The Pepsi Co. fiasco

By Shivam Saklani

What would a good top level manager of a firm, which sells sin goods, do, if suddenly, the society around him starts turning more health conscious?

These crucial situations expect a firm decisional role from the manager.

“Pepsi Co. India”, a fully owned subsidiary of New York based Pepsi Co INC. faced, or more appropriately, is still facing a similar kind of a problem. The society is indeed growing more health conscious, although the revenues from carbonated soft drinks are increasing but their growth rate is in lower single digits.

Henry Mintzberg , defined 4 decisional roles which are generally practiced by a manager. One of which is, “Resource Allocator”, the management of the PepsiCo India, assumed this role, wherein the company focused on the changing trends in the society, and decided that the company would now focus more on Hydration and juice and wellness subsidiaries, as the growth of the hydration segment, is in double digits while juices segments witness a growth of lower double digits.

Major chunk of the resources would now be diverted to the “Aquafina” & “Tropicana”, adding several products in their arsenal, Pepsi has already launched “Aquafina Vitamin” in kiwi and raspberry flavor.

A qualitative decision making technique, “Experimentation” has been exemplarily displayed by the firm, as Mr. Vipul Prakash, senior vice president, PepsiCo India, said, ”Pepsi would also try to reduce calories in its drinks. A target of keeping only 100 calories in every 355ml is expected to be achieved by 2025. Pepsi has launched 7up, with reduced sugar (up to 30%) in Gujarat. The pilot project has been a success and similar projects are being tried on Mirinda and Mountain Dew”. Pepsi, in some years would also be expected to venture into dairy business.

The decisions taken by PepsiCo, although classical and simultaneously, brave, aren’t purely objective, as they are gambling on the future market behavior with the current data. The move of altering the sugar content would (in my expectations) change the taste of the products which would definitely affect the revenue as well as the stock prices of the firm. It would still be very interesting to see how this decision of the beverage giant turns up.