Total Quality Management Benchmarking at Pepsi Cola PDF

Total Quality Management Benchmarking at
Pepsi Cola
Pepsi – An Introduction
Introduction
PepsiCo, Inc., major producer of carbonated soft drinks, other beverages, and snack foods.
Its beverage division, Pepsi-Cola Company, bottles and markets several popular brands of
soft drinks in the United States and throughout the world. PepsiCo also owns Frito-Lay
Company, the leading snack-food maker in the United States. PepsiCo is based in Purchase,
New York.
PepsiCo’s soft drink products include Pepsi, Diet Pepsi, and Mountain Dew. Other
beverages include Lipton Brisk and Lipton’s Brew iced teas, All Sport athletic drink, and
Aquafina bottled water. Frito-Lay products include Lay’s and Ruffles Potato Chips, Fritos
and Doritos Corn Chips, Chee tos Cheese Snacks, Tostitos Tortilla Chips, Rold Gold Pretzels,
and Grandma’s Cookies.
Early History
PepsiCo traces its origins to 1898 when Caleb Bra dham, a pharmacist in New Bern, North
Carolina, created a curative drink for dyspepsia called Pepsi-Cola. Pepsi-Cola, later referred
to simply as Pepsi, was a mixture of carbonated water, cane-sugar syrup, and an extract
from tropical kola nuts. To sell his product, Bradham formed the Pepsi-Cola Company in
1903. In addition to selling the drink at drugstore counters, Bradham bottled Pepsi for sale
on store shelves. At this time, bottling was a new innovation in food packaging.
However, due to major increases in the price of sugar, Bradham began to lose money on
Pepsi, and in 1923 he filed for bankruptcy. The Craven Holding Company of Craven County,
North Carolina, purchased the company’s assets. In 1931 Charles G. Guth of the Loft Candy
Company in New York City purchased Pepsi-Cola from the holding company. Guth had
difficulty getting the business going again, but he increased sales by selling larger bottles at
an unchanged price. By 1933 Pepsi-Cola was sold by 313 franchised U.S. dealers; bottled in
the United States, Cuba, and England; and sold in 83 countries.
PepsiCo’s snack-food business dates from 1932 when ice-cream seller Elmer Doolin of San
Antonio, Texas, developed a business idea after eating a package of Mexican-made fried
corn chips. He purchased a recipe for the chips and established the Frito Company in 1932.
Originally, Doolin produced Frito’s corn chips in his mother’s kitchen. He later mechanized
production and moved operations to Dallas, Texas, in 1933. Around the same time, Herman
Lay of Nashville, Tennessee, developed a business distributing potato chips made by an
Atlanta manufacturer. In 1938 Lay bought the manufacturing company, renaming it H. W.
Lay & Company. The company prospered, becoming one of the largest producers and
distributors of snack foods in the southeastern United States. The company made and sold

