- Increasing demand for healthy food and beverages: There is an increasing awareness on food and how it affects the health. Most producers are now required to give details on ingredients used, calories, and other factors; this is due to the many programs to fight obesity. With the awareness of potential dangers to the health by consuming unhealthy food, there has been an increasing demand for healthy food and beverages. This stems an opportunity for Pepsi to take advantage of. Pepsi co could expand its product range with beverages and snacks that have low amount of sugar and calories.
- Increased bottled water consumption: Consumption of bottled water is growing both in Nigeria and the home country of Pepsi Co; USA. Pepsi Co could diversify into the bottled water industry and increase its revenue earning capacity.
- Emerging Markets: Emerging markets, especially the BRIC countries (Brazil, Russia, India, and china) represent good opportunities for penetration and expansion. Pepsi co has recognized this, they have made large investments in the BRIC countries in a bid to expand its market share because they are the fastest growing food and beverages market in the world.
- Strong dollar: In Nigeria, the dollar has been on an increase when compared to the naira. Less than a year ago, it was 168 NGN to 1 dollar; but today (Jan 15 2016) it is 300 NGN to 1 dollar. This can serve as a threat to Pepsi Co, because revenue earned from foreign countries have to be converted to dollars. In a country like Nigeria, competition in the beverage industry is high, and Pepsi Co cannot increase the prices of their products.
- Strong competition: Competition is fierce between Pepsi Co and Coca Cola. Both companies spend a fortune every year on advertisements and marketing. These costs cannot be written off because with intense competition in the carbonated soft drink industry, they must promote customer retention and device means of increasing their market share.
- Disclosure of nutritional information on product labels: It is a legal requirement in the USA and also all over to reveal the ingredients used in making a product on its label. Recently, researchers revealed that some ingredients, if consumed in extra large quantities could cause cancer.
- Consumer taste: Consumers of the food & beverage industry are becoming more health conscious and are clamoring for healthier food options. Due to the adverse effect the consumption of large volumes of sugary drinks like Pepsi and coke causes, consumers are reducing their consumption of carbonated drinks.
- Cannibalization in low calorie categories: In some cases, especially in low calorie products, Pepsi co.’s brands might be in direct competition with each other thereby reducing the overall revenue of the company.
Financial Analysis: PepsiCo and Coca-Cola
Has already established Pepsi Co and Coca Cola are the most popular and sought after beverages in the world. They alone have around 69.1% of the total market share in the carbonated soft drink industry. The competition is fierce, and their main aim is to outpace the other in becoming the lead distributor of sodas and other beverages. The “Cola Wars,” or intense competition between Coca-Cola and PepsiCo, began in the 1970’s and has continued for decades. PepsiCo had increased its market share by the late 70’s which had stumbled Coke as being the top distributor of beverages. Then, the relentless advertisements and campaign started, in a bid to achieve and maintain the status of the world’s number one brand in the Carbonated Soft drink industry. PepsiCo and Coca-Cola did so by targeting various income levels around the world with visually-attractive, likeable products that are affordably priced.
The following is a brief review of the financial performance of Coca Cola and Pepsi co by analyzing their 2014 FY financial statements in order to ascertain which is performing better and to provide accurate recommendations for improving the financial status of each