NATIONAL ECONOMICS UNIVERSITY OF VIETNAM

ADVANCED EDUCATIONAL PROGRAM

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INDIVIDUAL ASSIGNMENT REPORT

CASE 15: PEPSICO’S JOURNEY
TOWARD AN ETHICAL AND
SOCIALLY RESPONSIBLE CULTURE
Course: Business Ethics

Student’s name: Nguyen Thuy Duong

Student’s number: 11221602
Class: International Business Management 64B
Supervisor: Dr. Nguyen Bich Ngoc

HANOI – 2022

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ABSTRACT

Business Ethics Book (tenth edition)

https://bom.so/CEKYzY?fbclid=IwAR1umwCetizxWLZ-
u9raxNEU5rRG91RLow21xLwEakwTumoS5RrU2lqwVms
https://bom.so/JwfM8J?fbclid=IwAR3dAEWYFplIabk7Q7Me85LdJU
clbKqufHvSWqNfHaVrByqEn9wY-QAt8-U
https://logo-marque.com/pepsico-
logo/?fbclid=IwAR08oXEM9peEZQeDKvF14ByPtvgtmcZHAE63tX8dv
fsai5yIIafruBlN8TI
https://bom.so/FF9TPz?fbclid=IwAR3dAEWYFplIabk7Q7Me85LdJUc
lbKqufHvSWqNfHaVrByqEn9wY-QAt8-U
http://www.pepsico.com/PressRelease/Tingyi-and-PepsiCo-Open-
New-Beverage-Plant-in
-China10252012.html (accessed February 13, 2013)
, “Why PepsiCo Is a Global Leader in Water Stewardship and
Sustainable Agriculture,

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TABLE OF CONTENTS

ABSTRACT ............................................................................................. 2
TABLE OF CONTENTS ........................................................................ 3
A. SUMMARY ......................................................................................... 4
I. COMPANY OVERVIEW................................................................. 4
II. COMPANY AND MARKETING HISTORY ............................... 5
III. PEPSICO DIVISIONS AND BRANDS ..................................... 11
IV. CRITICISMS ................................................................................ 14
V. CONCLUSION .............................................................................. 21
B. ANSWER THE QUESTIONS. ........................................................ 21

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A. SUMMARY
I. COMPANY OVERVIEW
PepsiCo Inc. (PEP) is a leading global coporation in the fast food and
beverage industry over the world.

1. General Information
- PepsiCo is the parent company of many famouse fast food and drink
labels encompassing Pepsi Cola, Frito-Lay, Tropicana, Quarker and
Gatorade, which allocate their products to over 200 countries per year.
- Product mix of PepsiCo includes 22 brandes of soft drink and snack
foods that generate more than $1 billion each in retail sales annualy.

- The company’s headquarters are in Purchase, NewYork and employs

about 300,000 people.

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- In 2007, Indra K.Nooyi became the CEO of PepsiCo, until 2018
when she was accredited to the president of this company. In that
time, a Spanish businessman named Ramon Laguarta with 22-year
experiences working with PepsiCo replaced her to become the CEO.

Indra K.Nooyi Ramon Laguarta

- In 2019, Indra K.Nooyi decided to leave the coproration and Ramon
Laguarta has become the chairman and CEO of PepsiCo until now.

2. Achievements
- PepsiCo has received many valuable awards and recognitions over
the years.
- This company was ranked in the top 25 of the best global brands in
beverage industry and earning the Green Award by the Environmental
Protection Agency.

II. COMPANY AND MARKETING HISTORY

Before becoming one of the largest food and beverage companies
earning millions of dollars per year, PepsiCo had experienced a ups
and downs period happening in the transitions label betwenn the
owners in the duration from starting to 1933.

