PepsiCo's Distribution and Logistics Operations

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Case Details:

Case Code : OPER031
Case Length : 12 Pages
Period : 1991 - 2003
Organization : PepsiCo.
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
Industry : Food & Beverages

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"PepsiCo has continually been at the forefront of standards adoption, promoting industry efficiency and adding value throughout our supply chain."1

- Al Carey, Chief Operating Officer, PepsiCo Beverages and Foods, North America.


Headquartered in New York, the US-based PepsiCo is one of the world's leading beverage and snacks food companies. In its 2002 annual report, the company claimed to have the largest share in the US beverage markets (Refer Table I).

PepsiCo served diverse markets with its six group companies - Frito-Lay North America, Frito-Lay International, Pepsi-Cola North America, Pepsi Beverages International, Gatorade/Tropicana North America and Quaker Foods North America (Refer Exhibit I). For the fiscal year ended December 2002, PepsiCo Inc. (PepsiCo) reported revenues of $25.11 billion, an increase of 6.8% from the 2002 revenues of $23.51 billion (Refer Exhibit II).

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

Analysts felt that one of the main reasons for the company's massive growth over the decades and the leadership status it has acquired in almost all its business segments was PepsiCo's efficient distribution and logistics management operations. Depending on the product involved, PepsiCo chose between the various standard distribution methods employed, such as the Direct Store Delivery (DSD) system, the broker warehouse system, the vending and food service system and the pre-sell method.

PepsiCo adapted these systems to the local conditions of the various countries in which it operated. PepsiCo's highly advanced distribution system was well supported by state-of-the-art logistics systems. PepsiCo upgraded its technical capabilities consistently in order to strengthen its logistics management activities. PepsiCo's bottlers employed wireless technologies to strengthen their distribution system and effectively serve the customers in the markets in which they operated. However, with its vast worldwide operational network and good market presence globally, PepsiCo still did not put enough effort into integrating and streamlining the operations of its various group companies/divisions.

This was undoubtedly a difficult task, but the then CEO Roger Enrico (Enrico) announced the launch of the 'Power of One' program through which, he said, the company would achieve this streamlining of operations, in 1998. PepsiCo would generate savings worth millions of dollars if the program was implemented well. However, the program had not got off the ground even by early 2004.

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1]  As quoted in the article, "PepsiCo Joins UCC net for Global Services," posted on, dated December 12, 2003.


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