Business diversification strategy

1. Read:Case 9 (pg. 378): PepsiCo’s Diversification strategy

Respond to the following prompts. Using the frameworks outlined in chapters 7 & 8 to:Respond to the following prompts. Using the frameworks outlined in chapters 7 & 8 to:Evaluate PepsiCo’s diversification strategy? (apply Figure 8.3)Discuss the strengths and weaknesses of PepsiCo’s current strategy?Identify TWO strategic moves you would make to make PepsiCo’s corporate strategy more effective. Justify your choice.

CASE STUDY: PEPSICO’S DIVERSIFICATION STRATEGY IN 2022
JOHN E. GAMBLE Texas A&M University-Corpus Christi
PepsiCo was the world’s largest snack and beverage company, with 2021 net revenues
of approximately $75.5 billion. The company’s portfolio of businesses in 2022 included
Frito-Lay salty snacks, Quaker Chewy granola bars, Pepsi soft-drink products, Stacy’s
pita chips, Gatorade, Propel, bubly, Sabra hummus, Quaker Oatmeal, Cap’n Crunch,
Aquafina, Mountain Dew, Rice-A-Roni, and many other regu­larly consumed products.
The company viewed the lineup as highly complementary since most of its products
could be consumed together. For example, Stacy’s pita chips and Sabra hummus might
make a nice snack, and Doritos and an Aquafina might be part of someone’s lunch.
While PepsiCo’s shares had underperformed relative to companies competing in high
growth industries, the company had shown resil­ience and achieved growth in revenues
and earnings during the economic turbulence brought about by the COVID-19
pandemic.
The company’s top managers were focused on sus­taining growth in revenues and
earnings through strat­egies keyed to product innovation, international expansion, and
strategic acquisitions. New product innovations that addressed consumer health and
well­ness concerns were important contributors to the company’s 7.4 percent annual
growth rate in U.S. rev­enues between 2019 and 2021. PepsiCo’s focus on growth in
international markets allowed the company’s total revenues to increase by 8.8 percent
annually between 2019 and 2021. International markets with the highest annual growth
rates in revenues between 2019 and 2021 included China with a 43.6 percent annual
growth rate, South Africa with a 122.7 percent annual growth rate, and the United
Kingdom with a 10.5 percent annual growth rate.
In addition to focusing on strategies designed to deliver revenue and earnings growth,
the company maintained an aggressive share repurchase and div­idend policy, with
more than $7 billion returned to shareholders in 2020 through share repurchases of $2
billion and dividends of approximately $5.5 billion. The company’s common share
repur­chases totaled $106 million in 2021, with dividend pay­ments increasing to $5.8
billion. The company bolstered its cash returns through carefully considered capital
expenditures and acquisitions and a focus on operational excellence. Its investments
were fo­cused on manufacturing automation, a rationalized global manufacturing plan,
and reengineered distri­bution systems to drive efficiency. In addition, the company’s
Pep+ (PepsiCo Positive) sustainability plan focused on minimizing the company’s
impact on the environment by lowering energy and water consumption and reducing its
use of packaging ma­terial, meeting internal diversity, equity, and inclusion (DEI) goals,
and supporting and investing in the local communities in which it operated. For
example, the company was transitioning to renewable energy sources with a goal of
achieving net zero emissions by 2040. The company also planned to reduce water use
and replenish more water than it used by 2030 and to cut virgin plastic use by 50
percent between 2020 and 2030.
The company continued to manage its portfolio of food and beverage brands to focus
on growth. Many of its spikes in revenue growth in the past two
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EXHIBIT 1 PepsiCo’s Consolidated Statements of Income, 2019-2021 (In
millions, except per share amounts) 2021 2020 2019 Net Revenue $79,474
$70,372 $67,161 Cost of sales 37,075 31,797 30,132 Gross profit…
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decades had followed major acquisitions: a $13.6 billion acquisition of Quaker Oats in
2001; the 2010 acquisi­tion of the previously independent Pepsi Bottling Group and
PepsiCo Americas for $8.26 billion; the acquisition of Russia’s leading
food-and-beverage company, Wimm-Bill-Dann (WBD) Foods for $3.8 billion in 2011;
and the 2020 acquisitions of Pioneer Foods in South Africa for $1.2 billion and Rockstar
energy drink for $3.85 billion. The com­pany also shifted the makeup of its portfolio to
eliminate slow growth businesses, including the spinoff of Tropicana and Naked juices
as a joint venture with noncontrolling interest in 2022. Man­agement of PepsiCo’s brand
lineup was essential to future growth as annual consumption of carbonated soft drinks
fell each year. A summary of PepsiCo’s financial performance between 2019 and 2021
is shown in Exhibit 1. Exhibit 2 presents PepsiCo’s con­solidated balance sheets for
2020 and 2021. The com­pany’s calculation of free cash flow for 2019-2021 is shown in
Exhibit 3. Exhibit 4 tracks PepsiCo’s market performance between May 2017 and May
2022.
