PepsiCo

PepsiCo, Inc.
Type Public (NYSE: PEP)
Founded Flag of the United States.svg New York, New York (1965)
Headquarters Flag of the United States.svg Purchase, New York
Area served Worldwide
Key people Indra K. Nooyi (Chairwoman), (President) & (CEO)
Industry Food
Non-alcoholic beverage
Products Pepsi
Diet Pepsi
Mountain Dew
Sierra Mist
Starbucks Frappuccino
Lipton Iced Tea
Izze
Tropicana Products
Naked Juice
Gatorade
Propel Fitness Water
Quaker Oats
Lay's
Doritos
Tostitos
Fritos
Market cap USD 107.19 Billion (2008)
Revenue ▲ USD 39.474 Billion (2007)
Operating income ▲ USD 7.170 Billion (2007)
Net income ▲ USD 5.658 Billion (2007)
Total assets ▲ USD 34.628 Billion (2007)
Total equity ▲ USD 17.234 Billion (2007)
Employees 185,000(2008)
Divisions PepsiCo Americas (PepsiCo Americas Food, PepsiCo Americas Beverages), PepsiCo International
Website PepsiCo.com

PepsiCo, Incorporated (Short for Pepsi Company) (NYSE: PEP) is a large conglomerate with interests in manufacturing, marketing and selling a wide variety of carbonated and non-carbonated beverages, as well as salty, sweet and grain-based snacks, and other foods. Besides the Pepsi-Cola brands (including Mountain Dew), the company owns the brands Quaker Oats, Gatorade, Frito-Lay, SoBe, Naked, and Tropicana.

Indra Nooyi, chief executive of PepsiCo since 2006, has focused on maintaining the company's leadership in the snack food industry by being on the forefront of marketing healthier snacks and striving for a net-zero impact on the environment.[1] This focus on healthier foods and lifestyles is part of Nooyi's "Performance With Purpose" philosophy.

The company formed for distribution and bottling is The Pepsi Bottling Group (NYSE: PBG). PepsiCo is a SIC 2080 (beverage) company.

Contents

History

Headquartered in Purchase, New York, with Research and Development Headquarters in Valhalla, NY, The Pepsi Cola Company began in 1898 by a Pharmacist and Industrialist Caleb Bradham, but it only became known as PepsiCo when it merged with Frito Lay in 1965. Until 1997, it also owned KFC, Pizza Hut, and Taco Bell, but these fast-food restaurants were spun off into Tricon Global Restaurants, now Yum! Brands, Inc. PepsiCo purchased Tropicana in 1998, and Quaker Oats in 2001. In December 2005, Pepsico surpassed Coca-Cola Company in market value for the first time in 112 years since both companies began to compete.[2]

Corporate governance

Pepsi-Cola Venezuela

Current members of the board of directors of PepsiCo are Indra Nooyi C.E.O., Robert E. Allen, Dina Dublon, Victor Dzau, Ray Hunt, Alberto Ibargüen, Arthur Martinez, Steven Reinemund, Sharon Rockefeller, James Schiro, Franklin Thomas, Cynthia Trudell, and River King.

On October 1, 2006, former Chief Financial Officer and President Indra Nooyi replaced Steve Reinemund as chief executive officer. Nooyi remains the corporation's president, and became Chairman of the Board in May 2007.

Mike White is the President of Pepsi International Division.

Former top executives at PepsiCo

PepsiCo brands

PepsiCo owns five different billion-dollar brands. These are Pepsi, Tropicana, Frito-Lay, Quaker, and Gatorade. The company owns many other brands as well.

In 2007, Nooyi spent $1.3 billion on healthier-alternative brands like Naked Juice, a California maker of soy drinks and organic juice.

Pepsico has also recently acquired a 50% stake in Sabra Salads [2]

Partnerships

PepsiCo also has formed partnerships with several brands it does not own, in order to distribute these or market them with its own brands.

Discontinued lines

Former brands

PepsiCo owned a number of restaurant chains until it exited that business in 1997, selling some, and spinning off others into a new company Tricon Global Restaurants, now known as Yum! Brands, Inc.. PepsiCo also previously owned several other brands that it later sold.

