PepsiCo is not only a world leader in the soft drinks industry. This company is also a major player in the snack food industry, ranking second after Nestle.
PepsiCo started with one man (Caleb Bradham), one shop (a pharmacy), and one product (Brad’s Drink).
Today, the company sells 32 different carbonated and non-carbonated drinks and owns more than 15 world-renowned snack food brands.
The History of PepsiCo
Behind PepsiCo’s 129-year journey in business lies a fascinating story of triumph and failure, a rivalry with Coca-Cola, and creative advertising tactics.
Here is the story of a company that has forever been poking at its biggest rival, Coca-Cola.
Humble Beginnings
The tale of PepsiCo begins at a pharmacy in New Bern, North Carolina. Caleb Bradham owned this pharmacy, where he sold pharmaceutical drugs and a beverage called Brad’s Drink, served at the store’s soda fountain.
Customers loved to meet and socialize at the soda fountain as they drank Brad’s Drink, which Bradham advertised as a digestive aid.
Bradham created this drink himself, using ingredients like sugar, lemon oil, caramel, African kola nut, carbonated water, and other additives.
As more and more customers in North Carolina learned about Brad’s Drink, Bradham decided to give it a crispier name, Pepsi-Cola.
He also turned this product into a beverage business by distributing the syrup to other stores. Bradham instructed the store owners to add carbonated water to make the drink complete and ready for consumption.
Transitioning Fully to Pepsi-Cola
At his pharmacy, Bradham bottled, sold, and distributed Pepsi-Cola himself.
He did so for four years, until 1902 when he officially incorporated the Pepsi-Cola Company. A year later, Bradham trademarked the Pepsi-Cola name and patented his cola recipe.
He closed his pharmacy to focus wholly on processing, bottling, selling, and distributing the drink.
Bradham’s decision to franchise enabled him to expand to other states within North America.
He founded two bottling franchises that acquired the rights to bottle and sell Pepsi-Cola. By 1910, Pepsi-Cola had 250 bottling franchises across the United States.
Bankruptcy
After many years of success, the Pepsi-Cola Company faced its first significant setback that led to its demise. In 1914, after the start of World War I, the price of sugar skyrocketed due to rationing and limited supply.
Sugar is one of the main ingredients in Pepsi-Cola. Its high cost and scarcity affected the company’s operations to the point where the Pepsi-Cola Company could not pay its debts and expenses.
The Pepsi-Cola company declared bankruptcy in 1923. Bradham sold the rights to the Pepsi-Cola formula and reopened his drugstore.
Changing Ownership
Over the next decade, Pepsi-Cola’s ownership changed hands a few times before finally resting in the hands of Charles G. Guth.
Guth owned a fountain store company called Loft Candy Co., where he sold Coca-Cola, among other products. He switched to Pepsi after the Coca-Cola Company refused to supply him with large amounts of syrup to sell at his store.
Guth reformulated Pepsi-Cola and sold it for 5 cents per 12-ounce bottle. This amount was equivalent to the price of a 6-ounce Coca-Cola bottle.
The discounted price appealed to many Americans who were already enduring the Great Depression. Pepsi-Cola experienced steady growth thanks to creative marketing tactics and good management.
By 1960, the company reached annual profits amounting to $14.2 million.
The Pepsi Generation
In 1959, Pepsi-Cola ushered in a new president, Donald M. Kendall. Kendall is famous for making operational changes in five key areas: advertising, launching new soft drink brands, international expansion, creative packaging, and product line expansion.
In 1963, he led Pepsi-Cola to target the growing baby boomer generation.
Using advertising slogans such as “Come Alive! You’re in the Pepsi Generation” and “You’ve got a lot to live, Pepsi’s got a lot to give,” Kendall made the Pepsi brand youthful, energetic, and a favorite among the boomers.
However, the company was still trailing behind its rival, Coca-Cola.
The Merge With Frito-Lay
Kendall’s strategy for competing with Coca-Cola was to expand Pepsi-Cola’s product line beyond soft drinks.
In 1964, he led the acquisition of the Mountain Dew brand from the Hartman Beverage Company in Knoxville.
A year later, Pepsi-Cola merged with Frito-Lay, the leading manufacturer of snacks in the United States.
The Frito-Lay merger brought four world-renowned snack food brands (Lay’s, Cheetos, Ruffles, and Rold Gold) under Pepsi-Cola’s wing.
