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PepsiCo Profits and Food Case Report

Based on the case and the example of the report to write these 2 parts:

# legal environment

# swot- weakness

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CUSTOM PRODUCTS MARKETING Ann Wicke International Business IB501 May 2, 2018 CONSULTING REPORT THE SUPER SOCIALS CONSULTING PROJECT Contents 1.0 Executive Summary …………………………………………………………………………………………………………….. 2 2.0 PESTLE Analysis ………………………………………………………………………………………………………………….. 3 2.1 Political Environment…………………………………………………………………………………………………………………….. 3 2.2 Economic Environment …………………………………………………………………………………………………………………. 4 2.3 Social Environment………………………………………………………………………………………………………………………… 4 2.4 Technological Environment ………………………………………………………………………………………………………….. 6 2.5 Legal Environment …………………………………………………………………………………………………………………………. 6 3.0 Competitive Advantage/Analysis ………………………………………………………………………………………….. 9 4.0 SWOT Analysis………………………………………………………………………………………………………………….. 11 4.1 Strengths and Weaknesses (internal factors) …………………………………………………………………………….. 12 4.2 Opportunities and Threats (external factors) …………………………………………………………………………….. 12 5.0 Mission Statement ……………………………………………………………………………………………………………. 13 6.0 Vision Statement ………………………………………………………………………………………………………………. 14 7.0 Social Media Strategy………………………………………………………………………………………………………… 15 7.1 Social Media Calendar ………………………………………………………………………………………………………………… 17 8.0 Conclusion ……………………………………………………………………………………………………………………….. 22 9.0 References ………………………………………………………………………………………………………………………. 23 P a g e 1 | 24 THE SUPER SOCIALS CONSULTING PROJECT 1.0 Executive Summary Custom Products Marketing is a family-owned business with about 20 employees. It sells products manufactured and labeled in China and sold in the US. It has been family owned and operated since 1997. The company owns their own manufacturing plants in China having 350 people working for them. Due to the fact that they own the manufacturing plants, they have control over production scheduling, and shipment/delivery dates, which increases the reliability of their delivery commitments—an important attribute for customers. The owner, Brandon, focuses on the sales and promotions in the US, while her husband is more involved with the international side of the business, calling China and visiting frequently. The CIAM team suspects it will focus on ways to track and enhance social media presence, on how to convert online interest into clients, and what those in competitor businesses are already doing. Custom Products Marketing reaches its targeted segments through multiple social media: • Wants to implement more on social media. They have engaged in social media, but Brandon wants to do so more effectively. • Currently, her clients find her through Yelp! Her daughter, a recent USC grad who has a photography business, has been helping her. • Brandon knows that, as part of the project, student teams will need to attain clarity about how her business works and analyze its competitive advantages/strategy. In this report, the CIAM team will give an overall summary of PESTLE and SWOT analysis. The team will also do the research on the business of similar competitors so that Custom Products Marketing have a better understanding on its current situation. From all the research, the team will find out the best social media strategy for Custom Products Marketing. P a g e 2 | 24 THE SUPER SOCIALS CONSULTING PROJECT 2.0 PESTLE Analysis A PESTLE Analysis is a very useful tool for companies looking to track the environment they currently sell in or the environment they are planning on launching a new product into. PESTLE stands for: P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental (PESTLE Analysis, n.d.). This report breaks the six PESTLE elements that Custom Products Marketing is currently confronting in the US. By analyzing their current environment, Custom Products Marketing will be able to identify key areas of potential growth and potential mishaps. The following PESTLE analysis is based on sales in the United States for the promotional products industry. 2.1 Political Environment The political factors include situations where the government may influence the economy or the industry. Key examples include new tax policies, regulations, or political policies that restrict international business (PESTLE Analysis, n.d.). The main potential political issue that Custom Products Marketing should keep an eye on the current tensions between China and the United States. Tensions have increased due to President Trump’s tariffs again China manufactures. More information on the specific tariff is provided below in the economic section. Since Custom Products Marketing has a factory in China, it is important to keep an eye on the political tensions between the two countries. President Trump has repeatedly called out China’s government and trade system for “cheating” and “robbing” the United States. As tensions continue to rise, it will be important for Custom Products Marketing to keep an eye on the news in the upcoming months. P a g e 3 | 24 THE SUPER SOCIALS CONSULTING PROJECT 2.2 Economic Environment Economic factors “are determinants of an economy’s performance that directly impacts a company and have resonating long term effects” (PESTLE Analysis, n.d.). Key examples include: inflation rate, interest rates, foreign exchange rates, economic growth patterns etc. (PESTLE analysis, n.d). For instance, if one country suffers a high inflation rate, companies would have to change the way they price their products and services. It would also affect the purchasing power of a consumer and change demand/supply models for that economy. For Custom Products Marketing, they should be aware of any changes of inflation rate or foreign exchange rates. Even though we are currently in a stable international economic environment, the company still need to prepare all before something happens. Recently, president Trump’s tariffs against Chinese manufacturers has affected so many Chinses manufacturers to export products to the US. According to Jennings (2018), there are four types of Chinese imports being affected by Trump’s tariff hikes: consumer electronics, tires and rubber, automotive, and machinery. The good news for Custom Products Marketing is that their manufacturer is not on the list of Chinese imports subject to tariffs. Therefore, Custom Products Marketing can still import their products at the same price as before. Custom Products Marketing can take advantage of increased tariffs on other importers. 2.3 Social Environment Social factors are determined by factors like cultural trends, demographics, and social media trends. Key examples include: holiday shopping trends and social media influencers (PESTLE analysis, n.d.). Custom Products Marketing is deeply affected by the social trends in the US. They have to keep a good eye out of popular product types and upcoming trends, so that P a g e 4 | 24 THE SUPER SOCIALS CONSULTING PROJECT they can offer the appropriate products. Companies are always looking for that next clever idea to promote their business. If Custom Products Marketing stays in touch with the social trends it becomes easier to provide desired products to their customers. Current trends that Custom Products Marketing should be aware of are “athleisure” and Mobile E-Commerce. Athleisure is a $44 Billion Dollar industry in the US (Wilson, 2018). It is “faux athletic gear sold largely to non-athletes who care about fashion, not necessarily function” (Wilson, 2018, para 11). Its stylish yoga pants can be worn to brunch, the movie theater, or yoga. They are “workout” clothes that are designed to be comfortable and look pretty. This industry is growing rapidly in the US and several companies are capitalizing on that by creating branded athletic wear. Custom Products Marketing works with a lot of clubs and sports teams, they should be on the lookout for opportunities to sell branded clothing in this booming industry. Today’s technology allows for consumers to shop on a variety of devices. Mobile phones continue to grow in the E-Commerce Market and more and more customers purchase through their phones (PR Newswire, 2018). Several Business-to-business companies are capitalizing on this and are attributing increases in growth and value to their “stronger engagement on the mobile devices” and that, “the increase in the number of new and repeated online shoppers is driving the market of e-Commerce in the country” (PR Newswire, 2018, para 2). Currently All Products Promo has a website that adapts for a mobile version of the website. This is excellent. They should continue to make sure their mobile site runs effectively and provides a good user experience. P a g e 5 | 24 THE SUPER SOCIALS CONSULTING PROJECT 2.4 Technological Environment Technological factors are about the innovations in technology, which includes “automation, research and development and the amount of technological awareness that a market possesses” (PESTLE analysis, n.d.). With the development of high technology, manufactures have improved their speed of production and quality of the products. The usage of industrial robots is rising in many different industries. According to West (2016), In 2013, there were 1.2 million robots in factories and warehouses. The total rose to 1.5 million in 2014 and is expected to increase to 1.9 million next year. Japan leads the way in use of industrial robots with over 306,000 robots in use, compared to 237,000 in North America, 182,000 in China, and 175,000 in South Korea and Germany each. Therefore, from the development of automation, robotics, and advanced manufacturing, the overall economy gets increased. Custom Products Marketing must already be aware of that they should stay abreast of advances in automation, which affect their competitiveness in manufacturing. Since Custom Products Marketing owns two manufacture factories in China, they should always get their machines updated on time. In[ this way, the factories can produce more and better products. The costs may be increased, but at the same time, the benefits should also be increased as well. 2.5 Legal Environment The legal factors take into account any new policies or laws that are passed. Key examples include: consumer laws, safety standards, or labor laws (PESTLE analysis, n.d.). There are several legal situations that Custom Products Marketing should be aware of because they have potential consequences for their products: Supreme Court Case South Dakota v. Wayfair, a P a g e 6 | 24 THE SUPER SOCIALS CONSULTING PROJECT Fixed Price on Promotional Products Scheme, and Assembly Bills 2779, 2379, and 1884. South Dakota