Diversity

PepsiCo received a 100 percent rating on the Corporate Equality Index released by the Human Rights Campaign starting in 2004, the third year of the report. [3]

Tampering

During the summer of 1993, PepsiCo managed to stave off a runaway hoax pertaining to alleged product tampering. Syringes were claimed to have been found in cans of Diet Pepsi -- first in Seattle, then throughout the U.S. over the next few days. With the arrests of several of the fraudulent claimants, reports of found hypodermic needles ceased. PepsiCo's subsequent handling of the situation via carefully-worded press releases and VNRs is frequently cited as a textbook example of how exactly to handle falsely spread rumors about a company.[4]

Criticisms

PepsiCo in India

PepsiCo gained entry to India in 1988 by creating a joint venture with the Punjab government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint venture marketed and sold Lehar Pepsi until 1991, when the use of foreign brands was allowed; PepsiCo bought out its partners and ended the joint venture in 1994. [5] Others claim that firstly Pepsi was banned from import in India, in 1970, for having refused to release the list of its ingredients and in 1993, the ban was lifted, with Pepsi arriving on the market shortly afterwards. These controversies are a reminder of "India's sometimes acrimonious relationship with huge multinational companies." Indeed, some argue that PepsiCo and The Coca-Cola Company have "been major targets in part because they are well-known foreign companies that draw plenty of attention." [6]

In 2003, the Centre for Science and Environment (CSE), a non-governmental organization in New Delhi, said aerated waters produced by soft drinks manufacturers in India, including multinational giants PepsiCo and The Coca-Cola Company, contained toxins, including lindane, DDT, malathion and chlorpyrifos — pesticides that can contribute to cancer, a breakdown of the immune system and cause birth defects. Tested products included Coke, Pepsi, 7 Up, Mirinda, Fanta, Thums Up, Limca, and Sprite. CSE found that the Indian-produced Pepsi's soft drink products had 36 times the level of pesticide residues permitted under European Union regulations; Coca Cola's 30 times. [7]CSE said it had tested the same products in the US and found no such residues. However, this was the European standard for water, not for other drinks. No law bans the presence of pesticides in drinks in India.

The Coca-Cola Company and PepsiCo angrily denied allegations that their products manufactured in India contained toxin levels far above the norms permitted in the developed world. But an Indian parliamentary committee, in 2004, backed up CSE's findings and a government-appointed committee, is now trying to develop the world's first pesticides standards for soft drinks. Coke and PepsiCo opposed the move, arguing that lab tests aren't reliable enough to detect minute traces of pesticides in complex drinks. On December 7, 2004, India's Supreme Court ruled that both PepsiCo and competitor The Coca-Cola Company must label all cans and bottles of the respective soft drinks with a consumer warning after tests showed unacceptable levels of residual pesticides.

Both companies continue to maintain that their products meet all international safety standards without yet implementing the Supreme Court ruling. As of 2005, The Coca-Cola Company and PepsiCo together hold 95% market share of soft-drink sales in India. [8] PepsiCo has also been alleged to practice "water piracy" due to its role in exploitation of ground water resources resulting in scarcity of drinking water for the natives of Puthussery panchayat in the Palakkad district in Kerala, India. Local residents have been pressuring the government to close down the PepsiCo unit in the village.

In 2006, the CSE again found that soda drinks, including both Pepsi and Coca-Cola, had high levels of pesticides in their drinks. Both PepsiCo and The Coca-Cola Company maintain that their drinks are safe for consumption and have published newspaper advertisements that say pesticide levels in their products are less than those in other foods such as tea, fruit and dairy products.[9] In the Indian state of Kerala, sale and production of Pepsi-Cola, along with other soft drinks, was banned by the state government in 2006[10], but this was reversed by the Kerala High Court merely a month later.[11] Five other Indian states have announced partial bans on the drinks in schools, colleges and hospitals.[12]

Pesticide residuals controversy

Timeline

• 6 August 2003 – The Delhi based Center for Science and Environment (CSE) reveals that it has conducted a study on samples of 12 major soft drink brands sold in the country for the residual levels of pesticides and found the levels to be far too high when compared with the same in the samples from developed countries.