Company History
PepsiCo, Inc., was established in 1965 when Pepsi- Cola and Frito-Lay shareholders
agreed to a merger between the salty-snack icon and soft-drink giant. The new
company was founded with annual revenues of $510 million and such well-known
brands as Pepsi-Cola, Mountain Dew, Fritos, Lay’s, Cheetos, Ruffles, and Rold Gold.
PepsiCo’s roots can be traced to 1898 when New Bern, North Carolina, pharmacist
Caleb Bradham created the formula for a carbonated bever­age he named Pepsi-Cola.
The company’s salty-snack business began in 1932 when Elmer Doolin, of San Antonio,
Texas, began manufacturing and marketing Fritos corn chips and Herman Lay started a
potato chip distribution business in Nashville, Tennessee. In 1961, Doolin and Lay
agreed to a merger between their businesses to establish the Frito-Lay Company.
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EXHIBIT 2 PepsiCo, Inc.’s Consolidated Balance Sheets, 2020-2021 (in
millions, except per share data) 2021 2020 ASSETS Current Assets Cash
and cash equivalents $ 5,596 $ 8,185 Short-term investments 3…
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EXHIBIT 3 Net Cash Provided by PepsiCo’s Operating Activities, 2020-2021
2021 2020 Net cash provided by operating activities, GAAP measure $11,616
$10,613 Capital spending (4,625) (4,240) Sales of property, plan…
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EXHIBIT 4 Monthly Performance of PepsiCo, Inc.’s Stock Price, May
2017-May 2022 180 170 160 150 Stock Price ($) 140 130 120 110 100 2018
2019 2020 2021 2022 Year (a) Trend in PepsiCo, Inc.’s Common Stock Price
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+105 +90 S&P 500 +75 +60 +45 (May 2017 = 0) Percent Change +30
+15 PepsiCo’s 0 Stock Price -15 2018 2019 2020 2021 2022 Year (b)
Performance of PepsiCo, Inc.’s Stock Price versus the S&P 500 Index
During PepsiCo’s first five years as a snack and beverage company, it introduced new
products such as Doritos and Funyuns, entered markets in Japan and Eastern Europe,
and opened, on average, one new snack-food plant per year. By 1971, PepsiCo had
more than doubled its revenues to reach $1 billion. The company began to pursue
growth through acquisitions outside snacks and beverages as early as 1968, but its
1977 acquisition of Pizza Hut significantly shaped the strategic direction of PepsiCo for
the next 20 years. The acquisitions of Taco Bell in 1978 and Kentucky Fried Chicken in
1986 created a business portfolio described by Wayne Calloway (PepsiCo’s CEO
between 1986 and 1996) as a balanced three-legged stool. Calloway believed the
combination of snack foods, soft drinks, and fast food offered considerable cost sharing
and skill transfer opportunities, and he rou­tinely shifted managers among the company’s
three divisions as part of the company’s management development efforts.
PepsiCo strengthened its portfolio of snack foods and beverages during the 1980s and
1990s with the acquisitions of Mug Root Beer, 7-Up International, Smartfood
ready-to-eat popcorn, Walker’s Crisps (United Kingdom), Smith’s Crisps (United
Kingdom), Mexican cookie company Gamesa, and Sunchips. Calloway added
quick-service restaurants Hot-n-Now in 1990; California Pizza Kitchens in 1992; and
East Side Mario’s, D’Angelo Sandwich Shops, and Chevy’s Mexican Restaurants in
1993. The company expanded beyond carbonated beverages through a 1992
agree­ment with Ocean Spray to distribute single-serving juices, the introduction of
Lipton ready-to-drink (RTD) teas in 1993, and the introduction of Aquafina bottled water
and Frappuccino ready-to-drink cof­fees in 1994.
