Supply Chain Management of PepsiCo

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Case Details:

Case Code : OPER102
Case Length : 14 Pages
Period : 2005-2011
Organization : PepsiCo.
Pub Date : 2012
Teaching Note :Not Available
Countries : US; Global
Industry : Food and 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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About Pepsico

The origins of Pepsi date back to the late 19th century when a young pharmacist Caleb Bradham (Bradham) started selling a refreshing drink called ‘Brad’s Drink’ in his pharmacy. The drink was later renamed Pepsi-Cola after the digestive enzyme pepsin7 used in the recipe. The sales of Pepsi soon started to increase.This convinced Bradham to form a company called the Pepsi-Cola Company. Bradham got an official patent for the drink in 1903 and then started to sell it in bottles. The business showed spectacular growth and Bradham sold 7,968 gallons of the drink in the year 1903. He later started to award franchises to grow his business and the Pepsi-Cola Company’s franchisees spread to 24 states of the US. The strong franchise system developed by Bradham was one of the main reasons for Pepsi’s initial success. The sales of Pepsi also reached 100,000 gallons by 1910.

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The outbreak of World War I, however, affected the company’s business due to fluctuations in the price of sugar and Pepsi went bankrupt in the year 1923.
Bradham sold the Pepsi-Cola trademark to Craven Holdings Corporation and resumed his pharmacy business. Pepsi Cola Company was declared bankrupt for a second time in the year 1931 as the Great Depression8 affected its sales.
Pepsi’s fortunes changed when its assets were purchased by a successful candy manufacturer Charles G. Guth (Guth). Guth had been thinking of selling his own soft drink at his stores after Coca Cola declined to give him a discount on its drinks. He reformulated the Pepsi formula and started to sell it in 12-ounce bottles at a cheaper price than its competitors. With sales rising, Guth decided to purchase the Mavis Bottling company9 and start his own bottling operations. In 1935, PepsiCo Company was moved to the Mavis Bottling location at 47-51 33rd street, Long Island City, New York .

Excerpts - Next Page>>

7] Pepsin is an enzyme released by the cells in the stomach. It degrades the food proteins into peptides.
8] The Great Depression was a worldwide economic depression that started in 1929 and lasted till the late 1930s.
9] Mavis Bottling Company of America was a company engaged in bottling of carbonated beverage.

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