PepsiCo was the world’s largest snack and beverage company, with 2022 net revenues of approximately $86.4 billion. The company’s portfolio of businesses in 2023 included Frito-Lay salty snacks, Quaker Chewy granola bars, Pepsi soft-drink products, Stacy’s pita chips, Gatorade, Propel, Bubly, Sabra hummus, Quaker Oatmeal, Cap’n Crunch, Aquafina, Mountain Dew, Rice-A-Roni, and many other regularly consumed products. The company viewed the lineup as highly complementary since most of its products could be consumed together. For example, Stacy’s pita chips and Sabra hummus might make a nice snack, and Doritos and an Aquafina might be part of someone’s lunch. While PepsiCo’s shares had underperformed relative to the companies competing in high-growth industries prior to 2021, the company had shown resilience and achieved growth in revenues and earnings during economic turbulence brought about by the COVID-19 pandemic. In fact, PepsiCo’s common shares outperformed the S&P 500 Index by about a 25% margin in 2022.
The company’s top managers were focused on sustaining growth in revenues and earnings through strategies keyed to product innovation, international expansion, and strategic acquisitions. New product innovations that addressed consumer health and wellness concerns were important contributors to the company’s 10.0% annual growth rate in U.S. revenues between 2020 and 2022. PepsiCo’s focus on growth in international markets allowed the company’s total revenues to also increase by 10.0% annually between 2020 and 2022. International markets with the highest annual growth rates in revenues between 2021 and 2022 included Mexico with a 19.4% annual growth rate, Russia with a 20.2% annual growth rate, and Canada with a 3.8% annual growth rate.
In addition to focusing on strategies designed to deliver revenue and earnings growth, the company maintained an aggressive share repurchase and dividend policy, with more than $7 billion returned to shareholders in 2022 through share repurchases of $1.5 billion and dividends of approximately $6.2 billion. The company bolstered its cash returns through carefully considered capital expenditures and acquisitions and a focus on operational excellence. Its investments were focused on manufacturing automation, a rationalized global manufacturing plan, and reengineered distribution systems to drive efficiency. In addition, the company’s Pep+ (PepsiCo Positive) sustainability plan focused on minimizing the company’s impact on the environment by lowering energy and water consumption. The company also addressed sustainability and social concerns by reducing its use of packaging material, meeting internal diversity, equity, and inclusion (DEI) goals, and supporting and investing in the local communities in which it operated. For example, the company was transitioning to renewable energy sources with a goal of achieving net zero emissions by 2040. The company also planned to reduce water usage and replenish more water than it used by 2030 and to cut virgin plastic use by 50 percent between 2020 and 2030.
The company continued to manage its portfolio of food and beverage brands to focus on growth. Many of its spikes in revenue growth in the past two decades had followed major acquisitions such as its $13.6 billion acquisition of Quaker Oats in 2001, the 2010 acquisition of the previously independent Pepsi Bottling Group and PepsiCo Americas for $8.26 billion, the acquisition of Russia’s leading food and beverage company Wimm-Bill-Dann (WBD) Foods for $3.8 billion in 2011, the 2020 acquisitions of Pioneer Foods in South Africa for $1.2 billion, and Rockstar energy drink for $3.85 billion. The company also shifted the makeup of its portfolio to eliminate slow-growth businesses, including the spin-off of Tropicana and Naked juices as a joint venture with 39% noncontrolling interest in 2022. Management of PepsiCo’s brand lineup was essential to future growth as annual consumption of carbonated soft drinks fell each year.

ASSIGNMENT QUESTIONS
1.	What is PepsiCo’s corporate strategy? Briefly identify the business strategies that PepsiCo is using in each of its consumer business segments in 2023.
2.	Does PepsiCo’s portfolio exhibit a good strategic fit? What value-chain matchups do you see? What opportunities for skills transfer, cost sharing, or brand sharing do you see?
3.	Does PepsiCo’s portfolio exhibit good resource fit? What are the cash flow characteristics of each of PepsiCo’s seven segments? Which businesses are the strongest contributors to PepsiCo’s free cash flows?