v. Wayfair is a current case in the Supreme Court, which deals with online sales tax. The Supreme Court is currently split on its vote to overrule the 1992 decision, Quill Corporation v. North Dakota, which said “the Constitution bars states from collecting sales taxes from companies that do not have a substantial connection to the state” (Liptak, 2018, para 3). There are current arguments to overturn this ruling and require that online retailers, like Custom Products Marketing, collect sales tax in all the states where they do not have a physical presence. There is also discussion for collecting back taxes. South Dakota recently created a law that required “all merchants to collect a 4.5 percent sales tax if they had more than $100,000 in annual sales or more than 200 individual transactions in the state” (Liptak, 2018, para 14). They then proceeded to sue three large online retailers (Wayfair, Overstock.com and Newegg) for violating the law, which lead to this Supreme Court case. A decision is scheduled for June (Liptak, 2018). Custom Products Marketing should keep an eye on this court case, because if it is overruled, it could have a significant impact on their online business and sales tax policies. More information on where the current case is can be found here: https://www.nytimes.com/2018/04/17/business/justices-divided-on-sales-taxes-for-onlinepurchases.html. The second political factor that Custom Products Marketing should be aware of is a current criminal case against their competitors. Several promotional companies have been recently brought up on charges for conspiring to fix prices, specifically for silicon wristbands. Many competitors have already pleaded guilty in August of 2017 and customers are filing civil suits to get their money back. Promotional product companies who have plead guilty include: Custom Wristbands Inc., Kulayful Silicone Bracelets, Kulayful.com, Speedywristbands.com, P a g e 7 | 24 THE SUPER SOCIALS CONSULTING PROJECT Promotionalbands.com, Wristbandcreation.com, 1inchbracelets.com, Zaappaaz Inc., WB Promotions Inc., Wrist-band.com and Customlanyard.net (Central, 2018). This could provide an opening for Custom Products Marketing as customers look for more trustworthy companies to do business with. Assembly Bill 2779 revolves around plastic water bottles in California. This bill would “prohibit retailers from selling or offering single-use plastic beverage containers unless the bottles’ caps are tethered or otherwise contiguously affixed” (Central, 2018, para 2). This bill would not affect bottles in the reusable category, but rather, only those bottles with liquids inside of them. Crystal Geyser has already planned accordingly and has released a new cap on their plastic bottles, information on it can be found here: http://crystalgeyser1cap.com/ (Crystal Geyser, n.d.).While this bill is geared towards soda and other retail beverages, it could impact those specialty distributors who brand water bottles for events (Central, 2018). Custom Products Marketing does not sell any pre-sealed beverages, so this bill would not personally affect them. However, it is important to be aware of the situation as it might have an impact on the industry. Assembly Bill 2379 is geared towards clothing and garments made with more than 50% synthetic material (i.e. polyester). If passed, this bill would require all products made with more than 50% synthetic material to be sold with a warning label. This label can be a sticker, tag, or other type of label. The warning would state that these products shed plastic microfibers when washed (Central, 2018). This bill would only effect products sold in California, but most companies would probably implement the warning to all products sold to avoid confusion between sales. Custom Products Marketing would be affected if this bill were to pass. They sell a variety of products that are polyester, including bandanas, grocery totes, backpacks, headbands, lanyards, and blankets. The impact would include a small additional layer of cost to the P a g e 8 | 24 THE SUPER SOCIALS CONSULTING PROJECT production costs, as they would need to print and attach a warning label to all washable products made with more than 50% synthetic materials. It will be important for Custom Products Marketing to keep an eye on this bill. Assembly Bill 1884 is targeted towards disposable plastic straws. This bill would ban restaurants from providing single-use plastic straws to customers, unless specifically asked for (Central, 2018). This potentially opens up an avenue for re-useable branded straws for restaurants (Central, 2018). Custom Products Marketing currently only sells party glow straws. They may want to look into providing restaurants with branded re-usable straws if this bill is passed. 3.0 Competitive Advantage/Analysis The promotional products industry is highly saturated here in the United States. This makes it even more important to keep a close eye on competitors. The next section of the report does a competitive analysis on one of Custom Products Marketing’s competitors: 4 Imprint. It breaks down how their products compare with Custom Products Marketing in terms of (a) enduser utility? (b) price? (c) quality/reliability? (d) service? Custom Products Marketing should take this template and apply it to other competitors in the industry and do a quick analysis yearly. 4 Imprint was developed in 1987. Their mission to make promotional products easier and cheaper. They began with a catalog and have developed from there (4 Imprint, n.d.). Their website guarantees: Lowest prices or double the difference back, On-time shipment or your order is free, 100% satisfaction, Free samples, Free art, and Free proof of your imprint (4 Imprint, n.d.). End-user Utility: 4 Imprint has many many options for all of their products. When doing the price comparison below, we found that 4 Imprint had a greater selection than Custom Products P a g e 9 | 24 THE SUPER SOCIALS CONSULTING PROJECT Marketing and that they had a large variation in quality with all of their products. For both Custom Products Marketing and 4 Imprint, customers seemed satisfied with their end products and their usefulness. Price: For price, our team looked at three items: a tote bag, a pen, and a sticky note. It seems as though Custom Products Marketing is a price leader in some areas, but not others. The only area where we found Custom Products Marketing to be significantly more expensive was the bag section. This may be because Custom Products Marketing has a separate website for bags. Otherwise, they were extremely competitive in the price range. • Tote Bag: Green, 1,000, 15in x 13in x 10in Grocery Tote o 4 Imprint: $0.89 per tote – https://www.4imprint.com/product/1068361513/Value-Grocery-Tote-15-x-13 o Custom Products Marketing: $1.55 https://promoplace.com/allproductspromo/p/JROPV-KHSJP/jumbo-shopper-tote • Javelin Pen: White and Red, 500 Pens o 4 Imprint: $0.34 per pen – https://www.4imprint.com/product/6551/Javelin-Pen o Custom Products Marketing: $0.33 per pen https://promoplace.com/allproductspromo/p/NVSMM-FSPJI/slimster-retractablepen • Sticky Note Pad & Flag Book: Blue, 250, o 4 Imprint: $1.59 per pad – https://www.4imprint.com/product/9950-S24HR/Micro-Sticky-Book-24-hr o Custom Products Marketing – $1.20 https://promoplace.com/allproductspromo/p/RNRLM-IUSBS/compact-sticky- P a g e 10 | 24 THE SUPER SOCIALS CONSULTING PROJECT notes–flags-notepad-notebook Quality/Reliability: 4 Imprint has a couple bad reviews on Yelp. Most of the reviews praise the service and the quality of products. When they do have bad reviews, they claim incorrect orders, accidentally canceled orders, incorrect designs on orders. For example, one customer claims they had the “wrong design being produced on apparel over and over again” (Yelp, 2017). Custom Products Marketing is definitely more reliable than 4 Imprint in terms of order correctness and quality. Service: 4 Imprint has 4 stars on Yelp. Customers rave about their customer service in multiple reviews. One customer claims, “I am always impressed by these people. I’ve ordered tens of thousands of dollars in advertising material from these guys and I have to say that their customer service has always been superb” (Yelp, 2017). Another describes them as “Fast, efficient service and great product” (Yelp, 2017). They do only have four stars and few bad reviews, but none of the bad reviews seem to mention customer service. Custom Products Marketing has 5 stars, so they are ranked higher on yelp. They do however only have 9 reviews for their Custom Products Marketing Yelp page. 4 Imprint has 60 reviews. Based on these observations, it looks like Custom Products Marketing has better service, but that 4 Imprint could be close competition. 4.0 SWOT Analysis A SWOT analysis is a summary of internal and external factors f a company and industry. It reviews four basic quadrants: Strengths, Weakneses, Opportunities, and Threats. Review the chart below to see a quick summary of Custom Products Marketing’s SWOT. Data was pulled from the PESTLE and competitor analysis. P a g e 11 | 24 THE SUPER SOCIALS CONSULTING PROJECT 4.1 Strengths and Weaknesses (internal factors) Strengths Weaknesses • Customer Service • Large pool of competitors • Price • Small and Relatively Unknown • Reliability • Google search results low • Manufacturing • Google Search “Custom Products • Accurate Lead Times Marketing” takes me to their • Mobile Responsive Website blog, not actual website. • Website usability • Yelp Reviews • Price Chart for Products • Lower number of options compared to competitors 4.2 Opportunities and Threats (external factors) Opportunities • • Threats Develop new market like Japan • Similar competitors or other countries • Cheaper prices from others Design new products of cultural • Many customers care about more and social media trends • prices than quality Take advantage of automation to • Be aware of inflation rate, keep products being updated to interest rates, foreign exchange the trend rates, and economic growth • Re-usable straws patterns • Promotional Athleisure • P a g e 12 | 24 South Dakota v. Wayfair THE SUPER SOCIALS CONSULTING PROJECT • Assembly Bills 2779, 2379, and 1884 • Political environment between US and China and President Trump’s proposed tariff 5.0 Mission Statement Drucker asks the question “What is our business?” which is similar to the question, “What is our mission?” A mission statement is a declaration of an organization’s reason for being and it is different from one organization to another. We need to develop our mission statement very carefully so that all the people working in the organization can understand that why the business is established and can make feasible