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Cash Flow Productivity at PepsiCo: Communicating
Value to Retailers
Analysis by-
Akash PATIL
Bhumit KOTHARI
Case Blazer II
Synopsis of a Case
PepsiCo: Largest F & B business in US
World’s largest snack company
Second largest soft drink company
Employed over 2,00,000 worldwide
2009 sales: $43.2 Billion
Owns 19 Brands
Synopsis of a Case
Competitive edge- Product differentiation & Innovation
Goal- Single largest driver of Cash flow for retailers
Strength- Large, sophisticated and flexible distribution & merchandising system
Distribution logistics, Cross Docking
Direct Store Delivery (DSD)
Synopsis of a Case
Retailer Relationship Management- Team
Leaders
Merchandising decisions
Cash Flow productivity
Convincing Mercatco
Problems in a Case
Convince MercatCo and other retail
customers to use Cash flow productivity &
ROIC to make merchandising decisions
Prepare for a meeting next month with
MercatCo- create effective plan.
Change Change
2009 2008 2007 2009 2008
Total net revenue $43232 $43251 $39474 -% 10%
Operating Profit
FLNA- Frito lay $3258 $2959 $2845 10% 4%
QFNA- Quaker foods
America
628 582 568 8% 2.5%
LAF- Latin American
food904 897 714 1% 26%
PAB- Pepsi American
beverages
2172 2026 2487 7% (19%)
EUROPE 932 910 855 2% 6%
AMEA- Asia middle east
and Africa
716 592 466 21% 27%
Net impact on mark to
market
274 (346) 19 - -
PBG/PAS merger cost (49) - - - -
Restructuring - (10) - - -
other (791) (651) (772) 21% (16%)
Total Operating Profit $8044 $6959 $7182 16% (3%)
Total operating profit
margin
18.6% 16.1% 18.2% 2.5 (2.1)
2009
Total operating profit increased by 16% and margin by 2.5 points.
Foreign currency reduced operating growth
By 6%. Other corporate unallocated expenses increased by 21%
reflecting to losses, compared to previous year.
2008
Total operating profit decreased by 3% and margin
decreased by 2.1 points. Other corporate unallocated
expenses decreased by 16%
48%
23%
16%
13%
Net Revenue 2009
PespiCoamerican foods PespiCOamerican Beverage
PepsiCo International Europe PepsiCo international AMEA
36%
38%
16%
10%
Revenue % by segment 2009
PespiCo Americas foods PespiCo Americas Beverages
PepsiCo International Europe PespiCo nternational AMEA
Case Recommendations
PepsiCo showing slight decrease in current
liabilities. PepsiCo needs to increase the
revenue. The total debt of PepsiCo is also
decreasing which is very good signal for the
company. Financially PepsiCo is doing
good.
Case Recommendations
It will help you to obtain funding if you need it.
It will set out clearly the money that you need to put together to start the business and then to run it for a period.
It will help prevent you from going into a business that will not be successful.
It will highlight periods where your business may need extra financial help.
Conclusion
Company is doing good, decreasing in
trend for revenue is mainly due to the
current global economic crises which has
affected the profit margin. PepsiCo will
continue to generate solid value for our
shareholders.