• 6 August 2003 – Both the Cola giants join hands when faced with adversity. The PepsiCo India holding chairman Rajiv Bakshi assures that the company’s products are of highest quality and conform to very stringent standards set by “independent accredited laboratories”. He expresses the opinion that the company is open for inspection by “an independent accredited authority comprising experienced people”

• 7 August 2003 – Pepsi India comes up with a press release stating that all Pepsi products conform to the most stringent of quality standards world over. The regular testing and stringency norms at Pepsi, it seems, require the most sophisticated and specialized tests and equipment to be able to detect the pesticide residue at 0.1 parts per billion levels. Moreover, CSE is not a government accredited body certified for the capability of carrying any such tests, says the press release. The press release also cites the name of “an independent world-class laboratory” – VIMTA, which was accredited by the National Accreditation Board for Testing & Calibration for Laboratories (NABL), as having tested the Pepsi products against several stringent norms. Mutual mudslinging begins as the company openly questions the credibility of the tests done by CSE and its capability in conducting such tests.

• 10 August 2003 – While the Cola giants stick to their story of CSE’s claims to be incorrect, CSE reiterates that the soft drink majors follow double standards with the samples from US containing no pesticides, whereas the samples from Indian plants contain 30 to 35 times more than the acceptable levels of pesticide residues stipulated by European Economic Commission (EEC). The Cola giants start contemplating legal action in the wake of steep fall in sales.

• 22 August 2003 – Union Health minister Sushma Swaraj issues statement that only three samples out of the 12 in the contention meet the EEC norms; while the other samples have residue levels above the acceptable limits, they are only 2 to 6 times more than the acceptable level unlike 30 to 35 times as claimed by the CSE; This has been the result of tests conducted by two laboratories, the Mysore-based Central Food Technological Research Institute (CFTRI) and the Kolkata-based Central Food Laboratory (CFL).

• 23 August 2003 – The government appoints a 15-member all party Joint Parliamentary Committee under the leadership of Sharad Pawar to delve into the issue and submit a report on the same in the next session. The committee is also expected to suggest the safety standards for pesticide residue levels in soft drinks, fruit juices and other beverages that have water as the main ingredient.

• February 2004 – The JPC submits its report to the parliament, saying that the tests conducted by CSE are accurate and India needs to come up with a set of standards for carbonated beverages. Central Committee on Food Standards (CCFS) endorses the JPC report and says it will set final standards. Bureau of Indian Standards (BIS) also starts revising its standards.

• June 2004 – Pesticide Residue Sub-Committee of CCFS meets and decides to do year-long monitoring.

• November 2004 – CCFS meets and decides to set up National Expert Committee to study the matter.

• 8 August 2006 – Four states – Gujarat, Madhya Pradesh, Rajasthan and Chattisgarh ban the sale of Coke and Pepsi in the educational and governmental institutions. The ban is a consequence of CSE’s report stating that even now, the pesticide levels in these drinks are more than 24 times above the limits set by BIS. While the top management of both the companies insists that their products adhere to the most stringent norms and are safe for consumption, CSE toughens its stand that the Cola companies are misleading the general public and have a long way to go before actually meeting those safety norms.

• 10 August 2006 – Kerala announces a complete ban on production and sale of carbonated soft drinks, including Coca-Cola and Pepsi, while Karnataka announces a ban on sale of colas in schools and state-run hospitals.

• 14 August 2006 – PepsiCo India Chairman Rajeev Bakshi reiterates that the company’s products in India are as safe as anywhere else in the world. He expresses the company’s willingness to support the government in setting up criteria for pesticide residues in soft drinks, but insists that a protocol for testing has to be developed, which is not to stall notification of BIS norms, but a measure to ensure that the testing procedure is validated by series of labs in India and the world over.

• 22 August 2006 – The expert committee constituted by union health minister Anubumani Ramadoss quashes the CSE’s report on pesticide residue levels stating that the experiment methodology has lot of flaws in it right from sampling to reporting the residue levels.

• 22 September 2006 – The Kerala High Court quashes the government’s ban on production and sale of the Colas in the state. The state government is exploring other alternatives.