strategies after properly allocation of resources. While preparing a mission statement, managers from all the different departments or of different functions should be considered to develop or modify the mission statement. Mission statements should be inspiring, enduring, concise and clear to both employees and customer so that they both can have a strong emotional bond with each other. An appropriate mission statement is one which is having less than 100 words and it ignores ratios, numbers in it. ( David, David and David,2014). Effective mission statements help the firm to gain and maintain competitive advantage. Customer satisfaction is the most valuable intangible asset. The whole business organization should be customer oriented and mission statements should be developed after keeping this thing in mind as it could help in properly implementing marketing strategy. Customer centered mission statement enable a firm to effectively engage in advertising, P a g e 13 | 24 THE SUPER SOCIALS CONSULTING PROJECT publicity, selling and other marketing activities to induce customers to develop an attachment and bond with a firm (David et al, 2014). . Simply including the word “Customer” in the mission statement will not solve the purpose, the statement should be actually customer oriented. Mission statements which are written from customer perspective is helpful in proper implementation of marketing strategy. Customer oriented mission statements are designed from a customer perspective would positively impact organization performance by enhancing customer satisfaction (David et al 2014). Three main components which should be included in mission statement are as follows (Skrabanek, 2018). a) What do we do? b) Whom do we serve? c) How do we serve them? Mission Statement of Custom Products Marketing “To provide the best promotional products and best service” So, after analyzing their mission statement, we can find only one component in it and that is what they do. We get an idea that they are providing or making promotional products for other businesses. Rest other two components are missing components are missing. “We provide affordable and high quality promotional products for businesses at accurate delivery dates” 6.0 Vision Statement A vision statement is a kind of a road map which shows the future of the company. It is an inspiration and framework for all strategic planning. Creating a vision statement means articulating the dreams and hopes of the business. It even shows what a company is trying to P a g e 14 | 24 THE SUPER SOCIALS CONSULTING PROJECT build, and it serve as a touchstone for future action. Vision statements answer the question “Where we want to go?” WHY Vision statement is important for small business? a) A clear vision statement sets stage for strategic plans. b) It focuses and aligns efforts so that each employee is working for the same goal. c) Provide guidance to employees in making right decisions. d) It motivates and inspires personnel to go long way in achieving organization goals. Tips for crafting a Vision Statement a) Project five to ten years in the future. b) Dream Big and focus on success. c) Infusing vision statement with passion and emotion. d) Draw a graphic picture of the business you want in your mind. e) Communicate it with employees f) Be ready to commit time and resources to the established vision Vision for Custom Products Marketing “Providing result-oriented promotional products to help unleash the power of your logo” 7.0 Social Media Strategy As part of the social media strategy, we recommend the client to use Hootsuite (https://hootsuite.com/#), which is a social media posting platform. A platform such as Hootsuite allows you to schedule posts in advance and post on multiple social media profiles using just one platform. With Hootsuite, you have the capability of gathering valuable social media analytics on the performance of your posts and measure ROI. P a g e 15 | 24 THE SUPER SOCIALS CONSULTING PROJECT Further, we recommend using a social media calendar to organize posts. Here’s how a calendar helps your business: 1. Saves time – Instead of creating content on a daily basis, you can spend time in advance and write posts selecting a theme and engaging content for each month. This is really effective for time management and organization. Then you could use a platform such as Hootsuite to schedule these posts to go on their allocated slots. 2. Balanced topics – Viewers don’t follow a social media account to see repeat content. With a social calendar it is easy to make sure that you don’t make the mistake of overloading your viewers with the same content. For this reason, we recommend that you leverage the use of local events in the social calendar to reach out to new audience and at the same time be able to promote through hashtags and profile tags for a bit of free promotion. (Look at events posts below) 3. Themed Posts – These are great for adding a bit of fun to your social media. For the month of June, we created a theme for just bags and exclusively created posts for promoting special offers and fun stuff associated with bags. (Look for themed posts below) As an example, World Environment Day is great for promoting Tote bags as they help reduce the usage of plastic bags at various levels. “#mondaymotivation” is a great hashtag to create engaging content to keep the audience hooked. 4. Important dates – These help you relate to the local population. For example, don’t forget to post Happy 4th of July or in the month of June, Father’s Day is a great date to leverage and create engaging content. 5. Do it right – It’s a great idea to post uniformly across all channels. However, don’t post everything everywhere. Every social media platform has its advantages and P a g e 16 | 24 THE SUPER SOCIALS CONSULTING PROJECT disadvantages. #mondaymotivation is great for twitter and Instagram. However, Father’s Day is great for Facebook. A social media calendar helps you in clearly defining which posts go where. 7.1 Social Media Calendar Month: June Theme: Bags Bags Bags! Total Number of Posts: 8 Special Dates: June 5:- World Environment Day June 7-24:- Hollywood Fringe Festival June 17:- Father’s Day June 21:- Summer Solstice Festivals: June 7-24:- Hollywood Fringe Festival Calendar: Channel Monday Tuesday Wedn Thursday Friday Saturday Sunday esday Facebook June 7 – June 29 – June 17 – Hollywood Fun Friday Father’s Day Fringe Festival Twitter June 11 – June 5 – June 7 – June 3 – Taste #mondaymotivation World Hollywood of Nation Fringe Festival P a g e 17 | 24 THE SUPER SOCIALS CONSULTING PROJECT Environment Day Instagram June 11 #mondaymotivation June 7 – June 29 – June 3 – Taste Hollywood Fun Friday of Nation Fringe Festival June 17 Father’s Day June 21 Summer Solstice Important Posts: June 1: “Bags Bags Bags, everyday bags.. June is our month for bags.. Be on the lookout for offers” P a g e 18 | 24 THE SUPER SOCIALS CONSULTING PROJECT June 3: Taste of nation festival is on. ‘Custom Products Marketing’ provides these awesome looking cooler bags to keep food fresh. http://ce.nokidhungry.org/losangeles June 5: 15% off Tote Bags – World Environment Day Offer* Tote bags are great for the environment and for your brand. Get your brand logo customized tote bag today. We ensure highest quality. #worldenvironmentday P a g e 19 | 24 THE SUPER SOCIALS CONSULTING PROJECT *For orders over $50 only. Customized bags June 7: The Hollywood Fringe Festival represents freedom of expression. Free your employees of their load by giving them exclusive high-quality company branded office bags. June 11: #mondaymotivation – A list in time saves them dimes. Tips for grocery shopping as you use your branded tote bag: • Mistake: Not making a list at all • Not a mistake: Make a list • Save money – Plan a little in advance P a g e 20 | 24 THE SUPER SOCIALS CONSULTING PROJECT June 17: Father’s Day Being a daddy ain’t easy, that’s why we have amazing bags that you can gift to the Dads in the office. #fathersday *Customized bags| 15% off on orders over $50 June 21: Summer Solstice It’s the longest day of the year. Perfect time to sell summer products in our transparent tote bags. #summersolstice P a g e 21 | 24 THE SUPER SOCIALS CONSULTING PROJECT June 29 – Change moisturizer with toothpaste to instill laughter in the household. #funfriday These are all good events to get things going, the more that Custom Products Marketings posts on social media, the more known they will become. There are plenty of events and festivals coming up, such as ‘Burning Man’ and ‘Labor Day,’ that will be relevant and trending on social media. 8.0 Conclusion After researching everything that was required in the Statement of Work, The Super Socials were able to come up with a few possible ideas to improve Custom Products Marketing’s social media. It is important to make sure that the company’s social media is up and running, and that is relevant in the upcoming trends, as this will bring customers who want to promote their companies at these events. This also provides an advantage among the competitors, since it seems that they are not all that invested in the happenings of social media, which is definitely a big mistake. The world is focused on technology, and social media is a big part of that. Instagram, Facebook and Twitter are great platforms to market to companies that are up and coming, who are trying to get their name out there. The tools provided in this report will go a long way in becoming relevant in the P a g e 22 | 24 THE SUPER SOCIALS CONSULTING PROJECT social media world. 9.0 References 4 Imprint. (n.d.). About 4imprint. Retrieved from https://www.4imprint.com/info/aboutus Bulletin, D. (2018, January 29). 