Case study 15 pepsico’s journey toward an ethical and socially responsible culture

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MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMICS UNIVERSITY

-*** -

BUSINESS ETHICS INDIVIDUAL ASSIGNMENT Lecturer: Nguyen Bich Ngoc

CASE STUDY 15: PepsiCo’s Journey Toward an Ethical

and Socially Responsible Culture

Student: Nguyen Khanh Minh - 11224243

Class: International Business Management 64A

School of Advanced Education Programs (AEP)

MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMICS UNIVERSITY

-*** -

BUSINESS ETHICS INDIVIDUAL ASSIGNMENT Lecturer: Nguyen Bich Ngoc

CASE STUDY 15: PepsiCo’s Journey Toward an Ethical

and Socially Responsible Culture

Student: Nguyen Khanh Minh - 11224243

Class: International Business Management 64A

School of Advanced Education Programs (AEP)

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Abstract

PepsiCo is a multinational corporation operating in the food and beverage industry, present in over 200 countries with more than 290,000 employees worldwide Throughout years of development, PepsiCo has faced numerous challenges and difficulties However, with the relentless effort of its employees and leadership, PepsiCo has become one of the leading corporations in the world in the food and beverage industry

During its development, PepsiCo has not only focused on the goal of increasing revenue and profit but also on social responsibility and long-term value The company has implemented a strategy called "Performance with Purpose" with the aim of working

to protect the environment, improve quality of life, and benefit the community With this philosophy, PepsiCo has worked to minimize the impact of products and business operations on the environment, promote supplier diversity, and support communities in the areas where the company operates

With a long-term history of development and a commitment to social responsibility, PepsiCo is attractive research subject to explore how a leading global corporation can achieve sustainability and create value for both society and

shareholders Therefore, I have chosen Case Study 15:” PepsiCo’s Journey Toward an Ethical and Socially Responsible Culture” in this individual assignment to gain a better

understanding of the company's business philosophy and social responsibility activities

4

Table of contents

AB

ABST ST STR R RA A ACT CT CT 3 3

SU

SUMM MM MMA A ARY RY RY 5 5

COMPANY OVERVIEW 5

COMPANY AND MARKETING HISTORY 5

Building a brand 5

Celebrity Endorsements 6

Recent Years 6

PEPSICO DIVISIONS AND BRANDS 7

Pepsi-Cola Brands 7

Frito-Lay 7

Gatorade 8

CRITICISMS 8

India 8

Health 9

SOCIAL RESPONSIBILITY & SUSTAINABILITY 9

PepsiCo Guiding Principles 10

Sustainability 10

Employee Commitment 10

PepsiCo Foundation 10

Dream Machine 11

CONCLUSION 11

ANSWER THE QUESTION ANSWER THE QUESTION 12 12 1 How does PepsiCo balance those stakeholders such as consumers and shareholders interested in good tasting products and financial performance with special-interest groups and regulators that are more concerned about nutrition? 12

2 How effective do you think PepsiCo has been in responding to stakeholder concerns about nutrition and sustainability? 13

3 Do you think it is logical for PepsiCo to partner with nutrition and water conservation nonprofit groups since it received heavy criticism for unhealthy products and wasteful water practices? 14

Summary

COMPANY OVERVIEW

- PepsiCo is a global food and beverage company based in New York

- CEO: Indra K Nooyi (2007)

- PepsiCo has received several accolades:

COMPANY AND MARKETING HISTORY

- 1898: It was renamed Pepsi-Cola because of its main ingredients, pepsin and kola nut

- 1902: Bradham founded the Pepsi-Cola Company

- 1910:

- World War I: The company went bankrupt due to fluctuations in sugar prices

- 1923: It was sold to Craven's Holding Corp and then to Roy C Megargel, who unsuccessfully tried to revive it

- 1931:

two years

Building a brand

- Pepsi-Cola faced many challenges during the Great Depression and World War II Through innovative marketing campaigns and product positioning, the brand was able

to survive and even thrive:

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• Changing color on the label

 Pepsi’s success allowed it to begin marketing internationally in 1945

- After the war, Pepsi recognized the changing marketplace and adapted its slogans and marketing campaigns

