PepsiCo (PEP) is best known for its carbonated cola beverage, Pepsi, and its rivalry with Coca-Cola (KO). The company's expansion strategy began in 1965 with a merger between Pepsi-Cola and snack-food company Frito-Lay. As a global leader in packaged foods, snacks, and beverages, PepsiCo has used acquisitions to expand its core businesses to include a portfolio of popular brands.
As of May 2024, PepsiCo posted a market capitalization of $251 billion and a 2023 fiscal year net income of $9.16 billion. Food accounted for 59% and beverage 41% of the company's sales, with a net revenue of $91.47 billion.
Key Takeaways
- PepsiCo began strategic acquisitions beyond the beverage market in 1965 when it purchased Frito-Lay.
- In 2001, PepsiCo acquired Quaker Oats for $13.8 billion.
- PepsiCo sold Tropicana, Naked, and other select juice brands to PAI Partners in 2022 but retains a 39% non-controlling interest.
PepsiCo Beverages North America (PBNA)
PBNA includes world-famous proprietary brands like Pepsi, Gatorade, Mountain Dew, and Aquafina. It also includes partnership brands like tea variants from Lipton and coffee with Starbucks. In 2022, PepsiCo sold Tropicana, Naked, and other select juice brands to PAI Partners while retaining a 39% non-controlling interest in a newly formed joint venture, Tropicana Brands Group (TBG), operating across North America and Europe.
This division creates and distributes licensed products from Keurig Dr. Pepper, like Dr. Pepper, Crush, and Schweppes, and juices from Dole Food Company, Inc. and Ocean Spray Cranberries, Inc. PBNA accounted for 30% of net revenue for PepsiCo in 2023.
Frito-Lay North America (FLNA)
Frito-Lay resulted from the 1961 merger between the manufacturer of Fritos corn chips and the snack-food delivery company started by Herman W. Lay. Four years later, the company merged with Pepsi-Cola to form PepsiCo.
The acquisition of Frito-Lay marked Pepsi's first venture beyond the beverage market.
Frito-Lay has grown dramatically in size to become Pepsi's biggest profit producer. In fiscal year (FY) 2023, Frito-Lay North America accounted for 47% of operating profit, more than double any other division. Frito-Lay generates its profit stream from over 29 different snack brands, including Lay's, Doritos, Cheetos, Fritos, Sun Chips, Tostitos, Cracker Jack, Miss Vickie's, Rold Gold, Ruffles, Smartfood, and more.
Quaker Foods North America (QFNA)
The Quaker Oats name is more than 140 years old and was trademarked in 1877 with the U.S. Patent Office as a breakfast cereal. The company, then called German Mills American Cereal, would later merge with American oats millers to become the American Cereal Company in 1888 and the Quaker Oats Company in 1901.
In 2001, the company was acquired by Pepsi. The acquisition bolstered Pepsi's portfolio of food brands with additions such as Pearl Milling Co., Cap'n Crunch and Life cereals, and Pasta Roni. Quaker Oats also enriched PepsiCo's beverage portfolio with the sports-drink brand Gatorade. In 2023, QFNA accounted for about 3.4% of both the net revenue and operating profit of PepsiCo.
Europe
The European sector includes a range of beverages, food, and snack products. Established brands in this market include Lay’s, Doritos, Cheetos, Ruffles, Walkers, and Quaker cereals. This segment contributed 14.5% to the net revenue for PepsiCo in 2023.
Africa, Middle East, and South Asia (AMESA)
AMESA contains snack brands likeLay’s, Kurkure, Chipsy, Doritos, Cheetos, and beverages like Pepsi, Mirinda, 7UP, Mountain Dew, and Aquafina. It includes partnership brands like Lipton iced tea products with Unilever (UL). This market contributed 7% to operating profit in 2023.
Latin America (LatAm)
The LatAm division includes beverages, food, and snack products, including leading brands Toddy, Sabritas, Marias Gamesa, and Emperador. LatAm accounted for nearly 13% of PepsiCo's net revenue in 2023.
Asia Pacific, Australia, New Zealand, and China Region (APAC)
APAC manufactures and distributes many of Pepsi's largest brands, including Cheetos, Doritos, 7UP, Aquafina, and Quaker. In 2023, APAC accounted for 5% of PepsiCo's net revenue.
Which Segment, Food or Beverage, Leads PepsiCo's Net Revenue?
In 2023, food accounted for 59% of net revenue, while beverages accounted for 41%.
How Does PepsiCo Contribute to Sustainable Agriculture?
PepsiCo cites that 90% of crops like potatoes, whole corn, and oats are sustainably sourced globally as of 2023.
How Does PepsiCo Contribute to Recycled Packaging?
In December 2022, PepsiCo set a packaging goal that 20% of beverage servings will be delivered in reusable models by 2030.
The Bottom Line
Once a beverage company, PepsiCo began strategic acquisitions in 1965 when it purchased Frito-Lay. The company operates through seven segments to support brands, including Quaker Oats, Lipton, Doritos, and Gatorade.
