Pepsi

REPORT

ON

PEPSICO’S DISTRIBUTION &

LOGISTIC OPERATION
(SALES & DISTRIBUTION MANAGEMENT)

MASTER OF BUSINESS ADMINISTRATION

(IBS GURGAON)
2009-11

SUBMITTED TO,
PROF. ranjita gupta
Date: 31-08-2010

Roll No.09bs0002569 - SECTION G - TARUN DHINGRA

INTRODUCTION AND QUESTION 1
Pepsi

INTRODUCTION

Headquartered in New York, the US-based PepsiCo is one of the world's leading beverage and

snacks food companies. In its 2002 annual report, the company claimed to have the largest share

in the US beverage markets.

PepsiCo served diverse markets with its six group companies - Frito-Lay North America, Frito-

Lay International, Pepsi-Cola North America, Pepsi Beverages International,

Gatorade/Tropicana North America and Quaker Foods North America (Refer Exhibit I). For the

fiscal year ended December 2002, PepsiCo Inc. (PepsiCo) reported revenues of $25.11 billion,

an increase of 6.8% from the 2002 revenues of $23.51 billion

PepsiCo adapted these systems to the local conditions of the various countries in which it

operated. PepsiCo's highly advanced distribution system was well supported by state-of-the-art

logistics systems. PepsiCo upgraded its technical capabilities consistently in order to strengthen

its logistics management activities. PepsiCo's bottlers employed wireless technologies to

strengthen their distribution system and effectively serve the customers in the markets in which

they operated. However, with its vast worldwide operational network and good market presence

globally, PepsiCo still did not put enough effort into integrating and streamlining the operations

of its various group companies/divisions.

Pepsi
QUESTION 1

Analysts felt that one of the key reasons for PepsiCo’s dominance in the beverages and snack

food markets was its efficient distribution system. Describe PepsiCo’s distribution system and

the channels used, in detail

ANSWER

Since its inception, PepsiCo attached a lot of importance to its distribution operations. Each day,

the company's products such as snack foods and beverages, were distributed through various

retail channels in the US and across the world. PepsiCo's distribution system was aimed at

making available all or most of the products in its portfolio within a distance easily reachable by

consumers. PepsiCo was conscious of the need to adapt its distribution systems according to the

needs and preferences of global customers. Based on its experience, PepsiCo had developed

various distribution models to offer its products and services to customers in the US. These

included the Direct Store Delivery (DSD), Broker Warehouse Distribution (BWD) and Vending

& Food Service (V&FS) systems

The Direct Store Delivery

Pepsi
In DSD, products are delivered directly to the store and merchandised by consumer products

manufacturers.

Power of DSD

- GROWTH
- BUILDING SHOPPER LOYALTY
- DRIVING INNOVATION
- QUICKER SHELF SENSING
- RESPONSIVE DELIVERY
- EFFECTIVE MERCHANDISING

When you think growth, think DSD. In today’s retail environment, with an increasing number of
product choices and the inherent difficulty in managing store-specific assortments, DSD offers a
unique opportunity for a retailer to power growth. This growth takes five forms:

• Increase in volume at the store which translates to more sales

• Improvement in margin on products sold
• Acceleration in working capital
• Improved trade effectiveness of promotional activities
• Capabilities to better shape shopper experience to build shopper loyalty

In short, DSD drives an improved balance sheet for the retailer; and a better shopper experience
for the customer.

Quicker
Shelf Sensing
Responsive
Deliver
Effective
Merchandising
Growth
Building Shopper Loyalty
Driving Innovation

Broker Warehouse Distribution

Pepsi
For some of our products, traditional broker-warehouse distribution is as effective as and more

economical than DSD. Under this system, third-party distributors move our products to stores,

and store employees stock the shelves. That generally works best for products that are less fragile

(than potato chips, for example), less perishable and less likely to be "impulse" purchases,

products like Gatorade, Quaker Oats, Tropicana Twister or Cap'n Crunch cereal.

The merger dramatically expanded our broker-warehouse distribution capability by adding the

very large and efficient warehouse system used for Quaker and Gatorade products. To leverage

that strength, we've combined that system with Tropicana's. We're also using the Quaker-

Gatorade system very selectively for certain Frito-Lay snacks that are better suited to warehouse

distribution.

Vending & Food Service (V&FS) systems

Every year consumers buy more snacks and beverages from vending machines and the

"foodservice" companies that serve stadiums, office buildings, colleges and similar places. We

see this as a big opportunity. By combining capabilities of Frito-Lay, Tropicana and Quaker, we

created one of the biggest vending and foodservice sales forces in North America, a 600-person

team that already generates well over $1 billion in annual sales.

PEPSI TECHNIQUES
Pepsi
 1909-1939:    Delicious and Healthful

 1939-1950: Twice As Much For A Nickel Too

 1950-1963: The Light Refreshment

 1953-1961: Be Sociable 1961-1963: Now It's Pepsi For Those Who Think Young

 1963-1967: Come Alive! You're In The Pepsi Generation

 1967-1969: Taste That Beats The Others Cold

 1969-1973: You've Got A Lot To Live, Pepsi's Got A Lot To Give

 1973-1975: Join The Pepsi People Feeling' Free

 1975-1978: Have A Pepsi Day

 1978-1981: Catch That Pepsi Spirit

 1981-1982: Pepsi's Got Your Taste For Life!

 1983-1983: Pepsi Now!

 1984-now: Pepsi, The Choice Of A New Generation

Source:- http://www.garybeene.com/pepsi/pep-hist.htm