1.0- INTRODUCTION

PepsiCo, Inc. is currently one of the most successful consumer products company in the world with annual revenues exceeding $30 billion and has more than 480,000 employees. PepsiCo, Inc. began as a successor to a company incorporated in 1931, known as Loft Inc. Once known as Pepsi-Cola, the company expanded its business and adopted its current name, PepsiCo, after a merger with Frito-Lay in 1965.This merger dramatically increased PepsiCo's market potential and set the foundation for the company's tremendous growth.

PepsiCo's products are recognized and are most respected all around the globe. Currently, PepsiCo divisions operates in three major US and international businesses: beverages, snack foods, and restaurants. In each of these businesses, PepsiCo has attained a leadership position as being the world leader in soft drink bottling, the world largest snack chip producer, and the world largest franchised and company operated restaurant system. The corporations increasing success has been based on high standards of performance, marketing strategies, competitiveness, determination, commitment, and the personal and professional integrity of their people, products and business practices.

PepsiCo's overall mission is to increase the value of our shareholders' investments through sales growth, investments and financial activities. PepsiCo believes their success depends upon the quality and value of their products by providing a safe, whole some, economically efficient and a healthy environment for their customers; and by providing a fair return to their investors while maintaining the highest standards of integrity.

2.0-PEPSI LEGACY

Adding to the star wattage this spring was Mariah Carey, who took center stage with a national Pepsi commercial in a unique partnership. The Grammy Award-winning artist wrote and recorded original ringtones, available exclusively through the Pepsi Cool Tones & Motorola Phones promotion. For the first time ever in a large-scale national promotion, music fans could download new ringtones written and recorded by today's top artists specifically for the ringtone format, a length of 40 seconds or less.

The Pepsi Cool Tones & Motorola Phones promotion offered access to an unprecedented 150 original music and voice ringtones by Grammy Award-winning artists, including Mary J. Blige and The All-American Rejects

Page 1 of 22 Mind Breaker

as well as renowned producers Scott Storch and Luny Tunes.  With that combination,  ringtones will never be the same.

As America awaited the return of the Man of Steel in Warner Bros. Pictures’ highly anticipated summer release of Superman Returns, PepsiCo, the film’s official food and beverage partner, launched exclusive promotions, packaging and products tied to the movie’s release.  Through several interactive sweepstakes, participants from all over the country were crowned winners. One lucky consumer hit it big with a $1 million cash prize!  2006 also saw several new additions to the beverage aisle.January marked the introduction of FlavorSplash Grape, the latest addition in the popular FlavorSplash line of waters from the makers of Aquafina.  FlavorSplash Grape joined three existing flavors:  Citrus Blend, Wild Berry and Raspberry.  FlavorSplash by the makers of Aquafina is flavored with natural fruit flavors and sweetened with Splenda brand sweetener, making it free of calories, free of carbs, free of sugar and low in sodium.

In March, the Pepsi-Lipton Tea Partnership unveiled five new varieties within its ready-to-drink tea portfolio on both the Lipton Original and Lipton Iced Tea lines. Lipton Original Iced Tea added two great flavors: White Tea with Tangerine and Green Tea with Orange & Passion Fruit.   Lipton Iced Tea welcomed three new flavor varieties: Peach Iced Tea, Diet Peach Iced Tea and Diet Green Tea with Mixed Berry.  Both lineups deliver great taste with the health benefits of antioxidants.

Also in March, for the first time in its fifteen year history, Diet Mountain Dew was revamped with a new taste featuring a blend of sweeteners including Aspartame, Sucralose and ASK (Acesulfame Potassium).  The reformulation was met with much fanfare, particularly in Times Square, where a 100-foot snowboarding rail jam was constructed, featuring an exhibition by some of the best young snowboarders braving a snowy slope in the center of Manhattan.  Snowboarding champs Shaun White and Hannah Teter, who have been sponsored by Mountain Dew since 2003, were on-hand to help spread the word and celebrate the brand that’s synonymous with action sports.

