M 38.75 M 0 14.90 M 157.34 M 0 0 57.64 M 175.45 M 117.81 M 24.14 M 9.10 M 15.04 M 239.12 M 65.58 M 51.98 M 44.06 M 0 11.89 M 173.51 M 0 0 57.37 M 171.37 M 114.00 M 26.76 M 11.71 M 15.04 M 257.63 M FY2010 FY2009 FY2008 FY2007

######## ######## ######## 2.22 M 0 17.80 M 71.72 M 0 16.30 M 68.46 M 0 15.60 M 67.94 M 0 17.34 M 75.82 M

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Long Term Debt Provision for Risks & Charges Deferred Taxes Deferred Income Deferred Tax Liability in Untaxed Reserves Other Liabilities Total Liabilities Shareholders Equity Non-Equity Reserves Minority Interest Preferred Stock Common Equity Common Stock Capital Surplus Revaluation Reserves Other Appropriated Reserves Unappropriated (Free) Reserves Retained Earnings Equity in Untaxed Reserves ESOP Guarantees Unrealized Foreign Exchange Gain (Loss) Unrealized Securities Treasury Stock Total Liabilities & Shareholders Equity Common Shares Outstanding Gain (Loss) on Marketable

0 0 15.60 M 11.46 M 98.79 M

0 3.17 M 16.52 M 10.69 M 95.67 M

0 0 16.62 M 6.76 M 94.50 M

0 15.22 M 9.23 M 100.27 M

0 0 15.00 M 126.57 M

0 0 15.00 M 155.01 M

0 0 15.00 M 129.62 M

0 0 15.00 M 142.36 M

######## ######## ######## ######## 13.30 M 0 3,000.00 130.77 M 0 0 12.30 M 0 160.21 M 0 0 11.66 M 0 135.47 M 0 0 10.00 M 0 149.87 M 0 0

0 18.00 M 240.36 M 46.16 M

0 18.00 M 265.68 M 46.01 M

0 18.00 M 239.12 M 45.95 M

0 18.00 M 257.63 M 45.51 M

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