Tuesday, April 28, 2009

Pepsi Adopts New Strategy To Fight Recession

The positive results from the recession are that large companies have had to question their business process and efficiency. In a bold move the Pepsi Company has changed its business strategy in order to increase profits. One of the biggest factors that hinder change and productivity at large beverage companies is the cost involved in altering their bottling process. Often bottling companies have binding contracts that tie the beverage company to producing a product for a certain number of years in a particular size. Pepsi Co, the second largest beverage company in the world has invested $ 6 Billion ( R53.8 Billion) to change the status quo, by buying out two of their bottling companies. This is a strategic attempt to gain total control of their brands, awarding the company greater autonomy in the decision making process about a particular brand. The acquisitions would allow PepsiCo to "unlock significant cost synergies, improve the speed of decision making and increase our strategic flexibility", said PepsiCo chairman and chief executive Indra Nooyi.

The Business Day reported that “buying the bottlers may boost earnings by 15c a share and create annual pretax savings of more than $200 million.” Pepsi will have the competitive edge over rival Coca-Cola as they concentrate on providing beverage syrup to licensed bottlers, who add water and other ingredients, put the mixture in bottles and cans, and sell it. Businesses have had to have a deeper look at their brands, strategies, and their efficiency; the economical climate has left them with two options, adapt or die.

via: Business Day