In 1997, CEO Roger Enrico spun off the compa­ny’s restaurants as an independent,
publicly traded company to focus PepsiCo on food and beverages. Soon after the
spinoff of PepsiCo’s fast-food restau­rants was completed, Enrico acquired Cracker
Jack, Tropicana, Smith’s Snackfood Company in Australia, SoBe teas and alternative
beverages, Tasali Snack Foods (the leader in the Saudi Arabian salty-snack market),
and the Quaker Oats Company.
PepsiCo’s 2001 Acquisition of Quaker Oats
PepsiCo’s $13.9 billion acquisition of Quaker Oats in 2001 was the company’s largest
ever acquisition and gave it the number-one brand of oatmeal in the United States, with
more than a 60 percent category share; the leading brand of rice cakes and granola
snack bars; and other well-known grocery brands such as Cap’n Crunch and
Rice-A-Roni. However, Quaker’s most valuable asset in its arsenal of brands was
Gatorade.
Gatorade was developed by University of Florida researchers in 1965, but it was not
marketed commer­cially until the formula was sold to Stokley-Van Camp in 1967. When
Quaker Oats acquired the brand from Stokely-Van Camp in 1983, Gatorade gradually
made a transformation from a regionally distributed prod­uct with annual sales of $90
million to a $2 billion powerhouse. Gatorade was able to increase sales by more than 10
percent annually during the 1990s, with no new entrant to the sports beverage category
posing a serious threat to the brand’s dominance. PepsiCo, Coca-Cola, France’s
Danone Group, and Swiss food giant Nestlé all were attracted to Gato­rade because of
its commanding market share and because of the expected growth in the isotonic sports
beverage category.
Additional PepsiCo Acquisitions (2002-2020)
After the completion of the Quaker Oats acquisition in 2001, the company made a
number of acquisitions of small, fast-growing food and beverage companies in the
United States and internationally to broaden its portfolio of brands. Such acquisitions in
2006 in­cluded Stacey’s bagel and pita chips, Izze carbonated beverages,
Netherlands-based Duyvis nuts, and Star Foods (Poland). Acquisitions made during
2007 in­cluded Naked Juice fruit beverages, Sandora juices in the Ukraine, New
Zealand’s Bluebird snacks, Penelopa nuts and seeds in Bulgaria, and Brazilian snack
producer Lucky. The company also entered into a joint venture with the Strauss Group
in 2007 to market Sabra—the top-selling and fastest-growing brand of hummus in the
United States and Canada. The company acquired the Russian beverage producer
Lebedyansky in 2008 for $1.8 billion, and in 2010 it acquired Marbo, a potato chip
production operation in Serbia. In 2010 and 2011, the company executed its larg­est
acquisitions since the 2001 acquisition of Quaker Oats. In 2010, PepsiCo acquired the
previously inde­pendent Pepsi Bottling Group and PepsiCo Americas for $8.26 billion in
cash and PepsiCo common shares. The acquisition was designed to better inte­grate its
global distribution system for its beverage business. In 2011, it acquired Russia’s
leading food and beverage company, Wimm-Bill-Dann Foods, for $3.8 billion. The
combination of acquisitions and the strength of PepsiCo’s core snacks and beverages
busi­ness allowed the company’s revenues to increase from approximately $29 billion in
2004 to more than $66 billion in 2013.
PepsiCo made additional small acquisitions total­ing less than $500 million annually after
its acquisition of Wimm-Bill-Dann Foods, including the $200 million acquisition of KeVita
beverages in 2016 and its 2018 acquisition of Bare Foods for an undisclosed amount.
Both acquisitions were intended to expand its lineup of lower calorie and lower sodium
products. PepsiCo also acquired SodaStream in 2018 for $3.2 billion to capture a larger
share of the sparkling water category and to meet its commitment to reduce plastic
waste. PepsiCo initiated a mix of acquisitions of larger brands and smaller companies in
2020, with the acquisition of BFY Brands in 2020 for an undisclosed amount, Haomusi
Food Co., Ltd. for $700 million, Pioneer Foods for $1.2 billion, and Rockstar Energy
Beverages for $3.85 billion. The company made no significant acquisitions in 2021 or
2022. A listing of PepsiCo’s leading brands is presented in Exhibit 5.
PepsiCo’s Business Unit Performance
PepsiCo’s corporate strategy had diversified the com­pany into salty and sweet snacks,
soft drinks, bottled water, ready-to-drink teas and coffees, purified and functional waters,
isotonic beverages, hot and ready-to-eat breakfast cereals, grain-based products, and
breakfast condiments. Most PepsiCo brands had
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EXHIBIT 5 PepsiCo, Inc.’s Leading Brands by Category, 2022 Top Global
Brands Beverages Snacks Convenience Foods Pepsi . KeVita probiotic Fritos
. Quaker Oats Lay’s beverages Lay’s . Quaker Chewy granola M…
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achieved number-one or number-two positions in their respective food and beverage
categories through strategies keyed to product innovation, close relation­ships with
distribution allies, international expan­sion, and strategic acquisitions. The company was
committed to producing the highest-quality products in each category and was working
diligently on prod­uct reformulations to make snack foods and bever­ages less unhealthy.