2018 List of Festivals, Fairs and Special Events in SouthernCalifornia. Retrieved from https://www.ocregister.com/2018/01/29/2018-list-offestivals-fairs-and-special-events-in-los-angeles-county-and-southern-california/ Burst (n.d). Retrieved from https://burst.shopify.com/free-images Central, A. (2018, April 2). Promo Companies Sued Over Price Fixing. Retrieved from https://www.asicentral.com/news/newsletters/promogram/april-2018/promo-companiessued-over-price-fixing/ Central, A. (2018, April 18). Analysis: Proposed California Regulations Could Impact Promo. Retrieved from https://www.asicentral.com/news/newsletters/promogram/april2018/analysis-proposed-california-regulations-could-impact-promo/ Crystal Geyser. (n.d.). Crystal Geyser Alpine Spring Water. Retrieved from http://crystalgeyser1cap.com/ David, M. E., David, F. R., & David, F. F. (2014). Mission Statement Theory and Practice: A Content Analysis and New Direction. International Journal of Business, 7(1). Retrieved from http://strategyclub.com/wp-content/uploads/2014/11/MissionArticle.pdf-file.pdf Hootsuite. Retrieved from https://hootsuite.com/# Liptak, A. (2018, April 17). Supreme Court Divided on Sales Taxes for Online Purchases. Retrieved from https://www.nytimes.com/2018/04/17/business/justices-divided-on-salestaxes-for-online-purchases.html PESTLE Analysis. (n.d.). What is PESTLE Analysis? A Tool for Business Analysis. Retrieved from http://pestleanalysis.com/what-is-pestle-analysis/ P a g e 23 | 24 THE SUPER SOCIALS CONSULTING PROJECT Pixabay (n.d) Retrieved from https://pixabay.com/ PR Newswire. (2018, April 24). Promotions throughout the quarter attracted users and enabled Indonesian B2C e-Commerce Market to register 25% q-o-q growth in the quarter ending December 2017, says Frost and Sullivan | Markets Insider. Retrieved from http://markets.businessinsider.com/news/stocks/promotions-throughout-the-quarterattracted-users-and-enabled-indonesian-b2c-e-commerce-market-to-register-25-q-o-qgrowth-in-the-quarter-ending-december-2017-says-frost-and-sullivan-1022082266\ Skrabanek, B. (2018, April 11). Difference Between Vision and Mission Statements: 25 Examples. Retrieved from https://www.clearvoice.com/blog/difference-between-missionvision-statement-examples/ Unsplash (n.d). Retrieved from https://unsplash.com/ West, D. (2016, June 2). How technology is changing manufacturing. Retrieved from https://www.brookings.edu/blog/techtank/2016/06/02/how-technology-is-changingmanufacturing/ Wilson, C. (2018, April 18). Why The Word “Athleisure” Is Completely Misunderstood. Retrieved from https://www.forbes.com/sites/chipwilson/2018/04/18/why-the-word-athleisure-is-completelymisunderstood/#3deeb5054697 Yelp. (2017, January 16). 4imprint – Oshkosh, WI. Retrieved from https://www.yelp.com/biz/4imprint-oshkosh-4 P a g e 24 | 24 For the exclusive use of J. DORSETT, 2019. 9 -3 1 4 -0 5 5 REV: DECEMBER 21, 2015 JOSEPH L. BADARACCO MATTHEW PREBLE PepsiCo, Profits, and Food: The Belt Tightens Indra Nooyi, CEO of the food and beverage company PepsiCo, had emphasized adding healthier offerings to the company’s portfolio since her arrival in 2006. Her goal was to grow the company’s “Good-for-You” product category (with items such as oatmeal and fruit juices) to a $30 billion business by 2020.1 “With everyone’s focus on health, products that are nutritiously good, or nutritionally better than anything else out there, are a huge opportunity,” Nooyi explained in 2011. 2 With roughly onethird of the U.S. adult population obese, Nooyi’s strategy was also in line with a growing recognition that excess sugar consumption contributed to serious health problems.3 However, Nooyi and PepsiCo faced criticism not only for this strategy, but for the company’s financial results—particularly that of its stock price—which lagged its competitors (see Exhibit 1 for stock price comparisons with competitors, and Exhibits 2a through 2f for PepsiCo’s and select competitors’ financials). PepsiCo’s U.S. beverages business had struggled, and some believed that Nooyi’s strategy drew attention away from PepsiCo’s major brands.4 It appeared at times in the early 2010s that her job was at risk.5 While PepsiCo’s board publicly vouched for Nooyi and PepsiCo’s strategy, it was also said to be disappointed at the lack of potential successors within PepsiCo’s top management.6 PepsiCo’s efforts to develop healthier foods had won it few friends among health advocates. “The best thing Pepsi could do for worldwide obesity would be to go out of business,” one academic remarked.7 Others pointed to apparent duplicity as PepsiCo fought, through industry trade groups, against regulations, taxes, and other initiatives aimed at reducing obesity. 8 Comparisons were made between the food and beverage industries and the tobacco industry in their lobbying efforts.9 Fundamental questions remained about how Nooyi would lead PepsiCo. As the company grew in international markets, and as obesity became a larger concern in the developing world, should it sell its high-earning core brands there or focus on designing new, more healthful products? What were PepsiCo’s responsibilities to its consumers? Like tobacco companies in the late 20th century, food and beverage companies could be targeted with health-related lawsuits. How should Nooyi protect against this risk? Nooyi also had to decide what her strategy should be for the coming years. Should Nooyi invest in the core products such as Doritos and Pepsi-Cola that had made it successful in the first place, or push through with her vision of PepsiCo’s future? Was it possible for PepsiCo to succeed with a focus on nutritious foods, considering its broad product portfolio and competitors eager to take market share away from the company? Professor Joseph L. Badaracco and Case Researcher Matthew Preble (Case Research & Writing Group) prepared this case. This case was developed from published sources. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2013, 2014, 2015 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. 314-055 PepsiCo, Profits, and Food: The Belt Tightens In response to mounting criticism, Nooyi launched a strategic review to answer some fundamental questions in late 2011. What was the right balance in terms of investments and management focus between PepsiCo’s major brands, such as Pepsi-Cola and Doritos, and its healthier offerings? Was it possible to succeed with a focus on nutritious foods, considering its broad product portfolio and competitors eager to eat away at its market share? How long could Nooyi accept subpar performance while developing the Good-for-You category? America’s Obesity Problem Nearly 36% of adults and 17% of children in the U.S. were obese. 10 Obesity occurred when a person developed excess body fat from consuming more calories than he or she used. (Obesity differed from being overweight, which could come from muscle, water, or bone weight, as well as body fat.)11 Obesity increased a person’s risk of developing serious health conditions, including heart disease, type 2 diabetes, high blood pressure, stroke, and certain cancers.12 Medical treatment for obesity-related diseases cost nearly $150 billion annually. 13 Obesity rates had increased in the U.S. from the late 20 th century through the early 2000s. In 1990, no state had more than 15% of its adult population classified as obese. 14 By 2010, no state had a population where less than 20% of adults were obese, and many states had rates above 30%.15 Multiple causes were given for this rise, including more sedentary lifestyles, food choices, and portion sizes. The U.S. Centers for Disease Control and Prevention (CDC) dismissed the idea that some individuals had a genetic predisposition toward obesity, as “[g]enetic changes in human populations occur too slowly to be responsible for the obesity epidemic.”16 Drinks high in sugar were correlated to obesity, and as one observer noted, “it’s no surprise that America’s rising thirst for sugar-water has paralleled the epidemic rise of obesity and type 2 diabetes.”17 Approximately half of all U.S. adults drank at least one soda per day, and the average American drank 50 gallons of soda annually. 18 The American Heart Association recommended that women consume no more than 100 calories per day, and men no more than 150 calories per day, from added sugar—one 12-ounce (oz.) soda had 130 calories.19 The United States Department of Agriculture listed soda as an empty calorie product—a food with little or no nutritional value.20 (See Exhibit 3 for a comparison of the nutritional content of various foods and beverages.) Scientific evidence increasingly pointed toward drinks with added sugar or artificial sweeteners as contributors to obesity. “It is estimated that sweetened beverages account for at least one-fifth of the weight gained between 1977 and 2007 in the U.S. population,” one study found.21 Another study conducted on children found that “[f]or each additional serving of sugar-sweetened drink consumed, both body mass index . . . and frequency of obesity . . . increased after adjustment for anthropometric, demographic, dietary, and lifestyle variables.” 22 The study came to the conclusion that “consumption of sugar-sweetened drinks is associated with obesity in children.” 23 Another team of researchers tied sugary drinks to 180,000 deaths globally each year (133,000 from diabetes, 44,000 from cardiovascular disease, and 6,000 from cancer).24 Studies were also conducted on sugar addiction. In one experiment, rats were given cookies and plain rice cakes and then allowed to “self-dose” with cocaine, and the rats who liked the cookies best were also the heaviest cocaine users.25 “It has been found that the criteria for substance dependence are similar to that for food dependence. . . . When we looked at our animals, we observed that foods with properties which are more appealing, such as those high in sugars and fats content, are preferred and engender addictive-like responses,” said one academic.26 Another team of researchers worked with rats on sugar addiction.27 “If bingeing on sugar is really a form of addiction, there should be long2 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. PepsiCo, Profits, and Food: The Belt Tightens 314-055 lasting effects in the brains of sugar addicts. . . . Craving and relapse are critical components of addiction, and we have been able to demonstrate these behaviors in sugar-bingeing rats in a number of ways,” explained another academic.28 Some blamed the food and beverage industry for contributing to the obesity problem, with one individual describing “a conscious effort—taking place in labs and marketing meetings and grocery store aisles—to get people hooked on foods that are convenient and inexpensive.”29 For example, one specialized consulting firm was tasked with researching various combinations of a new Dr. Pepper soda.30 The consultants taste-tested 61 different flavor combinations on almost 4,000 people.31 Each participant was asked a detailed set of questions, and the firm was thus able to create a report on precisely how the new product should taste and be made to draw in consumers.32 PepsiCo PepsiCo formed in 1965 via the merger of the Pepsi-Cola Company (which owned the Pepsi and Mountain Dew beverage brands) and Frito-Lay, Inc. (the makers of the Fritos, Lay’s, Cheetos, Ruffles, and Rold Gold brand snack foods).33 Over time, the company introduced and acquired other wellknown brands, including Doritos, Tostitos, Walker’s, Quaker, Gatorade, Aquafina, and Tropicana. The company had once owned quick-serve restaurants, including the Pizza Hut, Taco Bell, and Kentucky Fried Chicken restaurant chains, all three of which it sold off in 1997.34 The company had 22 mega-brands in 2011 that each topped $1 billion in global sales.35 Its leading mega-brands, in order of sales, were Pepsi-Cola, Lay’s, Mountain Dew, Gatorade, and Tropicana. 