APPENDIX A (ref

APPENDIX A (ref.2)

APPENDIX B (ref.4)

STRENGHTS

Brand strength The Pepsi Company is the largest manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world. The Pepsi brand is unarguably one of the most recognizable brands in the 200 countries where it sells its products. The strong brand name is one of the basis for the companys competitive advantage on several of its core markets.

Effective strides in new markets

Pepsi has partnered with several companies (such as the joint venture with German Dairy) in order to increase the ability to react to demands and changes in the markets of iced tea, coffee and juices. The developing markets are more complex than the carbonated soft drinks.

Results of operations

In 2004, net-operating revenues totaled approximately $21.9 billion, an 8% increase

from 2002. Gross profit totaled $14.3 billion in 2004. The company generated $5,968 million from its operating activities and re-invests heavily into its business. The ability to generate significant cash flows is one of the its key strengths (ref.16).Strong existing distribution channels

Pepsi has operations worldwide and is well established in its distribution channels (such as store retailers or vending machines). Therefore, a new product launch can typically rely on the existing distribution system in order to reach the majority of its target market while requiring no major supply / delivery developments.

WEAKNESSES

Relying upon line extensions

PepsiCo is relying on brand extensions increase sales in specific lines, particularly its long-time carbonated soft drink products (i.e. the introduction of Vanilla Coke helped maintain sales for the core Cola beverages). However, there is a strong risk of cannibalizing existing sales in the long term (for example, Bubble Tea might deter on sales for iced tea).

Reliant upon particular carbonated drinks

The long-time presence of Pepsi beverage has established this particular line as a flagship product. While the core Pepsi products bring a solid base of sales and loyalty to the company, consumers expectations also become more and more anchored and single-lined, taking away freedom in the areas of line diversification and product modifications (taste, packaging, price).

Brand dilution

The tremendous amount of existing brands and new product being introduced by the company could diminish the value and differentiating strength of each product that is being manufactured.

Entrance into difficult non-core categories

The Pepsi Company is a truly global multinational business giant. While some categories of products are distributed in many areas of the globe (Cola, Powerade, etc.), geographical needs already require that these global brands are heavily adapted to their target region. Furthermore, many smaller and diversified product lines are more or less popular in one particular region over another. Therefore, the process of diversifying the production and marketing each product involves costly investments. These capital requirements typically increase as the product becomes heavily focused (for example, since the Pepsi brand is highly recognizable worldwide, marketing a bottle of Pepsi in Japan would be less difficult than marketing a bottle of Qoo in that same country Qoo being a lesser-known non-carbonated drink which was one of Pepsi's newest brand introduction in 1999).

Saturation of carbonated soft drink segment

Due to the countless number of brands available on the market, it becomes increasingly difficult in the soft drinks segment to innovate and create new products that genuinely stand out from their competition. And as we have seen, an analysis of the industry has shown that growth in the soft drinks market becomes difficult and challenging when the conditions and consumer trends cause a market demand that stays stagnant.

OPPORTUNITIES

New product introductions

The functional drinks market is one that particularly allows more innovation opportunities and gives greater freedom for creativity in the design, production, manufacturing, distribution, promotion and retailing choices and processes.

Brand is attractive to global partners

Because of the companys size (including value, brand name and operating revenues) and wide portfolio base, Pepsi enjoys a strong purchasing power over its suppliers, and also attracts large partnerships with various levels of consumer reach (e.g. Burger King, movie studio promotions, sponsorship agreements, etc.). Existing brand awareness also provides an international playing field for powerful marketing strategies.

THREATSStrong competition

Pepsi is competing in a global market that is characterized by an oligopoly between several (but few in numbers) competitors. The fight for market shares and sales in crowded markets becomes a complex one.

Potential health issues

The current trend of consumer and consumers groups awareness towards goods and services is both beneficial and threatening for companies in the food and beverages industry. Over the last few years, concerns over health issues have risen in the media through an expanded and ever-growing network of knowledge outputs (journals, TV channels, internet and so on). The move of the younger generation towards a healthier lifestyle call for careful planning and decision-making in new product developments. Large companies can also easily become the target of consumers apprehension.

Free trade

In an era of globalization, large international competitors can come out with comparative advantages (the constant fight to remain the first mover and market leader in a long-term spectrum). Issues arise when dealing with price competition and economic growth. Trade organizations are also faced with public pressure which can disrupt operations in one or more areas of the company.

APPENDIX D (ref.2 & 5)

D1. Off-Trade Company Shares of Functional Drinks by Value 2000-2004

% off-trade value rsp2001200220032004

QTG Canada Inc(PepsiCo)56.458.259.560.5

Coca-Cola Ltd32.232.433.132.8

Monarch Co, The7.55.84.53.3

South Beach Beverage Co1.11.111

GI Energy Drinks Corp0.10.10.20.2

Snapple Beverage Group0.10.10.20.2

Private label0.80.80.80.8

Others1.71.40.71.4

TOTAL100.0100.0100.0100.0

D2. Functional Drinks Sectors (Segmentation) by Value, 2005

*Based on United States report

D3. Functional Drinks Sales by Distribution Format (2004)

Distribution Channel% Sales

Supermarkets/hypermarkets30.8

Independent food stores2.8

Convenience stores1.5

Discounters5.9

Direct sales0

Vending0.1

Others58.9

Total100

APPENDIX E (ref.12)

Population by Age: 1990-2015

'000

19901995200020052010201510-14 yrs1,8771,9972,0562,1111,9631,868

15-19 yrs1,9381,9802,0962,1572,2282,068

20-24 yrs2,1242,0092,0702,2642,3482,426

25-29 yrs2,5832,1852,0762,2092,4382,529

TOTAL

8,741

8,891Total (Canada) = 32,241

Source:National statistical offices, Euromonitor International

Note:as at January 1st

Functional Drinks:

Consumption growth (Liters) from 1998 to 2003: 0.06 per year

Projected consumption (Liters) in 2005: 4.12

Market size calculations (ref.14 & 15):Total Canadian (10-29yo) Soft Drink Yearly Consumption (L)

# Male 10-29yoYrl Consumption (soft drinks)

(Population)(Liters)

4,436,8004,858,296

Total yrl consumption

(soft drinks Liters)

# Female 10-29yoYrl Consumption (soft drinks)

(Population)(Liters)

7,961,891

8 million Liters

4,251,5003,103,595

Total Canadian (10-29yo) Functional Drink Yearly Consumption (L)

8,000,000 L x 4.12% (functional drink market share) = 329,600 L

329,000 L is approximately equivalent to 1,000,000 cans (355mL volume)

MARKET SIZE:

8,688,300 people

329,600 L

1,000,000 cans

The market size represents our targeted pool of consumers. Further analysis in the marketing strategy plan will allow for estimates of the forecasted sales in the market segment specific to the RTD Bubble Tea drinks.

APPENDIX F (ref.13)

APPENDIX G

APPENDIX H (ref.16)

APPENDIX I (ref.16)