The company believed that its efforts to develop better-for-you products would cre­ate
growth opportunities from the intersection of business and public interests.
PepsiCo was organized into six business divisions, which all followed the corporation’s
general strategic approach. Frito-Lay North America manufactured, marketed, and
distributed such snack foods as Lay’s po­tato chips, Doritos tortilla chips, Cheetos
cheese snacks, Fritos corn chips, Grandma’s cookies, and Smartfood popcorn. Quaker
Foods North America manufactured and marketed cereals, rice and pasta dishes,
granola bars, pancake mixes and syrups, and other food items that were sold in
supermarkets. PepsiCo Beverages North America manufactured, mar­keted, and sold
beverage concentrates, fountain syrups, and finished goods under such brands as
Pepsi, Gatorade, Aquafina, Tropicana, Lipton, Dole, and Propel throughout North
America. Latin America manufactured, marketed, and distributed snack foods and many
Quaker-branded cereals and snacks in Latin America. The division also produced,
marketed, dis­tributed, and sold PepsiCo beverage brands in Latin America. Europe
manufactured, marketed, and sold snacks and beverages throughout Europe, while the
company’s Africa, Middle East, and South Asia divi­sion produced, marketed, and
distributed snack brands, Quaker-branded convenient foods, and beverages in those
regions. Asia Pacific, Australia and New Zealand, and China Region manufactured and
marketed snacks, beverages, and Quaker-branded convenience food items that were
distributed throughout the region. Select financial information for PepsiCo’s six reporting
units for 2019 through 2021 is presented in Exhibit 6.
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EXHIBIT 6 Select Financial Data for PepsiCo, Inc.’s Business Segments,
2019-2021 (in millions) Net Revenue 2021 2020 2019 Frito-Lay North
America $19,608 $18, 189 $17,078 Quaker Foods North Americ…
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Net Revenue 2021 2020 2019 Corporate unallocated expenses (1683) (1442)
(1306) Total $11,162 $10,080 $10,291 Capital Spending 2021 2020 2019
Frito-Lay North America $ 1,411 $ 1,189 $ 1,227 Quaker Foods N…
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Frito-Lay North America
In 2022, Frito-Lay owned the top-selling chip brand in each U.S. salty-snack category
and held more than a 2-to-1 lead over the next-largest snack-food maker in the United
States. Key trends that were shaping the industry were a growing awareness of the
nutritional content of snack foods and product innovation. Re­cently acquired brands
such as Bare Foods baked fruit and vegetable snacks offered an opportunity for
Frito-Lay to exploit consumers’ desires for health­ier snacks and address a deficiency in
most diets. Americans, on average, consumed only about 50 percent of the U.S.
Department of Agriculture’s recommended daily diet of fruits and vegetables. By 2025,
the company expected that 75 percent of its global foods portfolio volume would not
exceed 1.3 milligrams of sodium per calories and 1.1 grams of saturated fat per 100
calories. PepsiCo innovations were directed at adding new flavors of popular brands
and adding to its lineup of healthier snacks. Examples of these innovations included
Lay’s Poppables, Doritos Walking Tacos, El Isleño plantain chips, NatuChips, and its
Simple line of healthier versions of Cheetos, Doritos, Lay’s, Tostitos, and Ruffles chips.
Frito-Lay North America’s (FLNA’s) revenues in­creased by 8 percent between 2020 and
2021 with volume sales increasing by 2 percent. The increase in volume resulted from
higher sales of healthier snack brands while brands such as Tostitos declined at a
low-single-digit rate and Santitas declined at a double-digit rate between 2020 and
2021. However, the divi­sion was able to boost operating profit by 5.5 percent between
2020 and 2021 through productivity savings and reduced COVID-19 expenses in 2021
than in the prior year. The division produced 25 percent of PepsiCo’s net revenues in
2021 and 50 percent of its operating profit.