This year, taking vitamins just got a whole lot tastier when SoBe Beverages announced the launch of new SoBe Life Water, a line of refreshing vitamin-enhanced water beverages that contain the powerful antioxidant vitamins C & E as well as members of the vitamin B complex.  Available in five delicious flavors- Pomegranate Cherry, Blackberry Grape, Passionfruit Citrus, Orange Tangerine and Strawberry Kiwi- the lineup is the newest addition to SoBe’s family of great-tasting “healthy refreshment” beverages.

In April, just in time for the warm weather, Starbucks® Iced Coffee came in to cool things off.  The new premium line of ready-to-drink coffee drinks features Starbucks® Italian Roast coffee with just a hint of milk and sweetness in a slim 11-

Page 2 of 22 Mind Breaker

ounce can.  Available in both regular and light versions, the product is available in Starbucks retail stores as well as convenience and grocery stores nationwide.

In addition to the launch of Starbucks Iced Coffee, we also saw the introduction of two line extensions within the bottled Starbucks Frappuccino® and Starbucks DoubleShot® brands.  Starbucks Strawberries and Crème Frappuccino® crème drink, a smooth blend of real strawberries and low-fat milk, is the first coffee-free bottled Starbucks Frappuccino crème drink, inspired by the most popular non-coffee blended beverage in Starbucks retail stores.  Starbucks DoubleShot® Light espresso drink has the same high-quality, great tasting blend of rich espresso and a touch of cream as the original Starbucks DoubleShot, but with lower fat, calories and sugar. 

Over the summer, Pepsi challenged consumers to think differently about indulgence with the introduction of Jazz, a new line of zero-calorie colas available in rich flavors like Black Cherry French Vanilla and Strawberries & Cream.  Consumer research leading up to the product’s launch revealed that the smooth nature of the cola coupled with these aromatic flavors added up to a more indulgent experience than typical zero-calorie sodas. 

2006 also marked the beginning of a beautiful friendship when Ben & Jerry’s Ice Cream, the funky & chunky ice cream company from Vermont, announced a multi-year licensing agreement with PepsiCo. This summer, the two companies worked together to bring milkshakes to the masses with the launch Ben & Jerry’s MilkShakes- a rich, creamy drinkable treat in three classic flavors from the Vermont ice cream maker.  The euphoric milk beverages are currently available in Cherry Garcia, Chunky Monkey and Chocolate Fudge Brownie.

3.0-PRODUCT

3.1-PRODUCT LINE

Pepsi (8 fl. oz)

Contains: CARBONATED WATER, HIGH FRUCTOSE CORN SYRUP, CARAMEL COLOR, SUGAR, PHOSPHORIC ACID, CAFFEINE, CITRIC ACID, NATURAL FLAVORS

Calories 100Total Fat (g) 0Sodium (mg) 20Potassium (mg) 10Total Carbohydrates (g)  28Sugars (g) 28Protein (g) 0Caffeine (mg) 25

Page 3 of 22 Mind Breaker

Diet Pepsi and Caffeine Free Diet Pepsi have a light, crisp and refreshing taste with zero calories and fat. Check out the nutritional information below.

Diet Pepsi (8 fl. oz)Contains: CARBONATED WATER, CARAMEL COLOR, ASPARTAME, PHOSPHORIC ACID, POTASSIUM BENZOATE (PRESERVES FRESHNESS), CAFFEINE, CITRIC ACID, NATURAL FLAVORS

Calories 0Total Fat (g) 0Sodium (mg) 25Potassium (mg) 20Total Carbohydrates (g)   0Sugars (g) 0Protein (g) 0Caffeine (mg) 24

Diet Caffeine Free Pepsi (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL COLOR, ASPARTAME, PHOSPHORIC ACID, POTASSIUM BENZOATE (PRESERVES FRESHNESS), CITRIC ACID, NATURAL FLAVORS

Calories 0Total Fat (g) 0Sodium (mg) 25Potassium (mg) 20Total Carbohydrates (g)   0Sugars (g) 0Protein (g) 0Caffeine (mg) 0

Page 4 of 22 Mind Breaker

Regular Caffeine Free Pepsi (8 fl. oz)

Contains: CARBONATED WATER, HIGH FRUCTOSE CORN SYRUP, CARAMEL COLOR, SUGAR, PHOSPHORIC ACID, CITRIC ACID, NATURAL FLAVORS