36 PepsiCo further segmented its products into the categories of fun-for-you (such as Doritos); better-foryou (diet sodas); and good-for-you (Quaker oatmeal).37 The company’s net revenues were evenly split between its food and beverage offerings (its beverage products contributed 52%).38 PepsiCo divided its operations into four segments (see Table A). The U.S. was PepsiCo’s primary market, responsible for half of its total net revenues.39 (See Exhibit 4 for PepsiCo’s historical financials by segment.) Table A PepsiCo’s Revenues and Operating Profit by Segment 2012 % of net revenues % of operating profit Source: PepsiCo Americas Foods PepsiCo Americas Beverages PepsiCo Europe PepsiCo Asia, Middle East, Africa 35% 51% 34% 30% 20% 11% 11% 8% PepsiCo, 2011 Annual Report, p. 7, http://www.pepsico.com/annual11/downloads/PEP_AR11_2011_Annual_ Report.pdf, accessed August 2014. The Making of a Manager Nooyi was born in Madras, India (modern-day Chennai), in 1955 to a family that pushed her to succeed.40 Her grandfather in particular had a lasting impact: “First [he taught me that] if you are given a job to do, do it really well. You must consistently ask yourself ‘Have I done it to the best of my ability?’ Second, he taught me to be a lifelong student. Don’t ever think you’ve arrived, and remember that what you don’t know is so much more than what you do.” 41 One observer noted that college friends described Nooyi as “a tough and independent team player whose first taste of business was managing college magazine advertising.”42 3 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. 314-055 PepsiCo, Profits, and Food: The Belt Tightens Nooyi earned an undergraduate degree and an MBA in India and joined a British textiles company.43 Nooyi left to join Johnson & Johnson as a local area product manager for a sanitary pad brand.44 One observer described the obstacles she faced in this job: “At that time, not only could such a product not be advertised in India, but many retailers shied away from stocking sanitary pads.”45 Nooyi wanted to continue her education and attended the Yale School of Management.46 “It was unheard of for a good, conservative, south Indian Brahmin girl to do this. It would make her an absolutely unmarriageable commodity after that,” Nooyi later recalled.47 She graduated with a degree in public and private management and worked for the Boston Consulting Group (BCG) for six years on corporate strategy.48 “I don’t think I could have gotten here without a strategy consultant background because it taught me inductive thinking. It taught me how to think of the problem in micro terms but also to zoom out and put the problem in the context of the broader environment and then zoom back in to solve the problem,” Nooyi remarked of her time with BCG. 49 She then spent four years at Motorola, which she joined as the business development executive responsible for the automotive and industrial electronic group, and left as vice president and director of corporate strategy and planning.50 Nooyi then moved to the industrials company Asea Brown Boveri (ABB) as senior vice president of strategy and strategic marketing. 51 She worked closely with the CEOs of both companies on corporate strategy.52 Nooyi joined PepsiCo as senior vice president of strategic planning in 1994 and became senior vice president for corporate strategy and development in 1996.53 “Indra can drive as deep and hard as anyone I’ve ever met . . . but she can do it with a sense of heart and fun,” remarked former PepsiCo CEO Roger Enrico.54 She played a key role in the decisions to sell PepsiCo’s restaurants and bottling operations.55 This was a difficult time for her: “I’d sit in meetings and try to be real macho and dehumanize these decisions. . . . Then I’d go into my office and close the door and shed a few tears, thinking, God, why can’t I just be building.”56 However, Nooyi was also behind decisions to move the company in new directions, and PepsiCo acquired the Tropicana and Quaker (which owned Gatorade) companies during her time in strategic planning.57 These acquisitions were driven by her understanding that health and nutrition were increasingly important to consumers. 58 Nooyi became president and CFO in 2001 under CEO Steve Reinemund.59 Reinemund described Nooyi’s “sharp talent for turning insightful ideas and plans into reality.”60 When Reinemund retired in 2006, Nooyi was chosen as the new CEO. 61 The move was hailed by analysts.62 One observer noted how Nooyi’s background differentiated her from other CEOs: “Unlike people in operations and sales, who have to worry solely about meeting quarterly-earnings targets and expanding existing markets, a corporate strategist must position the company for markets that don’t exist yet, and may not for another 20 years.”63 Commitment to Nutrition Nooyi’s strategic decisions reflected her belief that consumer demand was shifting toward healthier foods. She also saw little chance to grow through sodas alone.64 “What’s been happening in this category forever: we, Pepsi, would push like hell to get a program with the [retailer], we’d spend everything, and get a tenth of a point of market share. . . . The next period, Coke would come along, push like hell, and gain a tenth. This was a zero-sum game. The cola category was profitable, but didn’t grow profits,” she remarked.65 Instead, Nooyi saw opportunity in both making its existing snack and beverage products healthier through R&D, and in transforming the company’s portfolio to include healthier items: “Reduce the salt level, but don’t give up on taste. Reduce the fat levels. Reduce the sugar levels. Take the zero calorie products and nudge consumers to buy more of that. . . . Take the 4 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. PepsiCo, Profits, and Food: The Belt Tightens 314-055 good-for-you products and make them great tasting so people never have to compromise taste for health or health for taste,” Nooyi said. 66 Shortly into Nooyi’s tenure as CEO, PepsiCo launched Performance with Purpose, its plan for sustainable growth built on three sustainability “pillars”: human, environmental, and talent (see Exhibit 5).67 Under this plan, PepsiCo would increase the number of products based on healthy foods such as whole grains, fruits, and vegetables.68 PepsiCo also planned to cut sodium by 25% and saturated fats by 15% in some foods and markets by 2015, and sugar in some beverages and markets 25% by 2020.69 The company planned to include nutritional information on all packaging by 2012, and to stop selling drinks high in sugar in schools by 2012.70 Nooyi made two significant hires early in her tenure: that of Derek Yach, an epidemiologist and former World Health Organization (WHO) official, as PepsiCo’s director of global health policy, and Dr. Mehmood Khan, who had once served as director of the Mayo Clinic’s diabetes, endocrinology, and nutritional clinical trial unit, as chief scientific officer.71 Yach recalled that in his first meeting with Nooyi, “[s]he said, ‘I want you to do exactly what you were doing at the WHO [developing dietary guidelines], and do it here for us at PepsiCo.’” 72 Nooyi invested heavily in R&D.73 PepsiCo reformulated some products and launched new ones by identifying a product’s unique taste and then replacing ingredients without changing taste. 74 For example, PepsiCo created a salt with less sodium but a similar taste and used it on potato chips in the U.K.75 PepsiCo also looked to reduce sugar or find replacement sweeteners for beverages.76 Tropicana’s Trop 50 brand fruit juices used a sweetener from the stevia plant and had 50% less sugar and calories than regular fruit juice.77 PepsiCo launched Pepsi Next in early 2012, claiming it had “real cola taste with 60% less sugar.”78 PepsiCo added to its nutrition portfolio through acquisitions and partnerships. In early 2011, PepsiCo became the majority owner of the Russian food company Wimm-Bill-Dann, a food and beverage company with dairy and juice products, for $3.8 billion. 79 In 2012, PepsiCo partnered with the German dairy company Theo Muller Group on a U.S. joint venture called Muller Quaker Dairy. The joint venture’s $206 million yogurt plant was scheduled to open in mid-2013.80 Analysts noted that the market was wary of the nutrition focus.81 However, these same analysts thought that “Pepsi will experience solid payback on nutritional initiative spending, given the large size and strong growth potential of the nutrition category.” 82 The Access to Nutrition Alliance (an initiative partly funded by the Bill and Melinda Gates Foundation) gave PepsiCo good marks for its work: “PepsiCo has a clear focus on nutrition and health in its growth strategy. . . . While a significant portion of its product portfolio consists of soft drinks and snacks, the company has undertaken meaningful efforts to diversify its offerings and improve its nutrition practices.” 83 The Food and Beverage Industries’ Actions to Address Obesity PepsiCo’s competitors took similar steps in the face of rising obesity rates and shifting consumer demands. Soda consumption rates in the U.S. had fallen since 2005.84 In 2006, the Coca-Cola Company (Coca-Cola), the Dr. Pepper Snapple Group (DPS), PepsiCo, and the American Beverage Association (ABA), along with the Alliance for a Healthier Generation (formed through a partnership between the American Heart Association and the William J. Clinton Foundation), agreed to limit the types of beverages available in schools.85 A progress report issued in early 2010 showed that while carbonated soft drinks accounted for nearly 40% of beverages these firms placed in U.S. schools in 2004, they accounted for just under 7% in the first half of the 2009–2010 school year.86 5 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. 314-055 PepsiCo, Profits, and Food: The Belt Tightens Coca-Cola had listed calorie content on its drinks since 2009 and introduced smaller 7.5 ounce cans of its leading sodas.87 Roughly 25% of the company’s beverage portfolio was low- or no-calorie drinks.88 Coca-Cola was also planning to launch an advertising campaign that touched upon obesity and health. One commercial highlighted the company’s healthier products, R&D, and efforts to educate consumers and support physical education. 89 Some observers criticized these efforts. “The idea that Coca-Cola is a force against obesity is ludicrous. . . . They sell liquid candy at a time when the last thing people need are calories with no nutrients attached,” one academic remarked. 