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First and foremost, PepsiCo company initially developed by a
pharmacist named Caleb Bradham with his recipe in the 1980s. Brad
also marketed his fisrt products with a simple campaign name “Brad’s
Drink”. Until 1898, there was a change in recipe when he used a new
ingredients: pepsin and cola nut; Bradham decided to renamed Pepsi-
Cola. Fortunately, after that, his new creation had been extremely
popular and spread quivkly. Because of Pepsi-Cola’s success,in 1902
Bradham had established the Pepsi-Cola company to allocate the
drink to everywhere.
One year later, there was a big mars of his career in beverage
manufacturing industry when his patent of Pepsi recipe was
recognized officially. By 1910, Pepsi-Cola company had franchies in
24 states and sold over 100,000 gallons of the syrup yearly.
Howewver, before achieving the leading position as it is today, the
Pepsi brand had been suffered from several ostacles from internal and
external factors.
The first challenge in the development of Pepsi-Cola was the negative
effects of World War I, especially in the field of economics and
finaces. In the bad period of history, not only did the war bring about
seriously negative about life and health, but also the market prices. To
be specific, war led to the several price fluctuations im a lot of
essential products, particularly price of sugar. As a result, the Pepsi-
Cola company had to be in the brink of bankruptcy because of losing
money.
In 1923, in order to solving the financial issues, Bradham decided to
transfer trademark to Craven’s Holding Corporation. However, shortly
after buying, the company sold it to a stocker to revitalize the Pepsi
brand but it did not worked. That was one of the reasons led to the
second bankruptcy of Pepsi in 1931.
Fortunately, a candy manufacture Charles Guth who owned Loft.Inc,
relized the Pepsi-Cola’s potential investment and decided to purchase
the company. Finnaly, after two failures in its history, within two
years, the company was firstly earning over a million dollars.
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After a developed period of Pepsi-Coca company, it officially became
a famous face in the beverage market. In order to clearly understand
the marketing history of this corporation in years later, student have to
know about its maketing csmpaign by duration.
1. Period 1: Building a brand
In order to overcome the Great Depression, Pepsi carefully positioned
itself as a low-cost leader and launched a marketing campaign using
jingle “nickel nickel” slogan. That advertising campaigm was targeted
to market segment who were financially-strapped. Because of the
difficulty of finance, they might be reluctant to pay a nickel for a
drink.

In World War II, Pepsi-Cola continued to fight for a new challenge:

sugar shortage in the market, however Pepsi’s marketing campaigns
and brand design helped Pepsi went through the difficult period by
changing the colors on the label to be red, white and blue to show
patriotism.

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Over the years, Pepsi-Cola finnaly relized the market changing so its
marketing campaigns had to be changed too. Pepsi immediately ended
the long-running “nickel nickel” slogan and introduced a more lively
“More Bounce to the Ounce” slogan.

During the 1950s, Pepsi evolved from the low cost price leader to a
more lifestyle drink approach. As Americans gradually concenred
about their helth situations, Pepsi created slogan such as “The Light
Refreshment” and “Refreshing Without Filling”.

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After that, new marketing compaigns collaborated with advertiser
Alan Pottasch were introduced aiming to the younger generation and
the post-war baby boom generation that set the stage for Pepsi’s long-
lasting brand image. Thess campaigns included slogans such as “Be
Sociable, Have a Pepsi” and “Now It’s Pepsi, For Those Who Think
Young” to focus on maket segments in the age group from 17 to 35.
Pepsi-Cola also cared about the environmental challenges and under
Pottasch launched the “Pepsi Generation” campaign in 1963, which
was an advertising breakthrough as it helped set a new standard fot
marketing and advertising in America.
Future campaigns continued to promote this brand image, with
slogans such as “You've Got a Lot to Live. Pepsi's Got a Lot to Give”,
“Catch that Pepsi Spirit!”,“Pepsi Now!” and "Come Alive. You're in
the Pepsi Generation!"
Pepsi-Cola successfully adapted its practices and product positioning
with the times through its marketing activities. In 1964, in lieu of
repsonsing the healthcare lifestyle, Pepsi introduced a new prodcuct
line named Diet Pepsi along with the Mountain Dew brand.

2. Period 2: Celebrity Endorsements

In more rencent years, Pepsi has built its brand image by using the
influence of celebrities. Especially, a resounding success in this
campaign was the collaboration between this brand and singer
Michael Jackson. The King of Pop had earned for Pepsi $5 million
dollars and made trendy drink for the new generation.

