Pepsi Vs Coce

Case Overview

At December 4th 2000, PepsiCo, Inc. announced the merger with the Quaker Oats company. With this merger, PepsiCo, Inc. have the access to Gatorade and control the sport drink market by 83,6%. Analysts estimated that PepsiCo would control 33 % of the U.S noncarbonated beverage market after the Gatorade acquisition, While Coca Cola only control 21 % of the market.

Key Issues

Coke and Pepsi had created one of the strongest rivalries in beverages business, Carolyn Keene (consumer analyst) need an EVA analysis for Coca Cola and Pepsi for 2001-2003 in order to develop a view which of the two companies would be more attractive investment over the next few years.

Coca Cola Background

Coca Cola was the largest manufacturer, distributor and marketer of soft drink and syrup in the world. It also marketed and distributed noncarbonated-beverages. In 1985, Coca Cola implemented strategy of Bottling Spinningoff so that ROE rise from 23% to 57%. Douglas Daft instituted major organizational change such as cutting staff, reduce bureaucracy, and come up with new noncarbonated products. In 2000, Coca Cola annual sales were $20.5 billion and its market value $110.1 billion. Analyst were optimistic the change in management would return the Coca Cola, Co. to its glory days.

PepsiCo Background

PepsiCo sold and distributed salty and sweet snacks under the Frito-Lay trademark and manufactured concentrates of Pepsi, Mountain Dew and others. Roger Enrico (CEO, 1996-2000) have succeeded risen ROE from 17% in 1996 to 30% in 2000. In 1999, Enrico spun off Pepsi's capital-intensive bottling operations into an independent company. His action has made higher margin business, raise capital and freeing up cash flow within the parent company for other uses. In 2000, PepsiCo, Inc was $20 billion company involved in snack food, soft drink and noncarbonated beverage business. PepsiCo also acquired Tropicana (market leader in orange juice) & Quaker Oats (whose Gatorade dominated the market).