America

as Diet Pepsi, Mountain Dew, and Aquafina bottled water

PepsiCo, Inc

develop coffee drinks

Celebrity Endorsements

- Pepsi used celebrity branding to appeal to the younger generation:

- Pepsi made inroads into the Soviet market through a favorable relationship with Soviet Premier Nikita Kruschev

in 1972 & the first advertiser to buy time on Soviet television in 1988

Recent Years

- PepsiCo has been using celebrity marketing since the 1990s with endorsers such as Ray Charles, Cindy Crawford, and Shaquille O'Neal

- 2006: Indra Nooyi became CEO, reorganizing the company:

7

PEPSICO DIVISIONS AND BRANDS

- PepsiCo consists of four divisions:

- These divisions are further split up into different businesses:

Pepsi-Cola Brands

- Achievements:

other brands in the US and internationally

as Muscle Milk, Honest Tea, and vitamin water

The soft drink industry has seen a

decline in growth due to health

consciousness among consumers, which

has affected Pepsi's most popular brand

PepsiCo merged its two largest bottling companies and split into two businesses

to create better integration between its units: the Pepsi Beverages Company and PepsiCo Beverages Americas, which includes Tropicana, Gatorade, and Latin American brands

Frito-Lay

- Infomation:

brands

- Trouble: Frito-Lay faced controversies, including the use of a negative stereotype of Mexicans and Mexican-Americans through the Frito Bandito cartoon character

 The controversy highlighted the importance of cultural sensitivity and

stakeholder analysis in launching any campaign

Gatorade

- Infomation:

carbohydrates during games

Gatorade faced declining sales due to a

lack of appeal to younger generations

PepsiCo revitalized the brand and targeted a younger demographic by creating the "G Series", which includes three core product lines, different types of Gatorade for different stages of an athlete's game, low calorie options, and a natural alternative called G natural CRITICISMS

- PepsiCo faced challenges in entering new markets and cultural differences, as well as criticism for unhealthy products and excessive packaging waste

- They also experienced a decline in US soda consumption, compounded by regulatory actions such as bans on certain drink sizes and sales in schools

India

- PepsiCo faced allegations of using toxic

water and creating pollution in India:

pesticides that contribute to cancer

and immune system breakdown

also accused of polluting the land,

creating plastic waste, and taking

groundwater, making it difficult for

farmers to grow crops

it removed and partnering with water conservation organizations

is needed to discover ethical courses of action and avoid negative repercussions

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Health

- Pepsi-Cola has caused health problems for

the company due to increased health

consciousness in America

- The company has also faced regulatory

battles, including attempts to ban large

sugary drinks in New York City

- PepsiCo faced criticism from healthcare

professionals due to the high amount of

sodium, sugar, calories, and fat in its

traditional snack items

- The company has faced criticism from

profitability

- PepsiCo has diversified into other product lines and created low-calorie and low-sugar sodas

- PepsiCo has many defenders, with a poll revealing that 51 percent of New Yorkers disliked the ban, and minority-owned businesses claiming the ban would harm them

- Frito-Lay Company tried to address this issue by offering healthier alternatives such as Baked Lays, Baked Cheetos, and SunChips

- PepsiCo is investing in research and product development to offer healthier products and is hiring health officials to work on this issue

- PepsiCo's sponsorship of the Academy of

company's commitment to healthier snack foods

- PepsiCo announced in 2013 that it would remove the controversial additive, brominated vegetable oil, from its citrus flavored Gatorade

 The ethical dilemma faced by business leaders in balancing the interests of

society and investors Business ethics is rarely straightforward, and companies must carefully manage these conflicts

to balance the different interests of various stakeholders

SOCIAL RESPONSIBILITY & SUSTAINABILITY

PepsiCo's "Performance with Purpose" plan promotes social responsibility and sustainable growth through addressing products, environment, and employees They partner with organizations to promote nutrition and demonstrate social responsibility through various efforts such as sustainability and employee commitment

10

PepsiCo Guiding Principles

PepsiCo is committed to high standards and has developed six guiding principles to remain focused It strives to understand consumers' needs, be transparent, and analyze both short and long term consequences

TABLE 1: PepsiCo Guiding Principles

We must always strive to:

1 For our customers, our consumers and the world we live in

2 Sell only products we can be proud of

3 Speak with truth and candor

4 Balance short term and long term

5 Win with diversity and inclusion

6 Respect others and succeed together

Sustainability

- PepsiCo committed to reducing its environmental impact for social responsibility

- It focuses on reducing negative effects through water, energy, and packaging initiatives, and partners with Nature Conservancy to study sustainable water use

- PepsiCo uses a 5R system to improve environmental impact: reduce, recycle, use renewable resources, remove sensitive materials, and promote packaging reuse

- It has already taken steps such as reducing plastic in Aquafina bottles, using recycled materials, and developing lighter-weight packaging

Employee Commitment

- PepsiCo values social responsibility, reducing environmental impact and supporting employee engagement

- Encourages diverse corporate culture, providing employees with leadership training and ethics programs, and a Code of Conduct

- Maintains 24-hour anonymous ethics hotline for reporting concerns or ethical violations

PepsiCo Foundation

- The PepsiCo Foundation was established in 1962 for philanthropic contributions to non-profits

- PepsiCo encourages employee engagement through Matching Gifts Program and supports education for employees’ children

- PepsiCo contributes to disaster relief efforts and partners with organizations to improve access to clean water and children's lives in India and Bangladesh

Dream Machine

- PepsiCo partnered with Waste Management, Inc to launch Dream Machine recycling initiative to increase US beverage container recycling rate to 50% by 2018

- Dream Machine kiosks act as reverse vending machines, giving consumers points for recycling plastic bottles and cans

- Greenopolis, LLC working with PepsiCo to bring recycling systems to public areas and stores

- Points can be redeemed for rewards at www.greenopolis.com

- PepsiCo extends partnership with Entrepreneurship Bootcamp for Veterans with Disabilities to offer training in business management for disabled veterans

CONCLUSION

The article discusses PepsiCo's history of success and controversy, as well as its efforts

to become more stakeholder oriented The company faces challenges balancing nutritional concerns with consumers' desire for tasty food and has experienced ethical lapses in the past However, it has also become a leader in sustainability and social responsibility The article concludes that PepsiCo's future success will depend on its ability to learn from past mistakes and continue developing an ethical corporate culture that considers the needs of all stakeholders

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Answer the question

1 How does PepsiCo balance those stakeholders such as consumers and shareholders interested in good tasting products and financial performance with special-interest groups and regulators that are more concerned about nutrition?

PepsiCo is a global company that produces and sells a variety of beverages and foods under multiple brands To satisfy the needs of different customer categories, PepsiCo has created numerous brands that cater to each targeted group By doing so, the company can provide a wide variety of products that can exist in people's everyday lives, leading

to the fact that every single person has at least tried the product of PepsiCo one time in their life

In the food and beverage industry, it is crucial to provide good-tasting products that can

be suitable for the taste of the vast majority of consumers Therefore, when PepsiCo introduced many brands with tasty products that can satisfy consumers, the number of products from PepsiCo being sold significantly increased, leading to higher profits The higher profits simultaneously satisfy shareholders while satisfying consumers However, the company works in an industry where it is hard to provide the healthiest food and beverages directly to consumers Most of PepsiCo’s snack foods are processed and sometimes deeply fried, containing high amounts of saturated fats, sodium, and sugar - all bad for health This has caused regulatory authorities and health-conscious customers to start harassing PepsiCo

Despite the challenges, PepsiCo strives to achieve good results in nutrition and tries to produce a line of nutritional food for special interest groups such as people who want to reduce their weight or only to eat healthy food PepsiCo has reduced the sugars, fats, and other unhealthier ingredients of its products The company also hires health officials

to research what ingredients are healthy enough for the snacks produced by the company The result is the development of a non-caloric sweetener that earned 100 million dollars, which was able to meet both the financial and taste needs of stakeholders

However, ethical leaders must attempt to balance stakeholder interests, including those

of society - who have concerns over the growing issue of obesity and diabetes - and investors who care about profitability and the financial viability of the company In

2012, while PepsiCo was ready and willing to expand into healthier food products and make major changes, they faced criticism from their investors because of the decrease

in profit In this case, it is easy to put the blame on the investors, who have more of a