PepsiCo Inc.: Financial Analysis and Industry Outlook Report

This report offers a comprehensive overview of PepsiCo, a leading food and beverage company. It begins with a company overview, highlighting its diverse brand portfolio and global presence, and then delves into the industry outlook, discussing the influences of suppliers, customers, and competito...Read More

Company Overview
PepsiCo is recognized as one of the leading food and beverage companies across the
world having diverse portfolio of brands. The food products manufactured by the company are
chips, snacks, rice, pasta and other daily-based products. The beverage product portfolio of the
company includes carbonated soft drinks, juices, ready to drink tea, bottled water and sports
drinks. The company has a workforce diversity of about 274,000 people from across the world.
The company owns different types of brands such as Pepsi and Lays having a revenue realization
of about $1 billion annually (Bailey, 2014).
Industry Outlook: Stagnating Horizons
There is weak influence of suppliers on the company as high availability of suppliers
across the industry reduces their control over the company. The power of the suppliers is
weakened due to low forward integration that limits control of the suppliers over the company’s
supply chain. However, the there is large influence of the customers over the company’s
operations s consumers have high availability of options due to presence of high competition
across the industry. Therefore, consumers can easily shift from one provider to other and
therefore their choices have a large impact on the overall process of the company. The
competitors of the company in beverage industry are Coca-Cola, Red Bull and Monster Beverage
Corporation. Its competitors in the food industry include Kellogg Company, Kraft Foods Group
Inc., Nestle and others. The company due to its good brand image effectively competes against
the new entrants and even strongest brands in the industry.
Management Team
The company is lead by Indra K. Nooyi, Chief Executive Officer, who has shown
excellent leadership skills in managing a diverse team of management personnel. She is beings
supported by a team of experiences key management personnel who are highly committed to
achieve long-term goals and objectives of the company.
Key Indicators of PepsiCo Limited
Indicator Figure (2017) Indicator Figure (2017)
Credit risk A rating Equity 10,889,000
Assets $
79,804,000.00 EPS 3.38
Long term debts $
33,796,000.00 ROE (2017) 44.32%
Cash $
10,610,000.00 ROA (2017) 6.31%
Gross profit $
34,740,000.00 Gross profit % 54.69%

Operating Profit $
10,509,000.00 Operating Margin 16.54%
Total debt / Equity 3.12 Beta 0.63
(Morning Star, 2018)
Indicator 2015 2016 2017
Return on Assets % 7.77 8.79 6.31
Return on Capital % 13.38 15.55 11.00
Return on Equity % 37.20 55.14 44.32
Gross Margin % 54.44 55.08 54.69
EBIT Margin % 15.40 15.58 16.54
Total Debt/Equity 2.46 2.72 3.12
Current Ratio 1.31 1.28 1.51
Financial Leverage 5.86 6.71 7.36
Net Profit Margin % 8.64 10.07 7.64
Interest Coverage 8.67 7.37 9.34
Operating Cash Flow Growth %
YOY 0.70 -1.66 -3.94
Inventory Turnover 9.68 10.37 10.15
(Morning Star, 2018)
On the basis of above charts it has been found that profitability position of the PepsiCo
has decreased in year 2017 as compared to year 2016. PepsiCo maintain proper flow of liquidity
through maintaining the current ratio of 1.51 times in year 2017 as compared to 1.28 times in
year 2016. Return on assets, return on equity and return on capital has decreased in year 2017
when it has been compared with year 2016. In short it can be said profitability has been
decreased in year 2107. In year 2017, PepsiCo has received the A star credit rating from Fitch
(Rating Agency) (Reuters, 2017).

References
Bailey, S. 2014. PepsiCo: A company overview. [Online]. Available at:
https://finance.yahoo.com/news/pepsico-company-overview-203956177.html [Accessed on: 28
April 2018].
Morning Star. 2018. PepsiCo Inc PEP. [Online]. Available at:
http://performance.morningstar.com/stock/performance-return.action?
t=PEP&region=usa&culture=en-US [Accessed on: 28 April 2018].
PepsiCo: Our Leadership. 2017. [Online]. Available at:
http://www.pepsico.com/About/leadership [Accessed on: 28 April 2018].
Reuters. 2017. Fitch Rates PepsiCo's $3B Notes Issuance 'A'; Outlook Stable. [Online].
Available at: https://www.reuters.com/article/fitch-rates-pepsicos-3b-notes-issuance-a-
idUSFit997677 [Accessed on: 28 April 2018].