90 “The company needs to get off the idea that Coke is just another source of calories like broccoli, or rice cakes. It’s not. Coke is tasty, refreshing and delivers a little jolt, all of which are wonderful things, but they’re not nutrition,” an observer noted.91 Major food companies had responded similarly. The fast-food giant McDonald’s included apple slices in all of its Happy Meals (designed for children), and allowed customers to replace the Happy Meal’s soda with milk or juice.92 McDonald’s also pledged to cut sodium in its U.S. food offerings by an average of 15% by 2015.93 A number of companies, including PepsiCo and Mondelēz International, introduced pre-portioned 100-calorie packages of leading snack brands.94 Full Commitment? Openly discussing obesity was challenging for food and beverage companies: as one advertising professional noted, “[h]eavy drinkers are profitable consumers . . . and large servings at convenience stores and movie theaters mean more syrup sales. . . . [Coca-Cola] has every right to collect money from any consumer who buys its products, but perhaps there is such a thing as too much of a good thing?”95 Industry executives tended to talk about food and beverage choice as just one of many factors contributing to obesity. Nooyi remarked in one speech that a range of players—from urban planners, to video game manufacturers, to food retailers—all contributed in some way to obesity. 96 “We’ve got to get [children] off their rumps,” remarked Dr. Pepper Snapple’s CEO in reference to children spending too much time watching television and using computers. 97 Companies fought against attempts to paint the food and beverage industries as the main cause of obesity. One ABA executive, commenting on advertisements connecting soda and obesity, remarked that “the notion that there is a direct correlation between soda consumption and obesity doesn’t measure up to where the numbers are. . . . If consumption is down and obesity is up, it’s hard to find that correlation.”98 One food company executive questioned whether people really wanted more healthy food options.99 “Consumers say they want to eat healthy, but their behaviour tends to be slightly different,” he noted.100 Legislation and Industry Lobbying Public officials had also taken action while companies redesigned their portfolios. In Boston, Massachusetts, Mayor Thomas Menino banned junk foods and soft drinks from the city’s public schools in 2004, and selling drinks high in sugar and calories on city property in 2011.101 In New York City, Mayor Michael Bloomberg tried to ban the sale of sugary drinks in containers bigger than 16 oz. from certain venues (not including convenience stores and supermarkets).102 The ban was opposed by retailers, trade groups, and food and beverage companies through New Yorkers for Beverage Choices, an organization funded by the ABA. 103 The ban was halted in March 2013 before it went into effect when a New York State Supreme Court judge ruled that Bloomberg had to go through the city council and the board of health to institute the ban.104 6 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. PepsiCo, Profits, and Food: The Belt Tightens 314-055 That same month, the state of Mississippi introduced a law to prevent local governments from limiting portion sizes.105 “It simply is not the role of the government to microregulate citizens’ dietary decisions. . . . The responsibility for one’s personal health depends on individual choices about proper diet and appropriate exercise,” explained Mississippi’s governor.106 Many states and cities contemplated soda taxes, but met with strong resistance: through early 2012, such efforts had failed in 24 states and 5 cities.107 “We ran into the machine the way anti-smoking activists did in the early ‘60s. . . . [I]t’s not a fight you’re going to win right away,” noted New York’s governor.108 Others compared the food and beverage industry’s resistance to regulation with that of tobacco companies.109 One individual noted that companies were missing economic opportunities by fighting regulations, making the comparison to the U.S. automotive industry’s opposition to seat belts and other safety standards that ultimately caused it to lose market share to foreign companies more willing to meet consumer demand.110 Lawyers that had previously litigated against major tobacco companies had shifted focus to food and beverage companies over misleading product labeling. 111 It was not always clear how the general public wanted the government to address obesity. A 2013 poll of people from across the U.S. indicated that 69% of those surveyed would vote against a law similar to the one Bloomberg tried to implement in New York City. 112 However, a poll conducted in 2012 showed that a full 57% said it was either extremely or very important for the federal government to work on obesity-related health problems.113 Partnerships with Nonprofits and Professional Associations Beverage companies were also criticized for providing financial support to and partnering with nonprofits, medical professional associations, and other groups that historically supported consumers or health interests. For example, both Coca-Cola and PepsiCo had sponsored the Academy of Nutrition and Dietetics, and supported nutritional and public health fellowships and programs at universities.114 The American Association of Family Physicians and the American Academy of Pediatrics had both previously partnered with Coca-Cola.115 Some observers questioned beverage companies’ financial support of minority organizations.116 In New York City, the local chapter of the National Association for the Advancement of Colored People and the Hispanic Federation fought against Mayor Bloomberg’s proposed soda ban. 117 Both Coca-Cola and PepsiCo said they did not ask for these groups’ support on such issues, and that the partnerships had been in place well before obesity concerns arose. 118 Some believed that partnerships with these companies were inappropriate, if not detrimental to making substantive change, as one academic noted: When the history of the world’s attempt to address obesity is written, the greatest failure may be collaboration with and appeasement of the food industry. I expect history will look back with dismay on the celebration of baby steps industry takes (such as publicprivate partnerships with health organizations, “healthy eating” campaigns, and corporate social responsibility initiatives) while it fights viciously against meaningful change (such as limits on marketing, taxes on . . . sugared beverages, and regulation of nutritional labeling).119 Another academic echoed these feelings: “There is a basic conflict in working with the snack food sector, since branding snacks as ‘healthy’ only diverts attention from the real issues. In my view it is the culture of snacking—the consumption of superfluous calories between meals, or perhaps instead of healthy main meals—which is an unhealthy practice in itself.” 120 7 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. 314-055 PepsiCo, Profits, and Food: The Belt Tightens PepsiCo Struggles and Shareholders Push Back in the 2010s Nooyi faced an increasingly frustrated shareholder base as she moved forward with her strategy while PepsiCo’s performance lagged its peers. Coca-Cola and PepsiCo had long dominated the U.S. carbonated soft drink market, but soda consumption had declined since the mid-2000s.121 PepsiCo saw its share of the U.S. carbonated soft drink market fall from 31.2% at the start of Nooyi’s leadership (2006) to 28.5% for 2011.122 Coca-Cola’s market share dropped from 42.9% to 41.9% during the same time frame (see Exhibit 6 for market share in carbonated soft drinks).123 Coke Classic and Pepsi-Cola had historically ranked first and second, respectively, as the U.S.’s leading soda brands, but Pepsi-Cola fell to third place behind Diet Coke in 2010.124 PepsiCo responded with increased marketing for Pepsi-Cola in 2011.125 “I think one of the mistakes Pepsi’s made is that Nooyi has taken her eye off Pepsi and she’s focused on these better-for-you, lower-margin product items,” said one marketing industry executive. 126 Analysts pointed to market share losses in PepsiCo’s snack categories due to higher prices and noted that increased advertising and new innovations in its beverage category had not boosted market share.127 Coca-Cola was directly competing with PepsiCo’s Gatorade and Tropicana brands.128 Investors demanded clarity on Nooyi’s nutrition strategy and how she planned to grow the company.129 In 2011, Nooyi explained that growth in the nutrition side of the business would come naturally, with limited direct funding.130 “Nooyi has been trying to reassure Wall Street that soda and potato chips aren’t taking a back seat to nutrition,” one observer commented. 131 Some analysts were skeptical that nutrition brands would grow the company. “They [Pepsi] have to realize that at their core they are a sugary, fatty cola company, and people like that,” one analyst remarked.132 Other analysts were optimistic, noting the lack of a major global competitor in the category and PepsiCo’s strong nutrition brands such as Quaker and Tropicana. 133 When Nooyi launched the strategic review in late 2011, some analysts felt it was long overdue. 134 “The company’s somewhat neglected core brands are in desperate need of substantial incremental marketing support and perhaps less short-term promotional dollars,” one analyst noted. 135 Another analyst said that “[t]he rise and fall of PepsiCo over the last several years has been a frustrating example of strategy trumping execution and long-term fears compromising short-term asset allocation, market share, and returns.”136 The company’s board was also apparently losing patience: “The priority for the board is not breaking up the brands, but how quickly do they replace Indra [Nooyi],” stated one individual.137 Since 2005, Nelson Peltz, an activist investor, had owned an increasing number of PepsiCo shares, through his Trian Fund. Peltz, like some other investors, believed that PepsiCo should spin off its beverage business or merge with another large snack company and then spin off its beverage business. Expanding Internationally With attractive growth opportunities in the developing world, food and beverage companies increasingly turned to these markets, particularly as populations and incomes rose. PepsiCo had sold products in China since the early 1980s and Pepsi-Cola was available in the Soviet Union starting in the 1970s, while Coca-Cola had had a presence in Indonesia since the 1930s and Africa since the 1920s.138 8 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. PepsiCo, Profits, and Food: The Belt Tightens 314-055 PepsiCo’s products were used by roughly 3 billion people each year. 139 “[Emerging markets] represent all the growth of the future,” Nooyi noted in late 2011.140 She explained that PepsiCo would invest heavily in developing countries in the coming years, with a focus on Brazil, China, Colombia, Egypt, Jordan, India, Nigeria, Russia, Venezuela, and Vietnam. 