After the merger, Pepsi-Cola changed its name to PepsiCo and launched the Doritos brand.
Cola Wars
By 1980, PepsiCo had become a significant player in the soft beverage and snack food industry.
The company also ventured into the fast-food sector by acquiring three restaurant chains: Taco Bell, Pizza Hut, and Kentucky Fried Chicken (KFC). PepsiCo also became the first soft drink company to expand into the USSR.
However, the company was still behind Coke in sales and market share.
In 1985, Pepsi enjoyed a temporary three-month lead over Coke when the Coca-Cola Company introduced the New Coke syrup to replace the old one.
This move did not sit well with customers, who preferred the old to the new. They switched to Pepsi, demanding Coca-Cola to revert to the old Coke syrup. Coca-Cola restored its former formula after three months.
The 1990s
Throughout the 1990s, PepsiCo expanded its product line through strategic acquisitions and new product launches.
The company had become aware of American consumers’ changing eating habits and worked on meeting their needs. People were more conscious of what they were consuming, opting for healthier drink alternatives such as water and juice.
Therefore, in 1997, PepsiCo introduced the Aquafina bottled water brand and acquired Tropicana and South Beach Beverage Company, which processed SoBe juice blends.
PepsiCo also, in 2001, purchased the Quaker Oats company, which owned the Quaker Oats and Gatorade brands.
In the late 1990s, PepsiCo exited the fast-food industry by spinning off its three restaurant chains (Taco Bell, KFC, and Pizza Hut).
The chains didn’t contribute much to PepsiCo’s revenue stream. PepsiCo, in October 1997, organized the spinoff of the three chains into a separate company called Tricon Global Restaurants.
Pepsi Today
Today, PepsiCo is one of the largest snack and beverage companies globally. The company’s growth and diversification are beyond what Bradham could have imagined.
In 2009, PepsiCo acquired two of its largest bottling franchises in North America. This acquisition ushered in a new subsidiary, Pepsi Beverages Company, under the PepsiCo umbrella.
As of 2021, PepsiCo owned 23 snack and soft drink brands. The company’s net annual revenues amount to $70 billion.
PepsiCo Company Timeline
PepsiCo Company Timeline1893:
Caleb Bradham develops a soft drink and sells it at his drugstore.
1898:
Caleb Bradham introduces the name Pepsi-Cola for his cola drink.
1902:
Bradham incorporates the Pepsi-Cola Company.
1903:
Bradham trademarks the Pepsi-Cola name and patents the company’s cola recipe.
1905:
Bradham establishes the first bottling franchise for his company.
1910:
There are 240 Pepsi-Cola bottling franchises in more than 24 states in the United States.
1914:
Pepsi-Cola faces its first setback after the onset of World War I.
1922:
Pepsi-Cola goes bankrupt.
1923:
Caleb Bradham sells the Pepsi-Cola formula to Craven Holding Corporation.
1931:
Pepsi-Cola gets acquired by Charles G. Guth through his company, Loft Candy Co.
1959:
The Pepsi-Cola Company ushers in a new president, Donald Kendall.
1963:
Pepsi-Cola changes its advertising strategy to target the rapidly growing baby boomers generation.
1964:
The Pepsi-Cola Company acquires the Mountain Dew brand.
1965:
The Pepsi-Cola Company merges with Frito-Lay and becomes PepsiCo.
1977:
PepsiCo acquires Pizza Hut.
1978:
PepsiCo acquires Taco Bell.
1986:
PepsiCo acquires KFC.
1997:
PepsiCo launches the Aquafina bottled water brand and spins off its three restaurant chains into a separate company.
1998:
PepsiCo acquires Tropicana and South Beach Beverage Company.
2001:
PepsiCo acquires the Quaker Oats Company.
2009:
Pepsi purchases two of its largest bottling companies in North America.
2012:
PepsiCo enters the dairy sector through a joint venture with the Theo Muller Group.
2018:
PepsiCo acquires Bare Foods and SodaStream.
2019:
PepsiCo exits the Indonesian market and acquires BFY Brands.
2020:
PepsiCo acquires Rockstar Energy for $3.85 billion.
2021:
PepsiCo announces its plan to sell its controlling interest in Tropicana and other juice brands for $3.3 billion.