Calories 100Total Fat (g) 0Sodium (mg) 20Potassium (mg) 10Total Carbohydrates (g)   28Sugars (g) 28Protein (g) 0Caffeine (mg) 0

Caffeine Free Diet Pepsi (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL COLOR, ASPARTAME, PHOSPHORIC ACID, POTASSIUM BENZOATE (PRESERVES FRESHNESS), CITRIC ACID, NATURAL FLAVORS

Calories 0Total Fat (g) 0Sodium (mg) 25Potassium (mg) 20Total Carbohydrates (g)   0Sugars (g) 0Protein (g) 0Caffeine (mg) 0

After years of being kept apart on separate shelves of the refrigerator, Full Flavor and One Calorie are now living in complete harmony inside Pepsi ONE - the drink that unites the taste of regular cola with all the things you like about diet cola. Togetherness is better than apartness. Oneify.

Pepsi ONE (8 fl. oz)

Page 5 of 22 Mind Breaker

Contains: CARBONATED WATER, CARAMEL COLOR, NATURAL & ARTIFICIAL FLAVORS, PHOSPHORIC ACID, POTASSIUM BENZOATE (PRESERVES FRESHNESS), SUCRALOSE (SPLENDA(R)), CAFFEINE, CITRIC ACID, ACESULFAME POTASSIUM

Calories 1Total Fats (g) 0Sodium (mg) 25Potassium (mg) 35Total Carbohydrates (g)   0Sugars (g) 0Protein (g) 0Caffeine (mg) 36

Only Wild Cherry Pepsi has the thrilling burst of unique cherry flavor and a sweet, crisp taste that gives you "more to go wild for"!

Pepsi Wild Cherry (8 fl. oz)

Contains: CARBONATED WATER, HIGH FRUCTOSE CORN SYRUP, CARAMEL COLOR, SUGAR, PHOSPHORIC ACID, NATURAL FLAVORS, CAFFEINE, CITRIC ACID

Calories 100Total Fat (g) 0Sodium (mg) 20Potassium (mg) 10Total Carbohydrates (g)   28Sugars (g) 28Protein (g) 0Caffeine (mg) 25

Page 6 of 22 Mind Breaker

Diet Pepsi Wild Cherry (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL COLOR, PHOSPHORIC ACID, NATURAL FLAVORS, ASPARTAME, POTASSIUM BENZOATE (PRESERVES FRESHNESS), POTASSIUM CITRATE, CITRIC ACID, CAFFEINE, ACESULFAME POTASSIUM, CALCIUM DISODIUM EDTA (TO PROTECT FLAVOR)

Calories 0Total Fat (g) 0Sodium (mg) 25Potassium (mg) 45Total Carbohydrates (g)   0Sugars (g) 0Protein (g) 0Caffeine (mg) 25

It's the great taste of Pepsi with a splash of vanilla, for a taste that's smooth yet not too sweet.

Diet Pepsi Vanilla (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL COLOR, NATURAL AND ARTIFICIAL FLAVORS, PHOSPHORIC ACID, ASPARTAME, POTASSIUM BENZOATE (PRESERVES FRESHNESS), POTASSIUM CITRATE, CAFFEINE, ACESULFAME POTASSIUM, VANILLA EXTRACT, CITRIC ACID, CALCIUM DISODIUM EDTA (TO PROTECT FLAVOR)

Calories 0Total Fat (g) 0Sodium (mg) 25Potassium (mg) 0Total Carbohydrates (g)   0Sugars (g) 0Protein (g) 0Caffeine (mg) 25

Page 7 of 22 Mind Breaker

Indulge your senses when rich flavors meet zero calorie colas.