many snack foods, but its best-seller was its brand of potato chips, known as Lay’s. In 1945
the Frito Company gave H. W. Lay & Company exclusive Southeast distribution rights for
Frito’s corn chips, a market both companies hoped to expand nationwide. After continuing
their close business association for over 15 years, the two companies merged in 1961 to
become Frito-Lay, Inc., with headquarters in Texas.
Growth
The Pepsi-Cola Company, meanwhile, had changed hands several times and grown greatly
since 1933. The Loft Candy Company merged with the company in 1941, keeping the Pepsi-
Cola name. About this time, Pepsi became the second-best selling soft drink in America
behind its chief market rival, Coca-Cola (popularly known as Coke). In 1948 the Pepsi-Cola
Company began canning drinks in addition to selling them in bottles. Alfred Steele, formerly
an executive with the Coca-Cola Company, became president of the Pepsi-Cola Company in
1950. Former amateur boxer Donald Kendall took over as company president and chief
executive officer (CEO) in 1963 and began marketing Pepsi to young people in an
advertising campaign called “The Pepsi Generation.” The company acquired another
popular soft drink, Mountain Dew, in 1964. In 1965 the Pepsi-Cola Company merged with
Frito-Lay, Inc., to become PepsiCo, Inc., based in New York City. As president and CEO of
the newly merged company, Kendall later moved the corporate headquarters to its current
home in Purchase, New York.
In 1972 PepsiCo struck a deal with the Union of Soviet Socialist Republics (USSR), allowing
the company to distribute Stolichnaya vodka in the United States and to build soft-drink
bottling facilities in the USSR. Pepsi thus became one of the first American products to be
made and sold in the Soviet Union. In the late 1970s the company began to purchase fast-
food chains. It acquired Pizza Hut in 1977, Taco Bell in 1978, and Kentucky Fried Chicken
(later named KFC) in 1986.
The Cola wars
PepsiCo’s leading soft drink, Pepsi-Cola, and its chief rival, Coke, have dominated the soft-
drink market for decades, although Pepsi has traditionally remained behind Coke. In 1950
Coke outsold Pepsi by 500 percent worldwide. But Pepsi’s aggressive advertising campaigns
aimed at young consumers and major bottling and marketing deals made Pepsi a close rival
to Coke by the 1980s. PepsiCo has also enjoyed great success with its canned and bottled
Lipton brand iced teas, earning higher sales than the Coca-Cola Company’s Nestea products.
Also, in the United States, Pepsi had virtually an even market share with Coke in the mid-
1980s, when the Coca-Cola Company changed the formula for Coke. (It later reintroduced
the original formula under a new name, Coke Classic.) However, as Coke regained
popularity worldwide in the late 1980s and into the 1990s, it again became the global soft-
drink leader. In 1996 Pepsi-Cola International, PepsiCo’s international beverage production
and marketing division, suffered difficulties in Latin America, one of its most important
markets. The company was particularly hurt by the loss of a bottling plant to the Coca-Cola
Company in Venezuela.
Snack food Market Dominance

Many of PepsiCo’s other products continued to dominate their markets in the 1990s. Sales
of Frito-Lay products accounted for about 40 percent of PepsiCo’s total profits. By the mid-
1990s Frito-Lay products made up more than half of the U.S. market for snack chips, and
the company owned eight of the top ten chip brands. In 1995 U.S. consumers bought the
company’s original potato chip brand, Lay’s, at a rate of 4.5 kg (10 lb) a second. The
company’s leading product, Dorito’s tortilla chips, was the best-selling salty snack
(packaged) food in America in the mid-1990s. Salty snack foods include chips, pretzels, and
nuts, as opposed to nonsalty snack foods such as cookies and cakes. In 1994 Frito-Lay began
producing several baked and low-fat versions of some of their snack foods—such as Baked
Lays potato chips and Baked Tostitos tortilla chips—which soon dominated the company’s
sales growth.
Recent Developments
By the mid-1990s PepsiCo’s restaurant business consisted of 28,000 outlets worldwide,
more than were owned by any other company. The company also supplied its own
restaurants through a separate division, PepsiCo Food Systems (PFS). In 1997 PepsiCo sold
PFS. Also that year, PepsiCo spun off its restaurant chains to form a new company. The
move enabled PepsiCo to focus on its beverages and snack foods. In 2001 PepsiCo acquired
The Quaker Oats Company, a food and Beverage Company.
Pepsi cola in Pakistan
In Pakistan, there have been consumed different types of soft drinks but Pepsi is the most
frequently consumed soft drink. It is very much popular in the consumer; it has got big
target market and is competing with the other companies of soft drinks. 10 units of Pepsi
cola have been installed, in the different places of Pakistan i.e., Lahore, Multan, Gujranwala,
etc., and working with the best utilization of their resources in the optimum way. Each of
these units is owned by the different parties, which are strictly following the rules of the
parent company. The company to made production has licensed each unit. These units have
their own areas of selling and have different target markets. All these units are considered as
separate firms, which are the franchisees of Pepsi cola international.
Pepsi in Multan
Shamim & Company
History
SHAMIM & Co. was established in 1967 as a private limited company. It started its business
in 1968. Allah Nawaz Khan Tareen (Ret. DIG) got license of 7-up franchise and was producing only
one product, 7-up. But in 1973, it became Pepsi Cola franchise. Now a day MD of SHAMIM & Co.
is Alamgeer Khan Tareen son of Allah Nawaz Khan Tareen.
Total production of that plant was 600 crates per 24 hours. Now Factory has 5 plants, which
can produce 110,000 crates per 24 hours.

