Current Event Presentation

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Current Event Presentation

• Presented By
• Meghan Cianelli, Samantha Hicks
• Vanessa Hoza

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PepsiCo and The Pepsi Bottling Group Announce New
Joint Venture Operation in Russia

• March 1, 2007
• Reuters Online
• http//www.reuters.com/article/mergersNews/idUSN01
  36404120070301?src030107_1204_FEATURES_merger_tal
  k

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Facts on Pepsi

• PepsiCo is one of the world's largest food and
  beverage companies with annual revenues of 35
  billion.
• Its portfolio includes 17 brands that generate 1
  billion or more each in annual sales.

• Its principal businesses include Frito-Lay
  snacks, Pepsi-Cola beverages, Gatorade sports
  drinks, Tropicana juices and Quaker foods.

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Facts on Pepsi

• The Pepsi Bottling Group, Inc. is the world's
  largest manufacturer, seller and distributor of
  Pepsi-Cola beverages
• Has operations in the U.S., Canada, Greece,
  Mexico, Russia, Spain and Turkey.

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Pepsi History In Russia

• In Russia, Pepsi once had a larger market share
  than Coca-Cola.
• PepsiCo made a deal with the Soviet Union for
  scale production of Pepsi in 1972.
• When the Soviet Union fell apart , Pepsi, was
  associated with the old Soviet system

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Pepsi History In Russia

• In the early 1990s, the term, Pepsi-stroika",
  began appearing as a pun on perestroika", the
  reform policy of the Soviet Union under Mikhail
  Gorbachev.
• By July 2005, Coca-Cola enjoyed a market share of
  19.4 percent, followed by Pepsi with 13 percent.

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Pepsi Bottling forms Russia Venture

• PepsiCo, Inc. and The Pepsi Bottling Group, Inc.
  announced the formation of PR Beverages Limited,
  a joint venture comprising PepsiCo's concentrate
  and PBG's bottling businesses in Russia.

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Pepsi Bottling form Russia Venture

• This joint venture will enable the Pepsi system
  to respond more quickly to marketplace dynamics.
• Pepsi will be in an even better position to
  strategically invest in Russia to accelerate the
  Pepsi systems growth.

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Adaptation of Pepsi in Russia

• Products must be adapted in response to different
  or foreign market conditions.
• Pepsi had designed a different bottle which
  appeals to the Russian market.
• Pepsi has the ability to think globally but act
  locally creating a good competitive advantage.
• Pepsi in Russia

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Psychographic Profile of Russia

• Five Categories
• Kuptsy-(largest group, merchant)
• Cossacks
• Students
• Business executives
• Russian Souls

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Psychographic Profile of Russia

• The kuptsy prefer Russian Products but look down
  on mass produced goods of inferior quality.
• Russia has a broad consumer market, however Pepsi
  must decide which group is best for them to
  target.
• People used to want to buy things that only
  looked foreign. Now they want Russian.
• -Sergei Platinin, director of a Russian company

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Global Implications

• Pepsi outsells Coca-Cola in Russia due to its 23
  factories and lower prices
• The soft drink market in the U.S. is shrinking
• Loss of jobs in the U.S.
• The cola wars have moved from a domestic market
  to an international market

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Global Implications

• U.S. firms may gain a monopoly of the soft drink
  market in Europe
• With Coca-Cola's and Pepsi's investments they
  will increase sales worldwide and help to build
  up the economies that they are investing in.

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Conclusion

• Joint ventures allow Pepsi to keep its
  production costs low
• Low production costs allow Pepsi to charge lower
  prices than its main competitor Coca-Cola
• Low prices give Pepsi a competitive advantage in
  the international market