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Another outstanding achievement in marketing history was the
inroads Pepsi made into the Soviet market. The Soviet Premier Nikita
Kruschev was a major supporter of Pepsi, as evidenced by his public
consumption of the drink at the 1959 American National Exhibition in
Moscow. This helped establish a positive connection between the
Soviet Union and the company, resulting in a trade deal in 1972 when
Pepsi became the monopoly supplier to the Soviet Union. In the year
1988, Pepsi made history by being the first company to purchase
advertising airtime on Soviet television. Their advertisement, which
featured teenage actors from the Soviet Union, was aimed at
appealing to the younger generation. The Pepsi Generation was taking
control over the Soviet
Union and still remained popular in Russia after the Soviet Union's
dissolution.

3. Period 3: Recent years

Throughout the 1990s and early 2000s, PepsiCo has persisted in
utilizing celebrity marketing strategy. They have employed famous
personalities like Ray Charles, Cindy Crawford, and Britney Spears.
In order to attract sports enthusiasts, PepsiCo has also leveraged the
celebrity status of Shaquille O'Neal and Jeff Gordon, a racecar driver.
In 2006, PepsiCo underwent a significant change in leadership when
Indra Nooyi assumed the role of CEO. Nooyi initiated a restructuring
plan that involved prioritizing various initiatives for PepsiCo. During
her tenure, PepsiCo aimed to concentrate on global expansion,
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producing healthier snack options, minimizing their environmental
impact to achieve net-zero effect and creating an ideal working
environment.

III. PEPSICO DIVISIONS AND BRANDS

PepsiCo comprises of four divisions: PepsiCo Americas Beverages,
PepsiCo Americas Foods, PepsiCo Europe, and PepsiCo Middle East,
Asia, and Africa, which are then subdivided into several distinct
enterprises. Among PepsiCo's most well-known and lucrative
enterprises are the following.
1. Pepsi-Cola Brands

In order to enhance coordination between its different departments,

PepsiCo has initiated a reorganization of its Beverages division.
Previously, Eric Foss was in charge of PepsiCo's Americas Beverages,
which was a single business unit. Under the new restructuring,
PepsiCo's Americas Beverages has been split into two separate units,
with the Pepsi brand being managed by one of them icluding the
Tropicana, Gatorade, and Latin American. This action of Pepsi not
only aimed to persuade consumers cosumption, but also impact to
consumer’s desires to spend monet on multiple products. The entire
process is one additional way PepsiCo hopes to bounce back.

2. Frito-Lay

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Even having the historic merger between Frito-Lay and Pepsi-Cola,
Frito-Lay also achieved a successful business history. It was initially
developed by C.E.Doolin and Herman W.Lay in 1932. Nevertheless,
in this year, Herman started selling potato chips and established a
manufactuirng compant called H.W.Lay & Company.
After more 30 years, it merged with Pepsi-Cola to become PepsiCo
Company. Nowadays, Frito-Lay accounted for 50 percent of the snack
food industry in America. It is also including such famous brands as
Lay’s Potato Chips, Frito’s Corn Chips, Doritos, Cheetos, Grandma’s
Cookies, Tostitos, SunChips and Cracker Jack popcorn which
contributes $13 billion dollars to PepsiCo.
Besides the huge revenue that Frito-Lay has gained over the years,
this brand has many accomplishments to be proud of that go beyond
ist products. One of them is its Supplier Diversity Program, first
launched in 1983.
Furthermore, Frito-Lay has taken significant steps towards
sustainability. One of their initiatives involved transforming their
sales vehicles into hybrid cars and collaborating with Terracycle to
motivate their staff and customers to hand over used bags. Terracycle
then repurposes these bags into tote bags or other items sold.
As with all big companies, Frito-Lay experienced its share of
controversies in its history. In 1967, Frito-Lay introduced a cartoon
character named Frito Bandito, however they felt their character was a
negative and extremely offensive stereotype of Mexicans and

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Mexican-Americans. Due to the wide popularity of the character,
FritoLay refused to pull FritoBandito, prompting the National
Mexican American Anti-Defamation Committee and other groups to
file a $670 million lawsuit
against the company. Finally it was removed from the scene in the
early 1970s. The controversy emphasized the importance of cultural
sensitivity and stakeholder analysis when launching any campaign
that might alienate company stakeholders.

3, Gatorade

Gatorade, which is known as the most popular drink in sport.