In start Pepsi in Multan imported the material from USA & Ireland but due the problems of
shipment, time and availability, Pepsi Pakistan made the plant in HariPur Hadar where they
import the material from USA & Ireland. And now Pepsi in Multan takes Pepsi Concentrate
from the HariPur plant.
Along with the concentrate, Pepsi in Multan also imports the Sugar from Sheikho Sugar mill
& from Shaker Kunj. The bottles are manufactured by Tariq Glass in Lahore under licensed
by PEPSI Pakistan. The gases which are used in PEPSI are made by Multan Factory itself
but in case of shortage Factory buys it from Supreme Gas & Pak Gas. The caps and crowns
are imported from Imran Cork, Mehran – Karachi and Wincloa – Lahore.
Introduction
In Pakistan, at present SHAMIM & Co. is the largest production unit out of 11 franchisees.
SHAMIM & Co. covers the area of Southern Punjab which consists of Multan, Bahawalpur,
Bahwalnagar, Dera Ghazi Khan, Sahiwal, Khanewal, Rajan Pur, Taunsa, Okara, Rahimyar
Khan and Layyah. The company is properly serving all these areas with quality products.
Honors
In Pakistan, SHAMIM & Co. is in the list of top three out of eleven showing financial and
sales growth according to their relative volume size basis. When franchise cross a certain
volume, plant is classified as, “Mega Plant Status”. SHAMIM & Co. has achieved this status
in 2000 and 2001. Also it has ISO 9002 Certification and for year 2005 Shamim and
Company won the award of best quality unit among the eleven 11 units in Pakistan.
Mission Statement
“To earn profit by meeting the customers needs with quality products”.
Organization
Managing Director
He is the owner of this company and final operational authority to manage all departments
of the company. All departments’ heads are responsible to report him all about their
performances and matters.
General Manager Sales
G. Manager Sales is responsible for the performance of his department and to achieve the
objectives assigned to him such as marketing, sales, distribution. To carry out his duties
more efficiently he has four Regional Managers, 15 Area Sales Managers.
General Manager Operation
He is responsible for the whole administrative, shipping, workshop related activities to
smooth on the factory operations without any hindrances.

General Manager Technical
He is unlike Sales department performs key role as to manage Production Department
producing quality Products as per need of the sales department. Quality Control
Department also works under him.
G. Manager Finance
Finance, Accounts and MIS departments work under his control. He is responsible to make
major company financial policies to meet the needs of the each and every department
regarding budgets etc.
Organizational Chart
Global strategy
Pepsi has divided the total international market on the basis of taste constituting into three
zones.
 Asian zone
 European zone
 African zone
Pepsi is using the licensing strategy to go abroad. SHAMIM & Co. is also a Licensee.
Competitive priorities
“The competitive priorities are the operating advantages that firm’s processes must possess
to outperform its competitors.”

Shamim & Co. has the competitive priorities of high-performance design and consistent
quality.
High-Performance design
Actually Pepsi is getting the competitive edge in our region on the basis of its quality and the
quality is its taste. Through a complete marketing research they found that sweet taste is
liked more by this region. That’s why in Pakistan Pepsi is dominant soft drink and it has
almost 75% shares in this market. On the other hand when we look internationality then
Coca Cola is the leading company. So Pakistan is a big market for the Pepsi, where Pepsi is
generating a lot of revenues.
Consistent Quality
Another major and the strong aspect of the Pepsi in Multan is that they are producing a
consistent quality according to the PCI standards. The low quality bottles and the damaged
bottles are not dispatched towards the market. Pepsi has a lot of checks and balances on its
output level.
MANUFACTURING AND SERVICES STRATEGIES
Make-To-Stock Strategy
In Pepsi, Make-To-Stock manufacturing strategy is used. Bottles are produced in a
standardized process because the competitive priority is consistent quality. Firstly,
marketing department forecasts the demand then according to this forecasting MPS is made
and after making bottles Pepsi distribute these bottles to the market.
DEPARTMENTALIZATION
As it is a formalized company therefore there is a hierarchy of employees and the division of
departments in the organization. Following are the departments working in the
organization.
 Production Department
 Administration and Personnel department
 Sales/ marketing Department
 Finance Department
 Shipping Department
 Purchase Department
 Excise Department
 Computer Department
Each manager of a department is responsible for overall working of the department. A
manager has an assistant manager and after this there are shift in charge in production and
supervisors in sales. They control the activities of operatives.