Diet Pepsi Jazz Black Cherry French Vanilla (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL COLOR, NATURAL & ARTIFICIAL FLAVORS, PHOSPHORIC ACID, ASPARTAME, POTASSIUM BENZOATE (PRESERVES FRESHNESS), CITRIC ACID, POTASSIUM CITRATE, CAFFEINE, ACESULFAME POTASSIUM, CALCIUM DISODIUM EDTA (TO PROTECT FLAVOR)

Calories 0Total Fat (g) 0Sodium (mg) 25Total Carbohydrates (g)   0Sugars (g) 0Protein (g) 0Caffeine (mg) 25

Diet Pepsi Jazz Strawberries & Cream (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL COLOR, PHOSPHORIC ACID, NATURAL & ARTIFICIAL FLAVORS, ASPARTAME, POTASSIUM BENZOATE (PRESERVES FRESHNESS), CITRIC ACID, POTASSIUM CITRATE, CAFFEINE, ACESULFAME POTASSIUM, CALCIUM DISODIUM EDTA (TO PROTECT FLAVOR)

Calories 0Total Fat (g) 0Sodium (mg) 25Total Carbohydrates (g)   0Sugars (g) 0Protein (g) 0Caffeine (mg) 25

Page 8 of 22 Mind Breaker

New Pepsi Lime and Diet Pepsi Lime have a cool, fresh flavor, perfect to add some zing to your summer days. Check out nutritional information below.

Pepsi Lime (8 fl. oz)

Contains: CARBONATED WATER, HIGH FRUCTOSE CORN SYRUP, CARAMEL COLOR, NATURAL FLAVORS, PHOSPHORIC ACID, POTASSIUM BENZOATE (PRESERVES FRESHNESS), POTASSIUM CITRATE, CITRIC ACID, CAFFEINE

Calories 100Total Fats (g) 0Sodium (mg) 20Total Carbohydrates (g)   27Sugars (g) 27Protein (g) 0Caffeine (mg) 25

Diet Pepsi Lime (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL COLOR, NATURAL FLAVORS, PHOSPHORIC ACID, ASPARTAME, POTASSIUM BENZOATE (PRESERVES FRESHNESS), CITRIC ACID, POTASSIUM CITRATE, CAFFEINE, ACESULFAME POTASSIUM

Calories 0Total Fats (g) 0Sodium (mg) 25Total Carbohydrates (g)   0Sugars (g) 0Protein (g) 0Caffeine (mg) 25

Page 9 of 22 Mind Breaker

3.2-PEPSI BRAND’S

Aquafina

Make your body happy!

Dole Juice

Healthy juices on the go

Gatorade

Is it in you?

Lipton Brisk

It’s bold. It’s refreshing.It’s Lipton Brisk.

Page 10 of 22 Mind Breaker

Lipton Teas

Refreshment comes inmany flavors

Milk Chillers

Milk it for all it’s worth

Mountain Dew

Do the Dew

Diet Mountain Dew

How Dew does diet

Page 11 of 22 Mind Breaker

Mountain Dew Code Red

Do a kick of cherry

AMP Energy by Mountain Dew

AMP your world

MDX by Mountain Dew

Soda . Fully loaded.

Mug Root Beer

The taste you crave

Page 12 of 22 Mind Breaker

Pepsi

It’s the cola

Diet Pepsi

0 carbs. 0 calories.It’s the diet cola.

Jazz by Diet Pepsi

Jazz, the new sound of cola

Pepsi ONE

Page 13 of 22 Mind Breaker

Bring together great taste with one calorie. Oneify.

Propel

Made for bodies in motion

Sierra Mist

It’s that refreshing

SoBe

Healthy refreshment

Page 14 of 22 Mind Breaker

Starbucks Coffee Drinks

A new way to refresh

4.0-PRICING

The ASIA CSD market is mature. The industry sales growth is largely driven bypopulation growth as well as the amount of advertising and product innovation taking place in the industry. Given the mature nature of the market, both Pepsi and Coca Cola have resorted to pricing discrimination strategies to maximize the value of consumer demand.

Direct Price Discrimination

The simplest form of extracting customer surplus is charging customers with different prices based on their location and purchasing power. This is evident in the international operations of both Pepsi and Coca Cola. Cola prices in Mexico, Brazil and Eastern Europe are lower than prices in the ASIA, even though the cost of the concentrate is practically the same. Domestically, direct price discrimination is based on distribution channel segmentation. Restaurant fountain drinks, single drinks at gas stations and take-home packs at supermarkets have all different prices on a per-unit basis even though their costs adjusted for packaging and distribution would not warrant such a discrepancy. Obviously, such segmentation helps situational-based pricing differences: the most price insensitive consumers seem to be restaurant customers who need a drink to go with their meal. Also, single-drink buyers at gas stations are more likely to be impulse buyers and therefore have less price sensitivity

Page 15 of 22 Mind Breaker

than weekend family shoppers at supermarkets who purchase 12-packs for home consumption.

