Pepsi Co's Restaurants Essay

1330 words - 5 pages

SUMMARY & COMMENTSThis case presents the PepsiCo Company's situation between 1950s to early 1990s. PepsiCo is a large organization with a decentralized management approach.In 1933, 12 ounces of Pepsi was equal to a nickel where for one nickel you could buy 6 ounces of Coca Cola. By the end of 1940s, when Alfred Steele was the CEO, the company moved from low price strategy and launched an extensive marketing campaign to boost the company's image. The strategy was successful. Sales increased to $14.2 million in 1960 from a postwar low of $1.3 million in 1950.In 1963, Donald M.Kendall (CEO) and Andrall E.Pearson (COO) changed the company's cultural emphasis from passivity to aggressivity. During that time, the corporate office set strategy and maintained financial control, but left operating decisions to its energetic and industrious division managers who were eager to take charge. Kendall merged Pepsi-Cola with Frito Lay in 1965 and company name became PepsiCo.Kendall's successor, Wayne Calloway (1986), put the emphasis more on his employees. When asked by a Fortune magazine reporter to what he attributed PepsiCo's outstanding performance during his tenure, he replied "the three P's 'people, people, people'". He also believed that different experiences made great managers. He also challenged his managers to be innovative and was known for saying, "If it ain't broke, fix it anyway". All those statements made by Colloway shows his strategy in management. He believes given the right environment and empowered in a correct way, the success will come and the success of the manager would be for sure the success of the company.PepsiCo's BusinessesPepsiCo had three segments as shown in Table 1Table 1Soft Drinks Snack Foods Restaurants1991 Sales/Total Sales 35% 29% 36%1991 Profits/Total Profits 39% 35% 26%In 1986, PepsiCo purchased KFC. Combined with Pizza Hut and Taco Bell, the purchase made PepsiCo the international leader in number of restaurant units.In late 1980s, Coca Cola campaign against PepsiCo stating that restaurants that bought syrup from Pepsi-Cola were albeit indirectly, helping one of their toughest restaurant competitors. The result of this campaign cost PepsiCo to lose its Burger King and Wendy's accounts in 1991.All three of PepsiCo's restaurant chains were considered quick service.Pizza HutPepsiCo purchased Pizza Hut in 1977. In 1984, Pizza Hut challenged by Domino's Pizza chain focusing on delivery. As a result, Pizza Hut launched its own delivery business in 1985. In 1988, delivery business accounted for more than one quarter of Pizza Hut's sales growth and half of its profit growth at the store level. Delivery service was the first step toward repositioning of Pizza Hut into pizza distribution. Also expansion into non-traditional loacations like airports, amusement parks, stadiums and school lunch rooms was a key factor in its success.In 1991, Pizza Hut offered two new concepts: quick service and casual dining. Competitors were...

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