141 PepsiCo had invested some $9 billion in Russia alone in the early 21st century, which she said was “the single largest bet we’ve made on any single country outside the United States.”142 The question remained of how PepsiCo should expand in these markets: by continuing to sell its existing line of products, or by focusing on more nutritious offerings. In general, developing nations had a lower adult obesity rate (8.7% in 2008) than the total global adult obesity level (11.7% in 2008). 143 However, some regions were already experiencing serious obesity issues: Central America and South America had adult obesity rates of 30.4% and 21.6%, respectively, for 2008.144 Europe, by comparison, had a rate of 21.4%, and North America, 31%, during the same time period.145 Mexico, for example, had one of the world’s highest adult obesity rates in 2009 at 30%.146 One report noted that soda was a major source of sugar for Mexicans and that “[b]etween 1999 and 2006, the consumption of high-energy beverages more than doubled for adolescents and tripled for women. The net effect was to more than double the total energy consumed for adolescents and adult women.” 147 Mexico was the largest consumer of Coca-Cola products by far, with a per capita consumption of 728 8-oz. servings in 2001; the second-largest was Chile at 460 servings.148 One industry analyst noted that there were a number of low-calorie products available in Mexico, but that “I think it really is more of an apathy issue. Consumer education is the key in my mind.” 149 The Future of PepsiCo Nooyi expected balanced growth in all of PepsiCo’s product categories: “Our goal is to make sure that we grow with the market in fun-for-you and better-for-you, but the market for good-for-you is growing almost twice as much as [the other categories]. So we want to make sure we grow as fast as the market or faster. So if you look at PepsiCo 10 years from now, I suspect right now good-for-you products are 22% of the portfolio, it might rise to 27% to 30% of the portfolio,” she said in 2011.150 “A large company like ours has to learn to place multiple bets, and that’s what we’re doing.”151 9 This document is authorized for use only by JAMES DORSETT in 2019. This document is authorized for use only by JAMES DORSETT in 2019. 40% 60% 80% 100% 120% 140% 160% 180% 200% Nestlé Coca-Cola S&P 500 In October 2012, Kraft Foods Inc. became Mondelēz International and spun off its North American grocery operations to create Kraft Foods Group, Inc. In this graph, Mondelēz International represents the former Kraft Foods Inc. prior to October 2012. “Mondelēz International Completes Spin-Off of its North American Grocery Business,” Mondelēz International, October 1, 2012, http://ir.mondelezinternational.com/releasedetail.cfm?ReleaseID=734903, accessed August 2013. General Mills Note: Mondelez Capital IQ, accessed August 2013. Dr Pepper -10- Source: Pepsico Indexed: Jan 2006 = 100 Pepsico & competitors stock prices PepsiCo and Select Competitor Stock Prices, 2006–2012 (indexed to 100 as of January 2006) Source: Capital IQ, accessed 8/8/13 Exhibit 1 314-055 For the exclusive use of J. DORSETT, 2019. For the exclusive use of J. DORSETT, 2019. PepsiCo, Profits, and Food: The Belt Tightens 314-055 Exhibit 2a PepsiCo Financials (in US$ millions, except earnings per share (EPS); PepsiCo’s fiscal year ended in late December) Total revenue Gross profit EBIT Earnings from continuing operations Net income Diluted EPS (excluding extra items) Source: 2011 2010 2009 2008 2007 2006 66,504 34,957 10,375 6,462 6,443 4.03 57,838 31,661 9,499 6,338 6,320 3.92 43,232 23,133 8,130 5,979 5,946 3.77 43,251 22,988 7,502 5,166 5,142 3.21 39,474 21,436 7,284 5,670 5,658 3.41 35,137 19,375 6,502 5,642 5,642 3.34 Capital IQ, accessed May 2013. Exhibit 2b The Coca-Cola Company Financials (in US$ millions, except EPS; Coca-Cola’s fiscal year ended December 31) Total revenue Gross profit EBIT Earnings from continuing operations Net income Diluted EPS (excluding extra items) Source: 2011 2010 2009 2008 2007 2006 46,542 28,338 10,912 8,646 8,584 1.85 35,119 22,426 8,965 11,837 11,787 2.53 30,990 19,902 8,544 6,906 6,824 1.47 31,944 20,570 8,796 5,874 5,807 1.25 28,857 18,451 7,252 6,027 5,981 1.29 24,088 15,928 6,497 5,080 5,080 1.08 Capital IQ, accessed May 2013. Exhibit 2c Dr. Pepper Snapple Group Financials (in US$ millions, except EPS; DPS’s fiscal year ended December 31) Total revenue Gross profit EBIT Earnings from continuing operations Net income Diluted EPS (excluding extra items) Source: 2011 2010 2009 2008 2007 2006 5,903 3,418 1,024 606 606 2.74 5,636 3,393 1,025 528 528 2.17 5,531 3,297 1,085 555 555 2.17 5,710 3,120 973 (312) (312) (1.23) 5,695 3,131 1,015 497 497 1.96 4,700 2,741 1,013 510 510 2.01 Capital IQ, accessed May 2013. 11 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. 314-055 PepsiCo, Profits, and Food: The Belt Tightens Exhibit 2d Nestlé Financials (in US$ millions, except EPS; figures are rounded to the nearest million. Nestlé’s fiscal year ended December 31) Total revenue Gross profit EBIT Earnings from continuing operations Net income Diluted EPS (excluding extra items) Source: 2011 2010 2009 2008 2007 2006 91,142 43,132 14,229 10,667 10,322 3.22 95,760 47,045 14,928 9,844 37,245 2.83 109,430 62,138 14,386 10,392 11,346 2.81 112,157 62,375 14,405 8,330 19,626 1.94 117,016 68,016 16,346 12,384 11,586 3.00 107,122 62,826 14,473 10,635 10,006 2.56 Capital IQ, accessed August 2013. Exhibit 2e General Mills Financials (in US$ millions, except EPS; figures are rounded to the nearest million. General Mills’s fiscal year ended in late May) Total revenue Gross profit EBIT Earnings from continuing operations Net income Diluted EPS (excluding extra items) Source: 2011 2010 2009 2008 2007 14,880 5,954 2,762 1,804 1,798 2.70 14,636 5,800 2,638 1,535 1,531 2.24 14,556 5,175 2,242 1,314 1,304 1.90 13,652 4,892 2,268 1,318 1,295 1.85 12,442 4,486 2,097 1,144 1,144 1.59 Capital IQ, accessed August 2013. Exhibit 2f Mondelēz International, Inc., Financials (in US$ millions, except EPS; Mondelēz’s fiscal year ended December 31) Total revenue Gross profit EBIT Earnings from continuing operations Net income Diluted EPS (excluding extra items) Source: 2011 2010 2009 2008 2007 2006 35,810 13,100 4,060 1,737 3,527 0.97 31,489 11,872 3,386 672 4,114 0.38 38,754 13,935 5,215 2,810 3,021 1.89 40,492 13,366 4,880 1,678 2,884 1.10 35,858 12,269 4,739 2,492 2,721 1.56 33,256 11,937 4,880 2,828 3,060 1.71 Capital IQ, accessed August 2013. 12 This document is authorized for use only by JAMES DORSETT in 2019. Source: NA 30 mg 41 g 41 g 0g NA 45 mg 39 g 39 g 0g 27 g 4g 250 12 g 4.5 g 5 mg 120 mg 33 g 1 Snickers Bar (52.7g) 19 g 0g 100 0g 0g 0 mg 0 mg 25 g 1 medium-sized apple (with skin) 12 g 4g 160 2g 0.5 g 0 mg 260 mg 32 g Quaker Instant Oatmeal—Maple and Brown Sugar (1 packet; 43 g) 13 g 10 g 150 6g 3.5 g 25 mg 115 mg 14 g Starbucks 12 oz. (tall) Caffè Latte with 2% milk 26 g 5g 170 1.5 g 1g 10 mg 85 mg 33 g Yoplait Original Yogurt, French Vanilla (6 oz.) 53 g 7g 590 22 g 4g 30 mg 480 mg 91 g Panera Bread Pumpkin Muffin -13- The Coca-Cola Company, “Coca-Cola, 12 fl oz. can,” http://productnutrition.thecoca-colacompany.com/products/coca-cola?packagingId=6971#nutrition, accessed May 2013; PepsiCo, “Pepsi, 12 fl oz.,”http://www.pepsicobeveragefacts.com/infobyproduct.php?prod_type=1026&prod_size=20&brand_fam_id=1051&brand_id=1000&product=Pepsi, accessed May 2013; Mars Incorporated, “Snickers Bar,” http://www.snickers.com/Nutritional-Info, accessed May 2013; United States Department of Agriculture, Household Commodity Fact Sheet, “Apples, Fresh,” April 2009, http://www.fns.usda.gov/fdd/facts/hhpfacts/New_HHPFacts/Fruits/HHFS_APPLES_FRESH_F510-515_Final.pdf, accessed May 2013; Quaker Oats Company, “Quaker Instant Oatmeal—Maple and Brown Sugar,” http://www.quakeroats.com/products/compare.aspx, accessed May 2013; Starbucks, “Caffè Latte,” http://www.starbucks.com/menu/drinks/espresso/caffe-latte#size=41&milk=63, accessed May 2013; Yoplait USA, Inc. Yoplait Original, French Vanilla,” http://www.yoplait.com/products/yoplait-original-style, accessed May 2013; and Panera Bread, “Panera Bread Product Nutrition Information 3/13/13–5/7/13,” http://www.panerabread.com/pdf/nutr-guide.pdf, accessed May 2013. 150 0g 12 oz. can of Pepsi-Cola 140 0g 12 oz. can of Coca-Cola Classic Nutritional Content of Various Foods and Beverages Calories Total Fat Saturated Fat Cholesterol Sodium Total Carbohydrates Sugars Protein Product Exhibit 3 314-055 For the exclusive use of J. DORSETT, 2019. This document is authorized for use only by JAMES DORSETT in 2019. Capital IQ, accessed May 2013. Operating profits are all pretax. Source: Note: 13,322 2,656 7,156 22,418 13,560 7,392 66,504 Revenue 3,625 803 1,126 3,452 1,427 896 11,329 Operating Profit 2011 12,573 2,656 6,315 20,401 9,602 6,291 57,838 Revenue 3,376 741 1,004 3,592 1,205 708 10,626 Operating Profit 2010 12,421 2,687 5,703 10,116 7,028 5,277 43,232 Revenue 3,105 781 904 2,172 948 700 (566) 8,044 Operating Profit 2009 12,507 1,902 5,895 10,937 6,891 5,119 43,251 Revenue 2,959 582 897 2,026 910 592 (1,007) 6,959 Operating Profit 2008 PepsiCo’s Performance by Segment, 2008–2012 (in US$ millions. PepsiCo’s fiscal year ended in late December) Frito-Lay North America Quaker Foods North America Latin America Foods PepsiCo Americas Beverages Europe Asia, Middle East, and Africa Corporate Total Segment Exhibit 4 314-055 -14- For the exclusive use of J. DORSETT, 2019. This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. PepsiCo, Profits, and Food: The Belt Tightens Exhibit 5 314-055 Performance with Purpose Performance with Purpose is supported by three pillars: Human Sustainability, Environmental Sustainability, and Talent Sustainability. Human Sustainability Human Sustainability means providing a wide range of foods and beverages, from treats to health eats. Our efforts to increase choices for our consumers include reducing levels of fat, sodium and added sugars in many of our treats. At the same time, we have expanded our portfolio to provide consumers with convenient foods and beverages that support their daily nutrition requirements. Environmental Sustainability Environmental Sustainability means finding innovative ways to cut costs and minimize our impact on the environment through energy and water conservation and reduction of packaging volume. Talent Sustainability Talent Sustainability means investing in our