Indirect Price Discrimination

Quantity discounts along with price coupons used in supermarkets are obvious indirect price discrimination tools Pepsi can use. However, the most effective indirect price discrimination tool Pepsi has is in fact its brand name. The Pepsi brand equity actually allows the company to maintain its pricing power. Its product image translates into perception for higher quality vis-à-vis private labels and other substitute drinks. Also, for both supermarkets and convenience stores the CSDs represent the number one and number three top-selling items 5. Retailers use this product category to induce store traffic and create additional sales, which in turn reduces their power relative to Pepsi. Given the 80% margin on concentrate, it is easy to see why Wal-Mart and other discount retailers can undercut Pepsi’s pricing with private labels, but still they will be ineffective in ‘stealing’ Pepsi customers as long as Pepsi’s brand (and Coke’s for that sake) maintains high customer loyalty.Pepsi may enhance its price discrimination capability though creating bundle offers torestaurants and convenience stores. The Frito Lay brand, controlled by PepsiCo through Frito Lay North America, is the undisputed leader in the salty snack segment. If Pepsi bundles snacks with soft drinks as part of its pricing strategy aimed at fast food restaurants and cstores it may be able to increase sales and obtain better shelf space from retailers. This may prove a very important tactic in trying to re-claim share in the fountain drink segment, a large 5 Deutsche Bank Securities Inc., equity research, 10 February 2003.Part of which was lost after Pepsi’s exit from the restaurant business in 1997. Currently, Coca Cola holds approximately 67%6 share of the total fountain cola sales.

5.0-MARKETING STRATEGY

Pepsi is known in the marketing world as a convenience product, one that is purchased without much consideration. So how is it decided which brand of soft-drink to buy? Annually, soft-drinks are a $5 billion business, that is why the techniques for marketing and ensuring Pepsi's purchase are so important.

In response to last year's success of the Pepsi Stuff Campaign, on May 13, 1997 they unveiled "Pepsi Stuff '97." This is a promotion in which you buy Pepsi products, receive points on the boxes and cans, and then redeem them for items in their catalogue. Pepsi was very successful last year with this campaign, attracting over 30 million participants. One major problem though was 21 year old John

Page 16 of 22 Mind Breaker

Leonard taking serious a television commercial that jokingly offered a military j et as a prize for 1 billion Pepsi points. Pepsi points were also purchasable, so Leonard rounded up five investors to purchase enough points to acquire the jet. Pepsi is now involve in a legal battle over this matter, even though the Pentagon has stated it is not possible to buy one of the jets. Taking into account the controversy of the jet, Pepsi has taken consideration to offer prizes in "Pepsi Stuff '97" that are legally attainable. They include "Fantasy Stuff" prizes, such as throwing out the first pitch at a World Series game or feeding the ball to Shaquille O'neal for a $25,000 slam-dunk.

Success in the soft-drink market also involves forming strategic alliances with companies to capture market share. Pepsi has secured two major deals this year, one with Warner Brother's International Theaters, and the other with Major League Baseball. The Warner Brother's alliance gives Pepsi exclusive pouring rights at all existing and projected Warner Brother's International Theaters. This includes 358 movie screens at 43 theaters in 6 countries, including: Great Britain, Spain, Germany, Portugal, Italy , and Japan. The significance of this deal according to Vince Gennaro, President of the Fountain Beverage Division at Pepsi, "Nearly half on the world's movie fans are between the ages of 15 and 24. Together with Warner Brother's, we intent to inject a wh ole new dimension of excitement into their regular trip to the multiplex."

Pepsi's five year deal with Major League Baseball gives them exclusive rights to use baseball's trademarks and team logos in al advertising, packaging, merchandising, and promotions. Pepsi has forged a reputation as appealing to the teenage audience, which is why Major League Baseball believes its deal with Pepsi will attract a younger audience, which was partially lost due to aggressive marketing campaigns by pro football and basketball, as well as the 1994 strike.

