PepsiCo, one of the world’s largest beverage and food companies, is presently focused on widen its business in Europe through the subsidiary PepsiCo International. In 2004, international sales accounted for $ 9,949 million - that is about one third of its group revenues. [Clark (European takeover targets), p. 31.]
Recently, the company has negotiated and realized several acquisitions in Europe. In May 2005, PepsiCo bought the leading German juice maker Punica Getraenke. [Mercer (Europe’s juice sector), p. 1.] In November 2005, it has reached agreement on the principal terms and conditions for the purchase of Sara Lee Corporation’s European nuts business in the Netherlands, Belgium and France. [PepsiCo International (Sara Lee Nuts Business), p. 1.]
With these investments, PepsiCo is driving an international expansion strategy. It aims growth outside the United States (U.S.) by adding local products to their global brands, until its traditional carbonated soft drink portfolio suffers from slower growth, and even some decline. [Mercer (Europe’s juice sector), p. 1.]
Using this situation as a background, it is interesting to analyze the market of PepsiCo. Who are the global competitors? What structure has the market, as the firm is seeking for growth?
The goals of this research are to deduct the market of PepsiCo and to measure its structure by using significant ratios.
First, PepsiCo will be briefly described and the contrast of a global and local view of the market will be compared. Afterwards the competitors of the firm will be named. The market will be split into the non-alcoholic beverage sector and the convenient food sector. Finally, the structure of these sectors will be measured by the concentration ratio and Hirschmann-Herfindahl-Index.
Table of Contents
1. Introduction
1.1 PepsiCo invests in Europe
1.2 Goals and Approach of This Study
2. The Boundary of the Market of PepsiCo
2.1 The Company PepsiCo
2.1.1 Overview
2.1.2 The Subsidiaries and its Products
2.2 Different Views of the Market of PepsiCo
2.2.1 Local View of the Market
2.2.2 Global View of the Market
2.3 Competitors
2.3.1 Coca-Cola Company
2.3.2 Nestlé
2.3.3 Cadbury Schweppes
2.3.4 Altria Group
2.3.5 Others
3. Structure of the Market of PepsiCo
3.1 Measurement of the Market Structure
3.2 Non-alcoholic Beverage Sector
3.3 Convenient Food Sector
3.4 Local View of the Non-alcoholic Beverage Sector using Official Market Definition
4. Conclusion
Research Goals and Key Themes
The primary goal of this research paper is to define the market boundaries of PepsiCo and to measure its market structure by utilizing significant economic ratios. The study investigates the competitive landscape by contrasting global and local views and analyzing key sectors to assess market concentration.
- Analysis of PepsiCo's international expansion strategy and corporate structure.
- Comparative evaluation of global versus local market perspectives.
- Identification and assessment of major international competitors in the beverage and food industries.
- Quantitative measurement of market structure using Concentration Ratios (CRn) and the Hirschmann-Herfindahl-Index (HHI).
- Examination of market sectors including non-alcoholic beverages and convenient food.
Excerpt from the Book
2.1.1 Overview
The company PepsiCo was borne in 1965, when the Pepsi-Cola Company acquired the snack food company Frito-Lay. In the nineties it started to expand its overseas operations. PepsiCo announced its IPO in 1999 – after it bought Tropicana juices from Seagram in 1998. Its purchase of the Quaker Oats Company in 2001 added the dominant Gatorade sports drink to its lineup.
Within the next years, PepsiCo found opportunities for growth overseas. In 2005, the company bought General Mills’s stake of the largest European snack food firm Snack Ventures Europe. In addition, PepsiCo acquired the German juice maker Punica Getraenke.
Today, PepsiCo operates through its four subsidiaries PepsiCo Beverages North America (PBNA), PepsiCo International (PI), Quaker Foods North America (QFNA) and Frito-Lay North America (FLNA) in nearly 200 countries. With 153,000 employees, the company had total net revenue 2004 of $ 29,261 million. In 2004, PepsiCo was ranked at place 62 of the Fortune 500 Ranking of the largest companies in the United States.
Summary of Chapters
1. Introduction: This chapter outlines PepsiCo's expansion strategy into Europe and defines the goals of the study, which include measuring the market structure of the firm.
2. The Boundary of the Market of PepsiCo: The section provides a detailed overview of the company, its subsidiaries, and its global competitors while debating the merits of local versus global market definitions.
3. Structure of the Market of PepsiCo: This core chapter applies concentration ratios and the Hirschmann-Herfindahl-Index to analyze the market power within the non-alcoholic beverage and convenient food sectors.
4. Conclusion: The final chapter summarizes the firm's strong position in concentrated sectors while acknowledging the limitations of broadly defined markets and highlighting regional differences in competition.
Keywords
PepsiCo, Market Structure, Industrial Organization, Concentration Ratio, Hirschmann-Herfindahl-Index, HHI, Non-alcoholic Beverage Sector, Convenient Food Sector, Global Competition, Market Share, Coca-Cola Company, Nestlé, Antitrust, Acquisitions, Business Strategy
Frequently Asked Questions
What is the central focus of this research paper?
The paper focuses on analyzing the market structure of PepsiCo, specifically by measuring its market position through economic concentration indicators.
Which specific industry sectors are evaluated in the study?
The research evaluates the non-alcoholic beverage sector and the convenient food sector.
What is the main objective or research question?
The goal is to determine the market boundary of PepsiCo and quantify its structure using concentration ratios and the Hirschmann-Herfindahl-Index.
Which scientific methods are utilized to analyze the market?
The study employs the concentration ratio (CRn) and the Hirschmann-Herfindahl-Index (HHI) to assess market competition and concentration levels.
What topics are covered in the main body of the paper?
The main body covers the company overview, an analysis of global versus local market views, an identification of major competitors, and quantitative sector analysis.
Which keywords best characterize this work?
Key terms include PepsiCo, Market Structure, Industrial Organization, HHI, Concentration Ratio, and Global Competition.
Why does the author prefer a global view of the market over a local one?
The author argues that a global view captures all regions and is more suitable for analyzing international firms with broad product portfolios and significant influence in their industries.
How does the author interpret the HHI results for the non-alcoholic beverage sector?
The author notes that while the sector appears concentrated based on the HHI being over 1800, the result should be viewed critically as a "broadly chosen market" definition may manipulate the index downward.
What role do mergers play in the context of the beverage industry discussed?
The paper highlights that potential mergers, such as between major players or acquisitions of smaller firms, significantly alter industry concentration and can lead to price increases and welfare losses.
- Quote paper
- Andreas Penzkofer (Author), 2005, The Market of Pepsi / PepsiCo, Munich, GRIN Verlag, https://www.grin.com/document/48711