Especially, this is the official sports drink of the NBA and major
league baseball, date back to 1965.
A team of scientists created the formula when they discovered that
players at the University of Florida were experiencing a loss of
electrolytes and carbohydrates during games.
In 1983, Quaker Oats Co. acquired Gatorade, which in turn was
acquired by PepsiCo in 2001 when PepsiCo bought the Quaker Oats
Co. Gatorade has become the third most popular selling drink under
PepsiCo. In spite of Gatorade’s success, the few previous years have
experienced a decrease in sales for Gatorade and the serious
conpetitive between brands in the sports drink market. In order to
overcome this challenge, PepsiCo decided to spend money in its
history to launch a new Gatorade campaign and lineup called the “G
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Series”. The G Series purposed to two strategies: revitalizing the
Gatorade brand and advertising more to teenagers. Commercials
promoting the new product include popular sportsmen like Michael
Jordan or Dwight Howard of the Orlando Magic together with the
progression of the Gatorade product.

IV. CRITICISMS
The success of PepsiCo was unachieved without significant obstacles
or moral conundrums. How to effectively enter other nations is one of
the major challenges for every global firm, especially when rules
differ from country to country. Even though PepsiCo spends a lot of
effort on studying new markets, the business ran into a number of
issues that led to conflicts with various cultures, both domestically
and overseas.
1. PepsiCo in India
PepsiCo to begin with entered the Indian showcase in 1989, and
since at that point the company got to be one of the biggest
nourishment and refreshment companies within the nation.
The company and other competitors in industry faced feedback
around quality and amount of the water utilized in their beverages. In
2003, CSE claimed that PepsiCo and other refreshment companies
were utilizing poisons. Toxins cause cancer and breakdown of the safe
framework.

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When these pesticides were once once more detailed in delicate
drinks. The Indian state briefly prohibited the deal of Pepsi and Coca
Cola. In India another major concern cited byagriculturists is that
Pepsi fabricating plants are contaminating the arrive. So it is causing
natural contamination. PepsiCo is attempting to repair its notoriety in
India. PepsiCo too collaborated with a number of organizations
committed to water preservation. By understanding moral
predicaments PepsiCo must proceed to require distinctive levels of
government into consideration.

2.Health
The nature of the products manufactured and sold by PepsiCo caused
problems for the company regarding health. Although PepsiCo now
has numerous products geared toward health, its most popular product
is still its signature Pepsi-Cola.
The most fixings utilized in PepsiCo distinctive items caused
wellbeing issues. At the same time, America is getting to be more
wellbeing cognizant. Due to this Pepsi battled back by making pop
that have moo calorie and sugar substance but this as it were makes a
difference with weight chance. PepsiCo has too confronted fights
from the regulatory zone. A few states prohibited the deal of pop.

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Although the battle may be a long one, PepsiCo is making strategies
to address these concerns. Interestingly, PepsiCo CEO Indra Nooyi is
ready and willing to expand into healthier food products and make
major changes when required. PepsiCo must carefully manage this
ethical
conflict to balance the different interests of various stakeholders.
3. Aquafina Tap Water
The public’s consideration was on Aquafina bottled water in 2007
when the watchdog group
Corporate Responsibility Worldwide claimed the
company utilized tap water to fill the water bottles being sold.

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This water was not from the tap, but rather was treated public water. A
lack of transparency in Aquafina's business methods was alleged.
Regarding the problem with tap water, water bottles are under fire for
adding so much plastic to landfills. More recently, PepsiCo paid $9
million to resolve an allegation that marketing promises for its Naked
juices were false. In more detail, Pepsi insisted that their juices are
all-natural.
VI. SOCIAL RESPONSIBILITY & SUSTAINABILITY
PepsiCo has acknowledged the value of social responsibility to its
reputation despite the numerous critiques it has faced over the course
of its lengthy existence. As such, PepsiCo continually emphasizes its
commitment to sustainable growth and its focus on generating
healthy financial returns, while giving back to those communities it
serves.
Corporate social responsibility is traditionally broken into three
categories:
· Environmental responsibility.
· Ethical responsibility.
· Economic responsibility.
ENVIRONMENTAL RESPONSIBILITY

