When you think of the name Pepsi, the first thing to that probably comes to mind is cola. And you're probably not alone. The multi-billion dollar multinational corporation's signature brand is well-known across the world as the preferred soft drink of millions of people, with flavors ranging from the original formula to diet options, and even fruit flavors. The company also released limited editions of its famous cola like Christmas Pepsi, available in 2007 and 2008, and Pepsi Mojito, a nonalcoholic version of the popular cocktail which was sold in stores in the summer of 2009.
But the company isn't just about soda. In fact, PepsiCo (PEP) owns about two dozen billion-dollar brands, making it one of the world's largest food and beverage companies. Most of those brands are in the beverage category and are easily associated with the company. But unlike its main rival, Coca-Cola, PepsiCo has expanded beyond the beverage market with close to a dozen total billion-dollar food and snack brands. This article looks at a brief history of the country, its most recent financials as well as some of the top, most successful brands under the PepsiCo banner.
- PepsiCo owns about two dozen billion-dollar brands, and is one of the world's largest food and beverage businesses.
- The company's expansion beyond sodas and juice drinks allows it to cut out the competition while diversifying its product offerings.
- Frito-Lay, which merged with PepsiCo in 1965, represented 43% of the company's total operating profit in 2018.
- Quaker proved to be a great investment for the company because of its Gatorade brand, which commands about half of the global sports drink market share.
- Tropicana, Sabra, and Naked round out the top five brands under PepsiCo banner.
Pepsi: A Brief History
PepsiCo was founded in 1965 as the result of a merger between the Pepsi-Cola and Frito-Lay. But the Pepsi brand and company's origins date back much further. Caleb Bradham first developed the recipe for the iconic soda in 1893 and introduced it as Brad's Drink. The beverage has since undergone several changes in identity. In 1898, Brad's Drink was renamed and marketed as Pepsi-Cola. In 1961, it was shortened and has since been known as Pepsi.
Pepsi is headquartered in New Bern, North Carolina, where Bradham—a pharmacist—invented the drink in his drugstore, where he sold it to his customers. The company has six different divisions: PepsiCo Beverages North America, Frito-Lay North America, Quaker Foods North America, Latin America, Europe Sub-Saharan Africa, and Asia, Middle East and North Africa.
PepsiCo's leadership team includes chairman and chief executive officer (CEO) Ramon Laguarta, as well as senior vice president and controller Marie Gallagher, vice chairman and chief financial officer (CFO) Hugh F. Johnston, and executive vice president and chief science officer (CSO) René Lammers.
PepsiCo's Revenue Growth
No matter where you travel in the world, you are probably only a short distance from a PepsiCo food or beverage item. According to PepsiCo's most recent annual report, the company generated net revenues of $64.7 billion for the year 2018. This figure is up slightly from revenues of $63.5 billion from the previous year. More than half of PepsiCo's global revenue comes from snack and food products. In its 2018 annual report, the company reported a 54-46 split between food and beverage revenue, with 57% of that coming from the United States and 43% from the rest of the world.
Unlike rival Coca-Cola (KO), which has largely remained focus on the beverage industry, PepsiCo has expanded its offerings well outside of sodas and juice drinks. This expansion has been thanks in large part to PepsiCo's aggressive acquisition strategy, which allows the company to subsume potential rivals while diversifying its product offerings.
PepsiCo's acquisition strategy allows the company to cut out potential rivals while diversifying its product offerings.
These are the main companies that have helped contribute to PepsiCo's success during the last 20 years.
PepsiCo was formed by the merger of Frito-Lay and the Pepsi-Cola Company in 1965. Frito-Lay brought several iconic and profitable snack brands to PepsiCo, including six of today's billion-dollar brands: Cheetos, Doritos, Tostitos, Lay's, Walkers, and Fritos. The Frito-Lay line has several other recognizable brands such as SunChips, Ruffles, Stacy's Pita Chips, Rold Gold pretzels, and baseball stadium favorite Cracker Jack.
In fiscal year 2018, Frito-Lay contributed to a quarter of the company’s revenues, bringing in about $16.3 billion in revenue. Frito-Lay's share of the total operating profit for 2018 was 43%.
The company spent $13.4 billion in 2001 for Quaker Oats, acquiring Gatorade in the process. At the time, Quaker Oats owned Gatorade and was a target of three different companies including Coca-Cola and PepsiCo. Ultimately, PepsiCo won the bidding war after Coca-Cola's board of directors voted down the deal.
Quaker ended up being a great investment. Gatorade has grown into a very profitable sports drink brand, and commands about half of the global sports drink market share. By acquiring Quaker, PepsiCo aimed to cater to a shift in consumer habits which moved away from sugary soft drinks to sports and energy drinks. The healthier shift in consumer tastes also led PepsiCo to decide not to sell Quaker Oats after acquiring it for Gatorade.
Quaker is best known for its oat products. However, the brand also produces granola bars, rice cakes, and grits. In addition, it produces non-Quaker brands, such as Aunt Jemima, Rice-A-Roni side dishes, as well as Cap'n Crunch and Life cereals. Beyond the Gatorade brand, the Quaker family produces only 6% of PepsiCo's annual revenue, or about $2.5 billion in 2018.
Before the Quaker Oats acquisition in 2001, PepsiCo made another strategic acquisition to capitalize on healthier consumer options. It acquired Tropicana in 1998 for $3.3 billion.
Tropicana was founded by Anthony T. Rossi in 1947. The company manufactures fruit and vegetable juice products. After acquiring Tropicana, PepsiCo grew the brand to number one in market share for U.S. juices. Tropicana remains one of PepsiCo's billion-dollar brands despite relatively weak sales in recent years.
Sabra Dipping Company
Founded in 1986, Sabra Dipping Company is one of the largest producers of Mediterranean-style hummus dips and similar products in the U.S. The company was acquired by Israeli food company Strauss in 2005. Strauss and Frito-Lay later entered into a joint venture partnership in 2008. Under the terms of the agreement, Strauss and PepsiCo each own 50% of Sabra. Pepsi has not released sales revenue for the Sabra brand to date.
Santa Monica-based Naked Juice was founded in 1983. The company evolved and grew over the course of the next two decades. By the time PepsiCo expressed an interest in acquiring the company, it was a subsidiary of North Castle Partners. PepsiCo acquired Naked Juice for an undisclosed sum in the later part of 2006, and finalized the deal in the early part 2007. Like Gatorade, Naked Juice helped PepsiCo diversify its product offerings to cater toward an increasingly health-conscious pool of consumers. Recent sales figures for Naked Juice are not readily available.
While the subsidiaries and acquisitions noted above are some of PepsiCo's largest and most important brands, there are a variety of other, smaller companies included under the Pepsi umbrella as well. In September of 2006, PepsiCo bought sparkling juice manufacturer Izze. In August 2018, PepsiCo announced the acquisition of sparkling water brand SodaStream.