IV.

Internal Analysis

A. Company Background

Pepsi-Cola Products Philippines Inc. (PCPPI) is the exclusive manufacturer of

PepsiCo beverages and snacks in the Philippines, with a relationship spanning 70
years. PCPPI is a listed company in the Philippine Stock Exchange (PSE: PIP) with
Lotte Corporation, a holding company of Lotte Chilsung Beverage—one of the
biggest beverage companies in South Korea, as the lead shareholder co-managing
with PepsiCo. PCPPI manufactures and sells well-known food and beverage brands:
Pepsi-Cola, Mountain Dew, 7-Up, Mirinda, Mug, Gatorade, Tropicana, Lipton, Sting,
Premier, Milkis, Aquafina, and Cheetos. It has established 14 operations across the
country, serving more than 700,000 outlets and providing employment through its
extensive distribution network. PCPPI is committed to create a positive impact on
society with programs focused on environmental sustainability, nation-building, and
inclusive development.

1. History

Pepsi-Cola Products Philippines, Inc. (PCPPI) was established in 1989 as Premier

Beverages by Luis Lorenzo, Sr. to acquire the bottling and distribution rights
to PepsiCo beverages in the Philippines.

In 1997, the Guoco Group acquired Lorenzo’s holdings in PCPPI. Under Guoco
management, ₱700 million was spent in 1998 to upgrade the facilities of PCPPI. In
2000, PepsiCo paid P 2 billion to the Guoco Group to acquire a 33% stake in PCPPI.
News reports cited the rationale was to ensure PepsiCo had a continuing market for its
concentrates, even if it meant infusing money into its licensed bottlers.

PCPPI became listed in the Philippine Stock Exchange in 2008.

In September 2010, Korean-based Lotte Chilsung Beverage Company Ltd. acquired

34% of PCPPI. The acquisition made Lotte Chilsung the largest shareholder in PCPPI.
Lotte Chilsung agreed to pay P4.447 billion to buy the 1.27 billion shares from the
Guoco Group.[3][4] In 2013, Lotte Chilsung increased its stake to 39%. As of March
2013, Netherlands-based Quaker Global Investments B.V. is the company’s second
largest shareholder with 29.5%.[5]

Pepsi-Cola in the Philippines

On October 16, 1946, John Clarkin acquired a franchise to bottle and

distribute Pepsi-Cola in the Philippines, establishing Pepsi-Cola Bottling Company of
the Philippine Islands Ltd. Clarkin was an American who came to the Philippines as a
member of the US Air Force during the close of World War II. In the beginning, the
company imported Pepsi-Cola until 1947, when its first bottling plant was established
in Quezon City. After Clarkin returned to the United States in 1957, PepsiCo
International took over the Philippine operations. In 1983, the Philippine operations
became a branch of PepsiCo’s New York office - renamed PepsiCo, Inc. (Philippine
branch) - and operated until 1985. From 1985 to 1989, Pepsi-Cola Distributors of the
Philippines, Inc., a group identified with Filipino businessmen Ernest Escaler
and Eduardo Cojuangco, Jr., took over the Philippine franchise.

2. Mission

 FOR CONSUMERS:

By creating joyful moments through our delicious and nourishing

products and unique brand experiences.

 FOR CUSTOMERS:

By being the best possible partner, driving game-changing innovation,

and delivering a level of growth unmatched in our industry.

 FOR ASSOCIATES AND OUR COMMUNITIES:

By creating meaningful opportunities to work, gain new skills and build

successful careers, and a diverse and inclusive workplace.

 FOR OUR PLANET:

 By conserving nature’s precious resources and fostering a more
sustainable planet for our children and grandchildren.

 FOR SHAREHOLDERS:

By delivering sustainable top-tier TSR and embracing best-in-class

corporate governance.

Vision

This reflects our ambition to win sustainably in the marketplace and accelerate
our top line growth, whilst keeping our commitment to do good for the planet
and our communities. It builds on decades of progress we’ve made since
PepsiCo was founded in 1965, while setting a firm foundation for a new era of
growth and prosperity. To help us achieve this vision, we’ve defined a new set
of aspirations: to become Faster, Stronger, and Better.

3.Products/Service Offerings

Brands

Carbonated:

 Pepsi
 Pepsi Light
 Pepsi Max
 7 Up
 Mountain Dew
 Mirinda
 Mug
 Lotte Milkis
Non-carbonated:

 Tropicana
 Mirinda Fun Mix
 Lipton
 Lipton Sparkling
 Gatorade
 G Active by Gatorade
 Sting Energy Drink
 Aquafina Purified Drinking Water
 Premier Drinking Water
 Lotte Let’s Be
 Knick Knacks X-Blast

Snack foods:

 Cheetos
 Doritos
 Fritos
 Lay's
 Ruffles
 Lay's Stax
Other:

 Quaker Instant Oatmeal

 Knick Knacks
 Lotte Xylitol
 Delfi
 Goya
 Boom Boom

4. Selling prices and Pack Sizes

PRODUCT VARIANTS SIZE PRICE

Pepsi
 ·8oz Glass
Bottle · 12oz
Glass
Bottle · 750 ml
Glass
Bottle · 1Liter
Glass
bottle · 250 ml
cans · 330 ml
cans · 300
ml · 600
ml · 1.25L · 1.
75L · 2.25L

Mountain Dew
 8oz Glass
Bottle · 12oz
Glass
Bottle · 750 ml
Glass
Bottle · 1Liter
Glass
bottle · 250 ml
cans · 330 ml
cans · 300
ml · 600
ml · 1.25L · 1.
75L · 2.25L

7UP  7up Diet  7oz Glass

Bottle · 12oz
Glass
Bottle · 750 ml
Glass
Bottle · 1Liter
Glass
bottle · 330 ml
cans · 300
ml · 600
ml · 1.25L · 1.
75L · 2.25L
Miranda
 7oz Glass
Bottle · 12oz
Glass
Bottle · 1Liter
Glass
bottle · 330 ml
cans · 300
ml · 600
ml · 1.25L · 1.
75L · 2.25L

Root Beer  8oz Glass

Bottle · 330 ml
cans · 300
ml · 1.25L · 1.
75L · 2.25L

Gatorade  Grape • Blue  8oz Glass

Bolt • Bottle · 350
Tropical ml · 500
Fruit • Pink ml · 1.5L
Lemonade •
Lemon Lime
• Orange
Chill •
Gatorade
Propel:
Mandarin
Orange, Gala
Apple and
Zero-Calorie
Lemon •
Gatorade
 Low Carb:
Lime and
Grape

Tropicana
 Tropicana  8oz Glass
Twister, no Bottle · 355
pulp Juicy ml · 1L
Pulp orange
juice drink
with real
pulp sacs
Fruit Burst
Tropical
juice drink
with real
pineapple
cubes

Sting  Strawberry  8oz • 330ml

Milkis  Regular,  250 ml

Strawberry
 5. Distribution Network

The company offers its products through direct sales, distributors, and wholesalers to
supermarkets, restaurants, and convenience store chains. Pepsi-Cola Products
Philippines, Inc. is based in Muntinlupa City, the Philippines. It has established
manufacturing facilities accross the country, serving at least 500,000 outlets and
providing employment through its extensive distribution network.

Direct store delivery

Under the DSD system, PepsiCo delivers products directly to retail stores. Of the
three channels, DSD enables PepsiCo to merchandise with maximum visibility. It’s
more suitable for products that are restocked often and are sensitive to promotions and
marketing.

Customer warehouse

The customer warehouse system is a less expensive distribution channel. It’s ideal for
products that are less fragile and perishable, have lower turnover, and are not
purchased impulsively.

Third-party distributor networks

PepsiCo distributes food and beverage products to restaurants, businesses, schools,

and stadiums through third-party food service and vending distributors and operators.

6. Highlights of Historical Performances

(2018)

PCPPI bagged three Excellence Awards during the 7-Eleven Suppliers’ Night for
having implemented various creative, customer-intuitive sales and marketing
initiatives, which contributed to 7-Eleven’s business growth in 2018. The company
won an Innovation Award for its initiative in developing activities and projects
tailor-made for 7-Eleven, in particular the exclusive launch of Pepsi Vanilla 500ml in
stores. The award also acknowledged the company’s consistent run of price
promotions for summer and Christmas which helped maximize sales of the Softdrinks
category. PCPPI also received the Brand Activation Partnership Award for its strong
support of 7-Eleven’s marketing activities. For 2018, the company contributed to
campaigns for Gulp (co-branded with Deadpool and Pokémon), and Slurpee
activations (Slurpee Summer Hit Song, and Slurpee Build Your Own Concert). As a
result of the latter, PCPPI helped regain sales for Slurpee, in spite of TRAIN and
subsequent price increase. In addition, PCPPI also supported 7-Eleven’s other events
(the annual Run 2018 and Trail 2018) and promotions (New Year New Ride
Promotion). Finally, PCPPI also won the Account Management Award which
recognizes the sales team’s dedication in client-servicing. The company maintained
excellent service through continuous weekly coordination with CDI and PSC
Marketing on requirements and system improvements, and by sending Quality
Service Assistants on daily store visits to assess product assortment quality and
execution.

(2009)

PepsiCo current performance and achievement is Conserved more than 12 billion

liters of water through efficiency improvements within PepsiCo operations as
compared to the 2009 baseline. Achieved a 16 percent reduction in per unit use of
energy in beverage plants and a 7 percent reduction in snack plants in 2010 compared
to a 2009 baseline. Introduced the first fully compostable Sun Chips bag, which is
made with 100 percent renewable plant-based materials. Increased the percentage of
executive positions held by women globally to 30 percent. Reduced saturated fat by
more than 50 percent in U.S. Lays and Ruffles potato chips. PepsiCo’s success is the
result of superior products, high standards of performance, distinctive competitive
strategies and the high integrity.