• 10 January 2007 – Pepsi India Holding chairman Rajeev Bakshi exits Indian operations.

• 16 February 2007 – The apex court accepts the appeal of Kerala state government against the High Court judgment quashing the ban on production and sale of Coca-Cola and Pepsi in the state.

Matter of contention

The presence of pesticide residues in the samples of soft drinks manufactured and distributed in India by the Pepsi India holding company are at levels greater than those present in the samples of similar products in US and Europe. Each of the three major parties involved, i.e., The Cola companies, CSE and the government, differ on what is acceptable standard for the pesticide residue levels in the soft drinks. While the Cola companies contend that their products in India are as safe as they are elsewhere, CSE is particular about the fact that the pesticides present in the soft drinks are carcinogenic in nature and the Cola companies are apathetic about this fact. The government neither cracked the whip on the Cola companies, nor did it play dumb spectator. The government says that while it is true that the residue levels of pesticides in soft drinks are above the EEC norms, they are not as high as those values reported by CSE. The matter has led to contemplation of setting criteria for the standard levels of pesticide residues in non-alcoholic beverages in India. The issue is alive for the past three years and no specific measures have come out till now in this regard.

Soft drinks market in India

India is one of the top five markets in terms of growth of the soft drinks market. The per capita consumption of soft drinks in the country is estimated to be around 6 bottles per annum in the year 2003. It is very low compared to the corresponding figures in US (600+ bottles per annum). But being one of the fastest growing markets and by the sheer volumes, India is a promising market for soft drinks. The major players in soft drinks market in India are PepsiCo and Coca-Cola Co. like elsewhere in the world. Coca-Cola acquired a number of local brands like Limca, Gold Spot and Thums Up when it entered Indian market second time. Pepsi Co’s soft drink portfolio consists of Miranda and 7Up along with Pepsi. The market share of each of the company is more or less the same, though there is a conflict in the estimates quoted by different sources [13]

The major ingredient in a soft drink is water. It constitutes close to 90% of the soft drink content. Added to this, the drink also contains sweeteners, Carbon dioxide, Citric Acid/Malic acid, Colors, Preservatives, Anti Oxidants and other emulsifying agents, etc.[14]

Social implications

The first time when CSE conducted tests on samples of 12 soft drinks, it found out that the pesticide residue levels in these samples are as high as 30 to 35 times that of the levels acceptable by EEC norms.

Indian soft drinks market is not under any regulation. Prevention of Food adulteration act 1954 does not include soft drinks. None of the BIS standards that existed before August 2003 had any guidelines or set criteria for the residue levels of pesticides in the soft drinks. But different international agencies have set standards for the residue levels of pesticides. The European Economic Community (EEC) sets the maximum admissible concentration of individual pesticides and related products in drinking water at 0.1 parts per billion to ensure that the toxicity is not dangerous to human beings. For a few pesticides like aldrin, dieldin and heptachlor epoxide the admissible limit is even more stringent, i.e., 0.03 parts per billion.[15]

The samples tested were found to contain four pesticides more often than others – Lindane, DDT and its metabolites, Malathion and Chlorpyrifos. Each of these can have detrimental effects on the general well-being of human beings. Lindane accumulates in the fat tissues and can cause damage to liver, kidney and is suspected to be carcinogenic in nature. DDT and its metabolites are found in almost 80% of the samples tested. DDT and its metabolites have negative impact on the potency levels of human beings and can increase the incidence risk of breast cancer among the female population. Chlorpyrifos is suspected to effect the functioning of the brain. It also affects the immunological system of the body. Malathion is also carcinogenic in nature.

Some of those who sympathize with PepsiCo in this whole pesticide saga say that the per capita consumption of soft drinks in India is too small for any of these pesticide residues in the soft drinks to have any appreciable effect if at all on the consumers. Though this may be true to certain extent, it has been scientifically proven that the excretion of some of the aforementioned pesticides from the human body is extremely slow even after the intake ceases. Moreover, all the aforementioned pesticides are proven to be highly carcinogenic in nature.