Quaker Foods North America
Quaker Foods North America (QFNA) produced, marketed, and distributed hot and
ready-to-eat cere­als, pancake mixes and syrups, and rice and pasta side dishes in the
United States and Canada. Quaker Oatmeal, Life cereal, and Cap’n Crunch cereal
vol­umes were competing in mature industries with weak competitive positions relative to
Kellogg’s and General Mills. Quaker Oats was the star product of the division, with a
commanding share of the North American market for oatmeal. The division recorded
sales of more than $2.7 billion in 2021. The sales volume and net revenue of Quaker
Foods products decreased by 7 percent between 2020 and 2021 as sales of pancake
mixes, syrups, and ready-to-eat cere­als declined at double-digit rates and sales of
oatmeal declined at a high-single-digit rate between 2020 and 2021.
PepsiCo Beverages North America
PepsiCo was the second largest seller of nonalco­holic beverages in North America
during 2020, with a market share of 26 percent. Coca-Cola was the larg­est nonalcoholic
beverage producer in North America, with a 44 percent market share in 2020. Dr
Pepper Snapple Group was the third-largest bev­erage seller in 2020 and was followed
by Red Bull. As with Frito-Lay, PepsiCo’s beverage business contrib­uted greatly to the
corporation’s overall profitability and free cash flows and was heavily impacted by
con­sumer preferences for healthier food and beverage choices. In 2021, North
American Beverages (NAB) accounted for 32 percent of the corporation’s total revenues
and 22 percent of its operating profits. The NAB division’s $1 billion brands included
Gatorade, Lipton ready-to-drink tea, Pepsi, Diet Pepsi, Mountain Dew, Diet Mountain
Dew, Aquafina, Miranda, Sierra Mist, Starbucks cold-coffee drinks, and SoBe. The
global carbonated soft drinks industry accounted for $221.6 billion in sales in 2021 and
was projected to grow at an annual rate of 4.7 percent through 2028. The division’s
revenues increased by 12 percent be­tween 2020 and 2021, which was driven by a 6
percent increase in overall volume, a 7 percent increase in noncarbonated beverages,
and a 4 percent increase in carbonated beverage volume. NAB’s fastest grow­ing
noncarbonated beverages were Gatorade and Lipton ready-to-drink teas, which both
grew at low- to mid-single-digit rates between 2020 and 2021.
Latin America
PepsiCo management believed international markets offered the company’s greatest
opportunity for growth since per capita consumption of snacks in the United States
averaged 6.6 servings per month while per capita consumption in other developed
countries averaged 4 servings per month and in developing countries averaged 0.4
serving per month. PepsiCo executives expected China and Brazil to become the two
largest international markets for snacks, with sig­nificant growth also expected in Mexico,
Argentina, and Chile.
Developing an understanding of consumer taste preferences was a key to expanding
into international markets. Taste preferences for salty snacks were more similar from
country to country than were prefer­ences for many other food items, and this allowed
PepsiCo to make only modest modifications to its snacks in most countries. For
example, classic variet­ies of Lay’s, Doritos, and Cheetos snacks were sold in Latin
America. In addition, consumer characteris­tics in the United States that had forced
snack-food makers to adopt healthier snacks applied in most other developed countries
as well.
PepsiCo was the second-largest seller of snacks and beverages in Mexico, and its
Doritos, Marias Gamesa, Cheetos, Ruffles, Emperador, Saladitas, Sabritas, and Tostitos
brands were popular through­out most of Latin America. The division’s revenues had
grown from $7.6 billion in 2019 to $8.1 billion in 2021 and accounted for 10 percent of
2021 total net revenues. The division’s revenues increased by 17 percent between 2020
and 2021 as a result of price increases, but its sales volume of snacks and beverages
also improved at a double-digit rate in Argentina and Chile and by single-digit rates in
Mexico, Brazil, and Guatemala. The division’s net price increases, productivity savings,
and favorable exchange rates led to a 33 percent increase in operat­ing profit between
2020 and 2021.
Europe
All of PepsiCo’s global brands were sold in Europe, as well as its country- or
region-specific brands such as Domik v Derevne, Chjudo, and Agusha. The com­pany’s
acquisition of Wimm-Bill-Dann Foods, along with sales of its long-time brands, made it
the number-one food and beverage company in Russia, with a 2-to-1 advantage over its
nearest competitor. It was also the leading seller of snacks and beverages in the United
Kingdom. The division’s snack volume sales increased by 4 percent during 2021, largely
because of double-digit growth in Turkey and mid-single-digit growth in Russia and
Poland between 2020 and 2021. While volume sales in the United Kingdom declined at
a mid-single-digit rate between 2020 and 2021, sales improved slightly during 2021 in
the Netherlands and France. Beverage sales grew at an 8 percent rate between 2020
and 2021, driven by double-digit growth in Russia, Turkey, and the United Kingdom. The
division’s 2021 operating profits decreased by 4.5 percent from 2020 as a result of
higher commod­ity costs and restructuring charges.