associates to help them succeed; providing a safe and inclusive workplace globally; and respecting, supporting and investing in the local communities where we operate. Source: This material is taken verbatim from PepsiCo, “In the Words of CEO Indra Nooyi,” http://www.pepsico.com/ Purpose/Performance-with-Purpose/In-the-words-of-CEO-Indra-Nooyi.html, accessed May 2013. Exhibit 6 U.S. Carbonated Soft Drink Category Market Share by Company (in %) Company 2011 2010 2009 2008 2007 2006 Coca-Cola Co. PepsiCo Dr. Pepper Snapple Cott Corp. National Beverage Hansen Natural (Monster Beverage Co.) Red Bull Big Red Rockstar Monarch Co. Private Label/other Total 41.9 28.5 16.7 5.2 2.8 1.2 1.0 0.6 0.6 1.5 100 42.0 29.3 16.7 4.8 2.8 1.0 0.8 0.5 0.5 1.6 100 41.9 29.9 16.4 4.9 2.7 0.9 0.7 0.5 0.4 1.7 100 42.7 30.8 15.3 4.7 2.6 0.8 0.7 0.4 0.4 1.6 100 42.8 31.1 15.0 4.8 2.5 0.8 0.6 0.4 0.4 1.6 100 42.9 31.2 14.9 5.1 2.5 0.6 0.5 0.4 0.3 0.1 1.5 100 Source: Compiled from “Special Issue: U.S. Beverage Results for 2012,” Beverage-Digest 63, no. 6 (March 25, 2013), http://www.beverage-digest.com/pdf/top-10_2013.pdf, accessed May 2013; “Special Issue: U.S. Beverage Results for 2011,” Beverage-Digest 61, no. 6 (March 20, 2012); “Special Issue: Top-10 CSD Results for 2010,” Beverage-Digest 59, no. 5 (March 17, 2011); “Special Issue: Top-10 CSD Results for 2009,” Beverage-Digest 56, no. 7 (March 24, 2010); “Special Issue: Top-10 CSD Results for 2008,” Beverage-Digest 54, no. 7 (March 30, 2009); “Special Issue: Top-10 CSD Results for 2007,” Beverage-Digest 52, no. 5 (March 12, 2008); and “Special Issue: Top-10 CSD Results for 2006,” Beverage-Digest 50, no. 5 (March 8, 2007). All reports dated from 2006 through 2012 are available at the Beverage-Digest archives, http://www.beverage-digest.com/editorial/archive07.php#070308, all accessed in May 2013. Note: In 2012, Hansen Natural changed its name to Monster Energy Corp. 15 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. 314-055 PepsiCo, Profits, and Food: The Belt Tightens Endnotes 1 John Seabrook, “Snacks for a Fat Planet,” New Yorker, May 16, 2011, http://www.newyorker.com/reporting/ 2011/05/16/110516fa_fact_seabrook?printable=true¤tPage=all, accessed March 2013. 2 Seabrook, “Snacks for a Fat Planet,” New Yorker, May 16, 2011. 3 Centers for Disease Control and Prevention, “Obesity and Overweight,” updated May 30, 2013, http://www.cdc.gov/nchs/fastats/overwt.htm, accessed July 2013. 4 Mike Esterl, “PepsiCo Board Stands by Nooyi,” Wall Street Journal, January 13, 2012, http://online.wsj.com/article/SB10001424052970203721704577157173241727072.html, accessed April 2013. 5 “Good for You, Not for Shareholders,” The Economist, March 17, 2012, http://www.economist.com/node/21550263, accessed August 2013. 6 Esterl, “PepsiCo Board Stands by Nooyi,” Wall Street Journal; and Josh Kosman, “PepsiCo Loses Pop With Nooyi Liter-ship,” New York Post, November 8, 2011, http://www.nypost.com/p/news/business/pepsico_loses_pop_with_nooyi_liter_ IyQhnPQs3s8K0W79TGGLKL, accessed August 2013. 7 Seabrook, “Snacks for a Fat Planet.” 8 Duff Wilson and Janet Roberts, “Special Report: How Washington Went Soft on Childhood Obesity,” Reuters, April 27, 2012, http://www.reuters.com/article/2012/04/27/us-usa-foodlobby-idUSBRE83Q0ED20120427, accessed April 2013. 9 Kelly Brownell, “Meet Big Soda—as Bad as Big Tobacco,” Time, October 24, 2011, http://ideas.time.com/2011/10/24/meet- big-soda-as-bad-as-big-tobacco/, accessed April 2013. 10 U.S. Centers for Disease Control and Prevention, “Overweight and Obesity,” updated August 13, 2012, http://www.cdc.gov/obesity/data/adult.html, accessed March 2013; and Cynthia Ogden and Margaret Carroll, Division of Health and Nutrition Examination Surveys, “Prevalence of Obesity Among Children and Adolescents: United States, Trends 1963–1965 Through 2007–2008,” U.S. Centers for Disease Control and Prevention, June 2010, p. 5, http://www.cdc.gov/nchs/data/hestat/obesity_child_07_08/obesity_child_07_08.pdf, accessed March 2013. 11 “Obesity,” MedlinePlus, U.S. National Library of Medicine, National Institutes of Health, last reviewed January 22, 2013, http://www.nlm.nih.gov/medlineplus/obesity.html, accessed August 2013. 12 U.S. Centers for Disease Control and Prevention, “What Causes Overweight and Obesity,” updated April 27, 2012, http://www.cdc.gov/obesity/adult/causes/index.html, accessed May 2013. 13 U.S. Centers for Disease Control and Prevention, “Overweight and Obesity,” updated August 13, 2012. 14 U.S. Centers for Disease Control and Prevention, “Obesity Trends Among U.S. Adults Between 1985 and 2010,” http://www.cdc.gov/obesity/data/adult.html#Groups, accessed May 2013. 15 U.S. Centers for Disease Control and Prevention, “Obesity Trends Among U.S. Adults Between 1985 and 2010.” 16 Office of Surveillance, Epidemiology, and Laboratory Services, Public Health Genomics, “Genomics and Health,” U.S. Centers for Disease Control and Prevention, updated May 10, 2013, http://www.cdc.gov/genomics/resources/diseases/obesity/, accessed July 2013. 17 D. J. Frenk, “Time to Focus on Healthier Drinks,” Harvard School of Public Health, The Nutrition Source, http://www.hsph.harvard.edu/nutritionsource/focus/, accessed May 2013. 18 Lydia Saad, “Nearly Half of Americans Drink Soda Daily,” Gallup, July 23, 2012, http://www.gallup.com/poll/156116/ nearly-half-americans-drink-soda-daily.aspx, accessed March 2013; and Seabrook, “Snacks for a Fat Planet.” 19 American Heart Association, “Sugars and Carbohydrates,” June 11, 2012, http://www.heart.org/HEARTORG/GettingHealthy/NutritionCenter/HealthyDietGoals/Sugars-andCarbohydrates_UCM_303296_Article.jsp, accessed April 2013. 20 U.S. Department of Agriculture, “What are Empty Calories?” http://www.choosemyplate.gov/weight-management- calories/calories/empty-calories.html, accessed April 2013. 16 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. PepsiCo, Profits, and Food: The Belt Tightens 314-055 21 Gail Woodward-Lopez, Janice Kao, and Lorrene Ritchie, “To What Extent Have Sweetened Beverages Contributed to the Obesity Epidemic?” Public Health Nutrition 14, no. 3 (March 1, 2011): 499, via Academic Search Premier, accessed April 2013. 22 David S. Ludwig, Karen E. Peterson, and Steven L. Gortmaker, “Relation Between Consumption of Sugar-Sweetened Drinks and Childhood Obesity: A Prospective, Observational Analysis,” The Lancet 357, no. 9255 (February 17, 2001): 505, via Academic Search Premier, accessed April 2013. 23 Ludwig et al., “Relation Between Consumption of Sugar-Sweetened Drinks and Childhood Obesity.” 24 American Heart Association, “180,000 Deaths Worldwide May be Associated with Sugary Soft Drinks,” March 19, 2013, http://newsroom.heart.org/news/180-000-deaths-worldwide-may-be-associated-with-sugary-soft-drinks, accessed April 2013. 25 University of Guelph, “Study Finds Strong Incentives Drive Food Addictions,” May 29, 2013, http://www.uoguelph.ca/news/2013/05/study_finds_strong_incentives_drive_food_addictions.html, accessed August 2013. 26 University of Guelph, “Study Finds Strong Incentives Drive Food Addictions.” 27 Kitta MacPherson, “Sugar Can Be Addictive, Princeton Scientist Says,” Princeton University, December 10, 2008, http://www.princeton.edu/main/news/archive/S22/88/56G31/index.xml?section=topstories, accessed August 2013. 28 MacPherson, “Sugar Can Be Addictive, Princeton Scientist Says.” 29 Michael Moss, “The Extraordinary Science of Addictive Junk Food,” New York Times, February 20, 2013, http://www.nytimes.com/2013/02/24/magazine/the-extraordinary-science-of-junk-food.html?pagewanted=all, accessed May 2013. 30 Moss, “The Extraordinary Science of Addictive Junk Food.” 31 Moss, “The Extraordinary Science of Addictive Junk Food.” 32 Moss, “The Extraordinary Science of Addictive Junk Food.” 33 PepsiCo, “Our History,” http://www.pepsico.com/company/our-history.html, accessed May 2013. 34 Glenn Collins, “Three Restaurant Chains Prepare for Life After PepsiCo,” New York Times, July 16, 1997, http://www.nytimes.com/1997/07/16/business/three-restaurant-chains-prepare-for-life-afterpepsico.html?pagewanted=all&src=pm, accessed July 2013. 35 PepsiCo, 2011 Annual Report, p. 9, http://www.pepsico.com/annual11/downloads/PEP_AR11_2011_Annual_Report.pdf, accessed August 2014. 36 PepsiCo, 2011 Annual Report, p. 9. 37 “1. Indra Nooyi,” Financial Times, November 16, 2010, http://www.ft.com/intl/cms/s/0/ca66b59e-ed92-11df-9085- 00144feab49a.html#axzz2SWL61CTP, accessed May 2013. 38 PepsiCo, 2011 Annual Report, p. 7. 39 PepsiCo, 2011 Annual Report, p. 7. 40 Patricia Sellers, “It’s Good to Be the Boss,” CNNMoney, October 2, 2006, http://money.cnn.com/2006/09/29/magazines/ fortune/mpw.femaleCEOs.intro.fortune/index.htm, accessed May 2013; and “1. Indra Nooyi,” Financial Times. 41 “1. Indra Nooyi,” Financial Times. 42 Anto Joseph, “A Woman with Fizz and Bottle,” Observer, August 19, 2006, http://www.guardian.co.uk/business/2006/aug/20/theobserver.observerbusiness2, accessed July 2013. 43 Sellers, “It’s Good to Be the Boss.” 44 “Indra Nooyi,” Newsmakers, Biography in Context, May 1, 2004, updated September 20, 2007 (Detroit: Gale, 2004), accessed April 2013. 45 “Indra Nooyi,” Newsmakers. 46 “Indra Nooyi,” Newsmakers. 17 This document is authorized for use only by JAMES DORSETT in 2019. For the exclusive use of J. DORSETT, 2019. 314-055 PepsiCo, Profits, and Food: The Belt Tightens 47 “Indra Nooyi,” Newsmakers. 48 PepsiCo, “Our Leadership, Indra K. Nooyi,” http://www.pepsico.com/company/leadership.html, accessed May 2013. 49 Gary Burnison, “How Pepsi’s Indra Nooyi Learned to Be a CEO,” Fast Company, April 29, 2011, http://www.fastcompany.com/1750645/how-pepsis-indra-nooyi-learned-be-ceo, accessed July 2013, reprinted by permission of the publisher from: Gary Burnison, No Fear of Failure: Real Stories of How Leaders Deal With Risk and Change (Hoboken, NJ: John Wiley & Sons, Inc., 2011). 50 PepsiCo, “Our Leadership, Indra K. Nooyi”; and “Indra Nooyi,” The Paulson Group, 2013, http://www.paulsoninstitute.org/voices/meet-the-experts/indra-nooyi/, accessed July 2013. 51 PepsiCo, “Our Leadership, Indra K. Nooyi.” 52 John A. 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For the exclusive use of J. DORSETT, 2019. PepsiCo, Profits, and Food: The Belt Tightens 314-055 73 Nanette Byrnes, “Pepsi Brings in the Health Police,” Business Week, January 14, 2010, http://www.businessweek.com/magazine/content/10_04/b4164050511214.htm, accessed May 2013. 74 Seabrook, “Snacks for a Fat Planet.” 75 Seabrook, “Snacks for a Fat Planet.” 76 Seabrook, “Snacks for a Fat Planet.” 77 Tropicana, “Trop 50,” http://www.tropicana.com/#/trop_home/home.swf?/trop_trop50/productsLanding.swf, accessed May 2013. 78 Mark J. 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