Pepsico’s Turning Point Case Study Solution
Major cause of these environmental changes is mass use of nitrogen rich fertilizers and the ingredients by the food and beverage companies. Therefore, food and beverage companies should play a constructive role in addressing these issues to remove their growth constraints related to the criticism from the environmental communities.
In order to address these issues, the companies could either reduce their use of nitrogen rich ingredients or take certain steps to reduce the amount of nitrogen in the overall environment. The companies should avoid use of nitrogen fertilizers and should search out the products of those farmers that do not use fertilizers for their crop. Moreover, the companies could also invest in reducing greenhouse gas emissions worldwide. For example, the companies could use renewable energy sources at their production plant to compensate the greenhouse gas emissions from the use of nitrogen-rich products.
Along with the ecological costs there are certain social costs associated with the food and beverage industry which must be addressed by the giant food and beverage companies to achieve the industry growth and to avoid the criticism from the environmental communities. Social costs associated with the industry includes the increasing health issues related to obesity, heart disease, diabetes etc. However, the giant companies could play a constructive role in addressing these issues.
The companies could move towards more healthy products by reducing the amount of toxic substances in their processed foods i.e. dioxin, which could result in deadly human diseases. Along with it, the companies should use more nutritious ingredients rather than derivatives of Corn and Soy to increase number of calories from their products. The companies could also do efforts to shift consumer tastes towards healthy products as they have controlled the consumer taste for few decades. In this way the giant food and beverage companies could play a constructive role in addressing social and ecological costs related to the industry.
Evaluation of Sustainability and CSR at PepsiCo
After the appointment of Indra Nooyi as a CEO in 2006, there was a potential shift in the corporate strategy and goals at PepsiCo. The new CEO was focused on investing in healthier products for achieving sustainable growth for the company along with providing healthier future for the people and the planet both. Under the new vision, the slogan of the company was also changed from the “fun for you” to “better for you”. (Officials, 2019)
Human Sustainability
The company announced certain goals and commitments related to human sustainability and the environmental sustainability. PepsiCo acquired Quaker Oats producing True North nut snacks and So Be, and Naked Juice producing soy drinks and organic drinks to introduce various healthier products in its portfolio. However, despite of being considered a PepsiCo’s healthy brand, the products of Quaker Oats contained several ingredients which were hazardous to health. These hazardous ingredients were not advertised which have become the base for criticism over the healthy brands of PepsiCo.
Along with the inculcation of healthy brands in its portfolio through acquisitions, PepsiCo has taken certain sustainability steps for its market places. One of major examples in this regard is the Company's marketing strategy related to schools. The company markets only low calories and nutritious beverages choices in schools.
Another step taken by PepsiCo towards human sustainability is the shift of its focus towards research and development for introducing new and healthy products in its portfolio. The company has increased its research and development budget and has introduced an army of health scientists to design certain healthy products.
Environmental Sustainability
Along with the human sustainability, PepsiCo has taken several steps towards environmental sustainability. The company has committed to various goals related to water, land, packaging, climate change and community. In this regard, the company committed to reduce its packaging by millions of tones to avoid high amount of wastages. Moreover, the company has committed to reduce greenhouse gas emissions along with the achievement of efficiency in the energy use. PepsiCo has also attempted certain philanthropic activities including a commitment to provide safe drinking water to 3 million people in developing countries by 2015.
On the basis of above analysis, it could be determined that the company has taken several steps towards human and environmental sustainability. However these steps are still not sufficient to achieve the desired industrial growth and to reduce the criticism over the social responsibility of PepsiCo.
Alternatives
Certain long term strategic alternatives could be derived for the company on the basis of above analysis. These alternatives can be evaluated on the basis of the fact that how the alternative would enable the company to achieve its goal of potential growth and reduce the criticism over the company. Moreover, the alternatives could be evaluated on the basis of the time frame that would be taken by an alternative to be implemented along with the cost and risks related to the alternative
Alternative-1: introduction of a New Product line Related to Healthy Foods and Beverages
The first step that PepsiCo could take is to introduce a new product line related to healthy food and beverages. Although, the company has already introduced certain heath related brands, but, the number of these brands in its portfolio is not potential to reduce the criticism and achieve potential growth. Therefore, the company should introduce a wide range of healthier products by using its substantial research and development expenditures. The pros and cons related to the introduction of a healthy product line in the portfolio are given below:
Pros:
- Ability to target large number of consumers i.e. health conscious consumers.
- Reduction of the criticism of environmental concerned societies and community development organizations.
- Fulfillment of the social responsibility by compensation of the hazardous products with healthy products.
- Could be implemented within few years i.e. 3 to 5 years.
Cons:
- Risk of failure of the new products in the market i.e. consumers may not like the taste and may not accept the healthier products due to the addictive nature of hazardous products.
- The hazardous products in the product portfolio may make the incorporation of healthy products fail to reduce criticism.
Huge cost of research and development required to build new healthy products............
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