CASE 165
PepsiCo: Poised to Deal with the Next
Generation’s Journey Toward an Ethical and
Socially Responsible Culture
CASE NOTES FOR INSTRUCTORS
This case describes the successes and the obstacles PepsiCo has experienced in its quest to become a
socially responsible company. Not only does it provide students with a better understanding of the
company, but it also encourages them to form their own opinions on whether PepsiCo is making a
genuine effort toward social responsibility or whether their efforts are mere window dressing. Instructors
may want to ask their students if they feel that a company whose primary product is unhealthy can really
become an ethical business.
As the primary competitor of Coca-Cola, PepsiCo must constantly adapt its strategies to maintain and/or
maintain market share. The company has invested in a number of products and has acquired subsidiaries
such as the Quaker Company and Frito-Lay. This extension into many diversified product lines can be
beneficial for PepsiCo as sales of soda have been decreasing in recent years. In particular, CEO Indra
Nooyi made a commitment to increase the company’s sales of healthier products. Although investors were
skeptical, Nooyi’s persistence paid off. Today about 45 percent of net revenue comes from these
“healthier” alternatives, demonstrating the consumer shift toward healthier foods and beverages.
On the other hand, PepsiCo has faced a number of challenges that question its status as a socially
responsible business. Its biggest challenge involves the unhealthy snack foods it sells. PepsiCo is trying to
overcome this challenge by offering healthier options.For instance, in India locals have complained about
Pepsi’s manufacturing, claiming that its factories deplete the groundwater in the area. PepsiCo has also
been criticized for the deceptive labeling of its Aquafina bottled water and for having a negative impact
on the environment through wastefulness and careless operating practices.
On the other handYet despite these criticisms, PepsiCo has made great strides in addressing these
concerns and undertaking initiatives in sustainability. For instance, its recycling and packaging initiatives
have reduced the amount of plastic that ends up in landfills as a result of its operations. The firm has
embarked upon water conservation initiatives to improve its water efficiency and decrease its impact on
local water sources. It also has created a compliance program modeled after its Guiding Principles.
Finally, PepsiCo acknowledges the importance of corporate philanthropy through its creation of the
PepsiCo Foundation and through campaigns to encourage greater community involvement.
QUESTIONS AND DISCUSSION
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?
Balancing these various stakeholders is probably the biggest challenge PepsiCo is trying to overcome.
Students might have a variety of answers to this question. One way PepsiCo is working to placate
special-interest groups and regulators is by investing more in healthy products. The trick is to make
these products taste good so that consumers will buy them. PepsiCo is also attempting to listen to
2. How effective do you think PepsiCo has been in responding to stakeholder concerns about nutrition
and sustainability?
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?
Students’ answers may vary and should be supported by reasoning. Some may think that it is logical
because the partnerships allow the company to learn better practices from experts in areas where they
are obviously deficient. The results of the partnerships also seem to indicate that the company is
ADDITIONAL RESOURCES
Naked Juice settlement: http://blog.al.com/bargain-mom/2013/08/naked_juice.html
PepsiCo in China:
http://adage.com/article/special-report-women-to-watch-china-2013/pepsico-s-katty-lam-woos-ch
inese-snackers-surprises/243555/
Health advocate works with PepsiCo to develop healthier snacks:
http://www.npr.org/blogs/thesalt/2013/01/28/169733003/how-one-man-tried-to-slim-down-big-so
da-from-the-inside
PepsiCo environmental sustainability:
http://www.pepsico.com/Purpose/Environmental-Sustainability.html
Indra Nooyi was right: http://fortune.com/2015/06/05/pepsico-ceo-indra-nooyi/
Bringing back aspartame: http://fortune.com/2016/07/07/pepsi-ceo-diet-pepsi-aspartame/