"Project Blue" is an international venture the Pepsi hopes will transform its international marketplace presence. It represents a $500 million investment, including the system-wide conversion of bottles and cans, coolers and vending machines, as well as trucks and other

Page 17 of 22 Mind Breaker

transports. The new design features a striking blue "grid" background; bold vertical typography; and a three dimensional globe that evokes the company's "ball" icon. Currently Coca-Cola is associated with red, which is why Pepsi is attempting to create brand association and awareness with the color blue. According to John Swanhaus , Pepsi-Cola Company's Senior Vice President of International Sales and Marketing, "Blue is modern and cool, exciting and dynamic, and most importantly it's a color that powerfully communicates refreshment. Ultimately, we believe that owning blue will give us a significant competitive advantage in the marketplace.

Pepsi, with their aggressive marketing, also engage in creative ventures. Three such case include an innovative web site, the world's first commercial in space, and buying screensaver ad space in schools. The web site, called Pepsi World, combines breakthrough technology with powerful content. If features movie previews, origin al interactive games, first-run articles, new music, digital art, national Net-Promotions and more. This site allows Pepsi to aggressively market their brand name in a revolutionary way. The site is constantly being re-invented to remain at the forefront of the Cyberculture.

Pepsi is also breaking ground by filming the world's first commercial in space. It is part of Pepsi's partnership with the Russian Mir Space Station. For the ad, two cosmonauts film the deployment of a large-scale replica of Pepsi's new blue can, which w as described in the "Project Blue" section. The can itself is actually a fully orbital spacecraft built by International Space Enterprises. It was built to withstand temperature swings of -100 F to + 200 F.

A Canadian school board, faced with the problem of large-scale funding cutbacks , have sold to Pepsi, McDonald's, and Trident advertising rights to a screensaver program that mixes educational messages, motivational words, and corporate advertising. This subject is controversial, but all advertisements must agree to include an educationally motivating message. The Pepsi ad will have a slogan that encourages children to "develop a thirst for knowledge."

6.0-Distribution

Page 18 of 22 Mind Breaker

Ethical issues aside, clearly both Pepsi and Coke share a common interest ingenerating revenues through distribution of their products through vending machines on primary and high school campuses across the country. Unfortunately, both companies have been ineffective in responding to outspoken critics such as the Center for Science in the Public Interest (CSPI). The CSPI is leading a campaign of public health experts to raise awareness of the adverse health consequences of increased soda consumption.

However, Pepsi and Coke would benefit through a concerted marketing effort toencourage distribution of soft drinks in schools. For example, no direct connection has been made between soda consumption and increased obesity.17 Moreover, school officials across the country view soda vending machine contracts as a boon to ailing school district budgets.

One official in the Washington D.C. school district calls its contract with Coca-Cola a“godsend,” because it provides money for proms, bus tokens for needy students, and extra school books.18 Finally, both companies distribute more than carbonated beverages through vending machines – they also distribute

bottled water, juices, and sports drinks.

Pepsi and Coke would stand to benefit from shifting their focus from competitiveactions to obtain exclusive school district contracts to creating a unified marketing approach that educates consumers about their community involvement and eliminates negative “Fighting the Cola Wars in Schools.” The Washington Post. http://www.washingtonpost.com/wpsrv/national/colawars032399.htm18 Ibid.misperceptions. As a result, both companies would benefit from potential widespread acceptance of soft drink distribution in schools.

Page 19 of 22 Mind Breaker

6.1-RESTAURANTS

PepsiCo is the largest restaurant system in the world. The restaurant segment is engaged in the operation, development, franchising, and licensing of Pizza Hut, Taco Bell and KFC concepts. In 1977, Pizza Hut became a part of PepsiCo and is currently the leader among the pizza restaurant chain in the United States. Taco Bell, the largest Mexican-style restaurant in the United States, became a part of PepsiCo's restaurant system in 1978. Today, Taco Bell operates in 4,800 restaurants in the US and in 94 countries and territories worldwide. In 1986, KFC joined PepsiCo and is the leading fast-food chicken restaurant in the US T here are more than 5,000 company operated, franchised, and licensed KFC restaurants in the US.