Africa, the Middle East, and South Asia
PepsiCo’s business unit operating in Asia, the Middle East, and South Asia
manufactured and marketed all of the company’s global brands and many regional
brands such as Kurkure, Sasko, and Chipsy. The divi­sion’s revenues had increased by
33 percent between 2020 and 2021, which reflected a 14-percentage-point impact of
the Pioneer Foods acquisition in South Africa. Convenient food sales volume improved
by 38 percent in 2021, with 35 percent growth ac­counted for by the addition of Pioneer
Foods brands. Beverage volume grew by 20 percent between 2020 and 2021, which
was driven by double-digit growth in India, Pakistan, and Middle Eastern markets.
Operat­ing profit for the division increased by 43 percent be­tween 2020 and 2021, which
reflected a 31-point impact of the Pioneer Foods acquisition. Additional gains in
operating profits were attributable to produc­tivity savings and lower charges resulting
from COVID-19 during 2021.
Asia Pacific, Australia and New Zealand, and China Region
PepsiCo’s business unit operating in Asia Pacific, Australia and New Zealand, and the
China Region manufactured and marketed all of the company’s global brands and
regional brands such as BaiCaoWei, Be & Cheery, and Sting. The division’s revenues
had increased by 34 percent between 2020 and 2021, reflecting a 15-point impact of the
Haomusi Food Co., Ltd. acquisition. Haomusi’s most prominent brand was the Be &
Cheery brand sold in China. Convenient foods volume increased by 19 percent in 2021
with the addition of Be & Cheery brand ac­counting for a 16-percentage-point impact.
Sales vol­ume in Australia, Indonesia, and Taiwan also grew during 2021, although at
low-single-digit rates. Bever­age unit volume increased by 13 percent between 2020 and
2021 as sales in China improved during 2021 at a double-digit rate. Beverage sales
volume also grew in the Philippines and Thailand at single-digit rates, while sales
volume in Vietnam declined at a low-single-digit rate. Operating income improved by 14
percent during 2021 as a result of economies of scope provided by the Haomusi Food
acquisition and productivity gains.
Value Chain Alignment Between PepsiCo Brands and Products
PepsiCo’s management team was dedicated to cap­turing strategic-fit benefits within the
business lineup throughout the value chain. The company’s procure­ment activities were
coordinated globally to achieve the greatest possible economies of scale, and best
practices were routinely transferred among its more than 200 plants, over 3,500
distribution systems, and 120,000 service routes around the world. PepsiCo
management had a proven ability to capture strategic fits between the operations of
new acquisitions and its other businesses. In total, the company estimated that the
synergies among its business units generated approximately $1 billion annually in
productivity sav­ings. PepsiCo also shared market research informa­tion with its divisions
to better enable each division to develop new products likely to be hits with con­sumers,
and the company coordinated its Power of One activities across product lines.
PepsiCo’s Strategic Situation in 2022
PepsiCo’s strategy keyed to building its global brands, developing product innovations,
and boosting pro­ductivity through efficient operations had produced strong operating
profits and annual free cash flows through 2021. The company had also achieved
growth in revenues through high-potential acquisi­tions and divestitures of slow growth
businesses. Nevertheless, the company had struggled to achieve organic growth in
many of its major project catego­ries and promising international markets. While
PepsiCo continued to provide its investors with at­tractive dividend payments, the
company had yet to prove that its diversification strategy could deliver significant
increases in shareholder value.
The company was aggressively pursuing a strategy to increase its GFY and BFY
brands and improve the overall healthiness of its product portfolio. Its acquisitions of
established brands such as Gatorade and Tropicana had added to its portfolio of $1
billion brands, and new acquisitions such as Naked Juice might soon add to that list with
healthy food and beverages. Additional product introductions and acquisitions such as
bubly and Bare Foods might also contribute to future revenue growth. However, some
food and beverage industry analysts had specu­lated that additional corporate strategy
changes might also be required to restore previous revenue and earnings growth rates
and lead to increases in shareholder value.