The main reason cited for the highly unacceptable levels of pesticide residue levels in the soft drinks is mainly because of the negligence on the part of the companies to process the ground water before using it in the manufacturing process. The ground water in general, is contaminated because of unregulated and indiscriminate use of pesticides in India.

The public response to CSE’s findings has been very sharp as reflected by steep drop in sales of the soft drinks immediately following the release of CSE’s findings. [16] Though there was no hue and cry all over, the general public seems to have taken strong notice of the fact that all is not well with the soft drinks produced and marketed by the Cola Companies. The blatant denials by the head honchos did not allay the fears of the general public.

Political implications

The government’s response initially was guarded in nature. The government has conducted its own investigation into the matter and came out with the verdict that though the samples did contain pesticide residues, the levels were not as high as those stated by CSE. Lack of any specific guidelines or set criteria in this case has meant that the Cola Companies have not flouted any legality and could not be wronged for what they were doing. One positive that came out was that the government started tinkering with the idea of coming up with standards for acceptable levels of pesticide residues in the soft drinks and other beverages.

The political ramifications of the issue are there for all to see. The new UPA government that came into the power in May 2004 could not force the issue and this saw the pesticide issue taking backburner. Three years after the issue first saw the light, there was not much progress from the side of Pesticide Residue Sub-Committee of CCFS – the government supported body. CSE came up with fresh tests and still highly unacceptable levels of pesticide residues, this time taking the new BIS standards and guidelines for acceptable limits. Four states ruled by the opposition at the center, NDA, i.e., Gujarat, Madhya Pradesh, Rajasthan and Chattisgarh banned the sale of Coke and Pepsi in educational and government institutions. Karnataka and Kerala followed the suit, with the later even banning production of the soft drinks in the state.

Overall, the government did not play a proactive role in this issue as can be seen from the fact that three years after the issue first cropped up, the government is yet to come up with the standards for pesticide residue levels in the soft drinks. The fact that the ministry of health and CSE do not see eye to eye on the matter did not help the cause. Somehow, the matter has deviated substantially from the core issue, i.e., carcinogenic pesticide residue levels in the primary ingredient water. The CCFS is known to have been expending resources and time on the obesity inducing sugar, which anyway is not the major constituent of the soft drink composition. Moreover, the expert committee constituted by the ministry of health faulted the CSE’s methodology of conducting tests and hence the credibility of its tests.

Economic implications

Despite of the initial knee-jerk reaction, the general public by and large has not been paying much attention to the Pepsi pesticides issue. The ban imposed by some of the states will hit the profitability of the company’s operations. The thing really worth mentioning is the reluctance of both the Cola Companies in accepting the fact that they have been following different safety standards at different places. All through the issue, the chairman of Pepsi India Holding Rajeev Bakshi was adamant that Pepsi’s products in India are as safe as anywhere else. While it may be true that extremely low levels of per capita consumption render any fears of toxic effects of pesticides unreasonable, the reluctance of the Cola Companies in accepting the fact that the ground water used in the manufacturing process is not sufficiently treated, is an ominous sign to the consumer.

The cost involved with such processing and subsequent testing of the water samples for residue levels might not be exorbitant in comparison to the amount of damage from not taking any such initiative might cause in the long run. In the age of triple bottomline, the overall behavior of Pepsi India in the pesticides issue leaves a lot desired.

PepsiCo in Burma

From 1991 until 1997, PepsiCo was one of the most notable companies to do business in Burma. PepsiCo's business partner, Thein Tun, was a noted business partner of the ruling Burmese military junta, which has been alleged to be responsible for some of the worst human rights violations in the world.

PepsiCo's involvement prompted one of the biggest Burma-related boycotts in history. The campaign was on a par with those against Texaco and Unocal, running around the same time, and currently against Total Oil.