PepsiCo's Sustainable from the Start program puts supportability at

the heart of item plan, empowering item improvement groups to form
natural affect an basic portion of their choice making over the item
lifecycle, from plan, fabricating, and bundling to transportation and
conveyance.
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 ETHICAL RESPONSIBILTY
As such, PepsiCo continually emphasizes its commitment to
sustainable growth and its focus on generating healthy financial
returns, while giving back to those communities that it serves.
About health consciousness, PepsiCo has been scrutinized for its
unhealthy items and criticized for contributing to obesity. In spite of
the fact that PepsiCo made numerous changes to its product line,
joining more beneficial choices and decreasing fat, sugars, and other
unhealthy ingredients, it recognizes the consumers’ want for simple
and open snack
foods and beverages.
ECONOMIC RESPONSIBILITY

PepsiCo launches Sustainable Farming Program, which now engages

more than 40,000 farmers around the world. ... PepsiCo wins
prestigious Climate Leadership Award. 2019. PepsiCo prices the
company's first-ever Green Bond, proceeds from the U.S. $1 billion
offering
will fund key sustainability initiatives.
PepsiCo dispatches Economical Cultivating Program, which presently
engages more than 40,000 farmers around the world. ... PepsiCo wins
prestigious Climate Leadership Award. 2019. PepsiCo costs the
company's first-ever Green Bond, continues from the U.S. $1 billion
advertising will finance key maintainability activities.
1. PepsiCo Guilding Principles
PepsiCo keep strong quality standards in order to maintain its
commitment to its communities and its stakeholders. The firm works
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to keep its obligations and win the trust of stakeholders by sticking to
protocols and ensuring effective governance. PepsiCo created the
following six guiding principles to maintain its commitment in order
to assess its success and make sure it stays focused.
2. Sustainablility
In addition to being morally right, PepsiCo sees reducing its
environmental effect as being in the best interests of its stakeholders.
In terms of evironmental protection, For PepsiCo, a large part of its
sustainability efforts involves reducing the negative effects resulting
from the production and consumption of its products. This includes
“going green” (for example, through water conservation and the
reduction of waste products) and reducing its carbon footprint.
Through a number of programs related to water, energy, and
packaging, PepsiCo lessens its environmental effect. PepsiCo actively
implements strategies to reduce waste and save resources because it
makes products using water and actually sells bottled water.

Today, however, issues like population expansion, water scarcity, soil

erosion, and climate change on a global scale pose a danger to its
capacity to provide for human needs. There is an urgent need to
reform the food system.

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Besides that, PepsiCo wants to use its financial resources, experience,
and reach to make a contribution to the creation of a more sustainable
food system that can satisfy people's demands for nutrition and
enjoyment while also advancing economic and social progress within
the planet's natural ecological limits.
3. Employee Commitment
Additionally, PepsiCo has created a code of conduct that covers a
variety of business ethical topics, including bribery and conflicts of
interest. The business requires employees to be aware of its Code of
Conduct, and it hires a chief compliance officer to uphold it.
Employees at PepsiCo receive annual ethics training. Online or in-
person workshops are also options for training sessions. Independent
third parties often assess PepsiCo's compliance programs to identify
important concerns. External audits are conducted on more
specialized facets of PepsiCo's compliance program, such as its
environmental initiatives. Last but not least, the business operates
what it refers to as a "Internal Audit methodology" and keeps a 24-
hour anonymous ethics hotline open for employees to report issues or
ethical transgressions.
4. PepsiCo Foundation
The PepsiCo Foundation was established in 1962 and provides
philanthropic contributions to a variety of nonprofits.

5. Dream Machine
In April 22, 2010 (Earth Day) PepsiCo announced its multi-year
partnership with Waste Management, Inc., in support of the Dream
Machine recycling initiative. The Dream Machine is a way to promote
PepsiCo's sustainability initiatives while also addressing the obvious
need for more public access to recycling bins.