PepsiCo's restaurants have a record for growth and have produced more than $5 billion in revenues. PepsiCo restaurant system has more than 8,000 units outside the US and is operated in more than 90 countries.

PepsiCo's Food System (PFS) is the corporation's restaurant supply company and is responsible for the consolidation of many restaurant activities. PFS distributes to Pizza Hut, Taco Bell and KFC, more than $3 billion worth of restaurant equipment and supplies each year. However, in January of 1997, PepsiCo announced it would be splitting from its restaurant business after being in it for nearly two decades. PepsiCo is planing to concentrate on its faster growing Frito-Lay and Pepsi businesses.

7.0-COLA WARS

Pepsi versus Coke has been one of the highest-profile, highest-stakes marketing confrontations witnessed in any industry: "the cola-wars"- the only war where no one gets hurt. Coke has been winning the overall battle, but Pepsi does have its victories.

Internationally Coke's market share increased to 49.2% last year compared to Pepsi's rate, flat at 15.7%. Coke sold $12.7 billion

worth of products internationally, while Pepsi's totaled $3.2 billion. From this Coke pockets $.30 for every dollar, compared to Pepsi of less than $.07 per dollar.

Page 20 of 22 Mind Breaker

Pepsi targeted the teen market by forming exclusive contracts with American schools and developing advertising campaigns such as “The Next Generation” and “Joy of Pepsi”, featuring Britney Spears and also using different models,celebrities.

Another disaster occurred in Venezuela last year for Pepsi. Without notice Pepsi's independent bottler,

Embotelladras Hit de Venezuela, headed by CEO Oswaldo Cisneros, switched 18 plants and 2500 trucks to Coca-Cola for $300 million. Analysts feel that th is move will cost Pepsi $400 million in sales and $10 million in profit. All this comes despite the friendship between PepsiCo CEO Roger Enrico and Albert Uribe, Pepsi's Regional President.

In Russia, Coke has overtaken Pepsi, which has a huge market size of 150 million. Pepsi had a ten year lead on Coke but all is lost as Coke opened its twelfth plant in Russia in 1996, which is staffed by locals trained in Coke's bottling university in Moscow.

Despite Coke's sponsorship of the Olympics, Pepsi has had victories in the domestic market. Consider that Pepsi has been chosen as the exclusive soda for Radio City Music Hall's Christmas Spectacular, as well as other shows. Pepsi also sponsors the Great Western Forum, where the Los Angeles Lakers play, and they sponsor the Seattle Mariners.

As stated before, Pepsi has cast off Pizza Hut, Taco Bell, and Kentucky Fried Chicken in an attempt to create a focused company to beat Coke. This will allow Pepsi to now battle for fountain rights in places such as Burger King, Wendy's, and McDonalds. Th is is not an easy task, though, considering Coke is three times Pepsi's size in fountain sales and has ten times more salespeople. Also, Coca-Cola's Sprite has knocked Diet Pepsi out as the fourth largest US soft drink to number seven. Currently Coke, Pep si, and Diet Coke rank as the top three.

8.0-CONCLUSION

Pepsi has built a reputation around the world as a major player in the soft drink market as well as the leader in the snack food industry. This has been done by creating a wholesome environment for their customers all the while maintaining its

Page 21 of 22 Mind Breaker

integrity. Currently they are facing stiff competition from Coca-Cola, but with their various marketing ventures as well as the selling of their restaurant franchises, Pepsi is poised to give Coke a definite battle in the future as to which cola consumers want.

9.0-REFERENCES

1. By visiting authorized marketing channel by our self.

2. Internet search

http://www.pepsico.com/web_pages/corp_structuresf.html

http://cnn.com/US/9608/09/fringe/pepsi.pentagon/index.html

http://www2.mostnewyork.com/most/archive/97_03/032097/metro_sp/16068.hta

http://www.ddbniac.com/portfolio/cases/pepsi.html

http://www.wired.com/news/news/culture/story/2910.html

Page 22 of 22 Mind Breaker