PepsiCo formally began their investment in Burma in November 1991 when they opened a bottling plant in the then-capital Rangoon, despite the call by Aung San Suu Kyi and the National League for Democracy for companies to avoid doing business in Burma until it returned to democracy. The campaign against Pepsi was initiated by the Asian-based Burma Rights Movement for Action. The campaign later gained growing strength in the West as Burmese human rights groups focused on campaigns against companies in Burma, including the oil giants Texaco, Unocal, Amoco, and Petro-Canada. [17]

When Petro-Canada left Burma, Canadian and U.S. based Burmese democracy groups sharpened their focus on PepsiCo. The campaign received a massive boost when, in 1996, the Free Burma Coalition took the lead in forcing Pepsi out of American universities. This included the scrapping of a multi-million dollar deal at Harvard.

The campaign also spread to Europe, where the UK-based organization, Third World First, adopted the boycott. In response, in 1996, PepsiCo attempted to step out of the spotlight by selling its share of its Burmese joint venture to its partner but retaining its Burmese franchise agreement. Aung San Suu Kyi responded, "As far as we are concerned, Pepsi[Co] has not divested from Burma" and both human rights and environmental groups continued the pressure on Pepsi. Eventually, with the Burmese regime holding violent anti-democracy rallies and pressure from around the world mounting, PepsiCo announced in January 1997 that it would cut all ties with Burma. However, to this day, PepsiCo has not admitted that it was morally wrong to invest in Burma as some other companies have upon leaving the country.

PepsiCo in Israel

Until 1991 PepsiCo was not sold in Israel, for which it was criticised by many in the United States who believed it was supporting the Arab boycott of Israel. PepsiCo always denied this allegation, saying Israel was simply too small to support a franchise. As a result, the Israeli market was taken over by Pepsi's rival Coca Cola, and to this day Pepsi has a very small market share in Israel.[18] [19]

See also

Notes and references

  1. ↑ "The Pepsi Challenge". IUCN (2008). Retrieved on 25 March 2008..
  2. ↑ PepsiCo Buys 50% Stake in Sabra
  3. ↑ Corporate Equality Index 2006
  4. ↑ The Pepsi Product Tampering Scandal of 1993
  5. ↑ "Coca-Cola India", Jennifer Kaye, Tuck School of Business at Dartmouth, 2004 (PDF)
  6. ↑ "Coke, Pepsi lose fight over labels", Knight Ridder News, 9 December 2004
  7. ↑ "Indian Coke, Pepsi Laced with Pesticides, Says NGO", Inter Press Service, August 5, 2003
  8. ↑ "How a Global Web of Activists Gives Coke Problems in India", Wall Street Journal, July 7 2005
  9. ↑ Cola sales down 10% on state bans
  10. ↑ Sanjoy Majumder (2006-08-09). "Kerala bans Coke and Pepsi". BBC News. Retrieved on 2008-01-03.
  11. ↑ K.C. Gopakumar (2006-09-23). "Kerala HC quashes ban on Coke and Pepsi". The Hindu BusinessLine. Retrieved on 2008-01-03.
  12. ↑ Indian state bans Pepsi and Coke
  13. ↑ CSE Report: Analysis of pesticide residues in soft drinks, August 2006
  14. ↑ CSE Report: Analysis of pesticide residues in soft drinks, August 2006
  15. ↑ CSE Report: Analysis of pesticide residues in soft drinks, August 2006
  16. ↑ News snippets from www.domain-b.com
  17. ↑ "A Historical Look at the Pepsico/Burma Boycott " in Boycott Quarterly (Summer 1997), online at http://www.thirdworldtraveler.com/Boycotts/Hx_PepsiBurmaBoy.html[1]
  18. ↑ GETTING IN TEMPO WITH PEPSI COLA (Jerusalem Post, 1991)
  19. ↑ Snopes.com: Coca-Cola and Israel, 13 March 2007

External links

PepsiCo, Incorporated
Corporate Directors:
Indra Nooyi (Chairman and CEO) · Robert Allen · Dina Dublon · Victor Dzau · Ray Hunt · Alberto Ibargüen · Arthur Martinez · Steven Reinemund · Sharon Rockefeller · James Schiro · Franklin Thomas · Cynthia Trudell · River King
Brands:
Pepsi · Tropicana · Frito-Lay · Quaker Oats · Gatorade
Annual Revenue: $35.1 billion USD (▲16% FY 2006) · Employees: 168,000 · Stock Symbol: NYSE: PEP · Website: www.pepsico.com