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V. CONCLUSION

PepsiCo is the leading food and beverage corporation starting with

one man’s invention to becom a millions enterprise over the world.
With success comes controversy, which was certainly unavoidable to
any company, PepsiCo is moving toward a more balanced stakeholder
orientation by identifying stakeholders relevant to the firm and trying
to understand their demands.
While some of the company's previous difficulties were possibly
unavoidable, others were brought on by the company misinterpreting
stakeholder needs or acting unethically. PepsiCo faced a variety of
moral conundrums, from a lack of cultural sensitivity to health issues
to environmental destruction. It has, however, also emerged as a key
figurehead in the sustainability and social responsibility movements.
The future of PepsiCo depends on its efforts to improve its ethical
coporate culture built on values that encourage employees to share
theirs desires and persuade the stakeholders to impress their
requirements.

B. ANSWER THE QUESTIONS.

1. 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?
Economic, legal, ethical, and charitable social responsibility are the
four levels that exist. According to Ferrell, Fraedrich, and Ferrell
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(2015), the economic level is in charge of maximizing stakeholders'
wealth, achieving their primary goals, and creating value.
PepsiCo has balanced the needs of many customer categories by
developing numerous brands for each targeted group. To satisfy the
majority of customers, PepsiCo must offer a diverse range of items
that can be found in people's daily lives. As a result, every single
individual has tried a PepsiCo product at least once in their lives.
On the one hand,perhaps the Food and Beverage industy always
requires every business which readily provide good-tasting
refreshments than can be satisfiying the taste of the majority
customers. As a result, in order to gain more and more profits per
year, the suppliers espcially PepsiCo.Inc has to introduce many tasty
products which certainly can be suitable for a lot of buyers. And, the
higher revenur will surely make their shareholders satisfy at the same
time with consumers.
On the other hand, in many recents years, PepsiCo has to face to the
criticism of society about unhealthy products while they exactly work
in an industry where is very hard to manufacture the healthiest fast
food and soft drink directly to consumers. As many people know that
PepsiCo mainly manufactures and sells the products line recording to
very unhealthy food such as snack food, sugary drinks. These are
produced by a very harmful recipe with a lot of sugar, oil, sodium
primily causing the obesity and the heart diseases. In the long-term,
when buyers have more knowledge about negaative aspects of fast
food and they care more about healthcare measure, they will remove
the PepsiCo’s products to the favorite foods.

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However, the company does all necessary to obtain good nutrition
outcomes and aims to offer a line of nutritional food for certain
interest groups such as people who wish to lose weight or simply eat
healthy food. PepsiCo has decreased the amount of sugar, fat, and
other unhealthy substances in its products. The company also pays
health officials to examine what ingredients are healthy enough for
the snacks it produces. As a result, a non-caloric sweetener was
developed that made $100 million, allowing it to meet both the
financial and taste needs of stakeholders.

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2. Question 2: How effectively do you think PepsiCo has been
responding to stakeholders concerns about nutrition and
sustainability?
PepsiCo is one of the world's major producers of beverages such as
snack foods and soft drinks. This company overcame many hurdles
and achieved success by cultivating strong relationships with its
various stakeholders. It has also been quite effective in responding to
the nutritional and sustainability concerns of stakeholders.
In terms of nutrition, the fact that people nowadays are gradually
caring about their health situations and choice low-calories, low-fat
and natural products in lieu of sugary and salty food while the high
amounts of unnutritious food is the main line of PepsiCo. Therefore,
PepsiCo needs to change to keep its position strongly in the market.
At first, Pepsi fought back by developing drinks with reduced calories
and sugar content, but after learning that this may still harm people's
health, they had some tremendous success with sodas with zero
calories and natural and organic sweetness. Second, rather than deep-
frying snacks, the Frito-Lay firm, one of PepsiCo's main divisions,
has introduced baked lays, Baked Cheetos, Sunchips, and other
healthy alternatives. PepsiCo’s employees are continuing to research
healthier ingredients to put in PepsiCo snacks. One success thus far is
the introduction of a zero calories soft drink. Furthermore, continual
research and procedure innovation to offer healthier products are
important for PepsiCo’s future profitability.

3. 3. Do you
logical
partner
water for
with
PepsiCo
think
nutrition
it is
to and
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3. Question 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?
The connection between the company with other water and nutrition
conservation nonprofits groups will make sense to address those
criticisms. The support from other organizations will make motivation
to reduce the emergence issues regarding health consciousness, tasty
product, prices,…

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