Current and future challenges
PepsiCo, like many other companies operating in the beverage industry, currently faces a number of challenges that limit its potential to do business. Besides existing challenges, the continuously evolving social, legal and economic environment creates uncertainty in the industry, which may be realized as challenges in future. This report analyses PepsiCo’s current and future challenges and its external environment. The following are some of the company’s current challenges.
Global Macroeconomic Challenge
Pepsi is undoubtedly a global brand and thus, it operates in a global market. The global market is not a single market influenced by common factors. Different parts of the globe have unique factors that affect their macro-economies. The business is therefore susceptible to all economic conditions in these regions that result from unpredictable circumstances. Economic instabilities in different world regions that serve as Pepsi’s prime markets significantly impact the brand’s consumption in those regions. The business has to constantly innovate ways to manoeuvre through risks that are due to global economic situations which is not easy (Haas et al., 2015). Measures to reduce the risks may include reducing investments in regions perceived to have higher risks such as politically unstable nations. However, such measures imply reducing investment in those regions which limits the company’s growth amid potential to grow. This challenge is obviously not exclusive to PepsiCo but its impacts on the company’s business strategy are definitely unique to the organisation.
The conflict between “good-for-you” and “fun-for-you” products
In response to social trends in the direction of healthier food, Pepsi re-strategized their product mix to increase emphasis on nutritious products such as Quaker oatmeal. This move is unquestionably very strategic considering that, if food and beverage companies do not address the “healthy foods” concerns of their consumers, they might already be losing them. Unfortunately, these “good-for-you” products, as they are referred to by the company, are not as profitable as the “fun-for-you” (read by critics as “bad-for-you”) products. Fun-for-you products are simply branded concentrates of sugar and flavour; which are apparently low-capital investments (Setyawati & Santoso, 2016). On the other hand, the nutritious products involve a lot of capital and the margins are far lower compared to the traditional product line. For the company, this challenge has already created fear among investors who are seeing stagnant margins when they desire to see increasing stock prices.
Company’s environmental footprint
It is reasonable to argue that nearly all organisations involved with production create significant environmental impacts. Huge volumes of water, power and plastics go into the production and packaging of Pepsi. Inefficient water and power consumption practices are intolerable in a world where these resources are barely enough (Pogutz & Winn, 2016). Plastic packaging has created endless provocations between companies and environmental organisations or even individuals.