Pepsi and Coca-Cola are food and beverage companies with different varieties of brands that are highly demanded by customers in the market. Both companies are well established in the global market and operate in different countries. They compete in the global markets, and each company works tirelessly to put in place strategies that will make it gain a competitive advantage in the market. Coca-Cola is the main competitor to Pepsi in most of the global markets. However, the two brands compete mainly based on brand recognition and loyalty among their customers.
From the company’s 2020 annual report, the company has faced various challenges in its operations which have affected its performance in terms of the overall sales and profits due to the different strategies it put in place by the governments and management. Since the onset of the covid19 pandemic, the company has put in place measures to ensure that it safeguards both the employees and the customers from the pandemic. Some of these measures include quarantines, travel restrictions, and closure of the company’s physical stores. The company resolved to operate online stores, which brought about low productivity. These measures were an obstacle to the supply chain since the employees could not access the offices, the suppliers could not deliver raw materials, and the company could not deliver products to its customers, thus reducing the company’s sales and profits. The company’s board of directors was actively involved in sharing updates regarding the pandemic in order to sensitize its employees on the risks and the precautions to take to remain safe.
The existing market risks also limit the company’s operations. Since it operates in global markets, it is exposed to market risks that arise from the changes in the foreign exchange rates and commodity prices, which affect profitability. In 2020, the company generated about 42% of its revenue from markets outside the United States. However, due to the unfavorable foreign exchange rates, the revenue was reduced by 2%, reducing the company’s profits. At the end of the financial year in 2020, the company recorded a 2% decrease in the profits realized, and it was driven by the sudden changes that were brought about by the pandemic (Pepsico, 2022). Due to this performance, the company could not implement some of its proposed changes. In 2020, the company had proposed introducing new technologies that would automate processes to improve efficiency. However, this was not actualized due to the changes that came along with the pandemic.
Pepsi relies on its revenue generation and other credit facilities as its primary source of finances. The company has long-term debt financing and loans. The primary source of finances for the company is from the dividend payments, debt repayments by customers, and cash flows. Moreover, the company has agreements with its suppliers to extend its repayment terms, which are usually between 60-90 days, depending on the prevailing market conditions. The company’s operating profits and cash is seasonal since the company’s products are in high demand during season holidays, mainly during the third quarter of the year.
Coca-Cola is an established non-alcoholic beverage company globally operating in a highly competitive industry. The company has consistently recorded good performance until the onset of the covid19 pandemic in 2020. The company adhered to the measures and regulations that various governments put in place to curb the spread of the virus, which negatively impacted the performance of the company. During this period, the management shifted priorities from increasing sales to attaining health and safety for its employees and customers. The company deployed its employees in different regions and countries to monitor the pandemic situations and recommend various risk mitigation measures that ensured the employees’ safety. The company closed down its physical stores and offices and asked its employees to work remotely. To respond to the customer needs and demands during this period, the company developed strategies and systems that helped in managing supply chain challenges. It achieved this by ensuring proper inventory management measures that helped meet customer needs. The company increased its investment in e-commerce to maintain its productivity and performance.
The company’s market is dependent on consumer behavior and other demographic features. The company identified some of the factors that affect its products which were obesity, changes in consumer preferences, increased competition, and product quality and safety. Based on these factors, the company has ensured that it heeds to consumer needs by producing low-calorie beverages, such as Coca-Cola zero sugar drinks. It has also committed to continue generating new and improved products that address these needs to acquire customer satisfaction and loyalty. Therefore, the company is determined to prioritize its customers by continually addressing their needs which will help it maintain its competitive position in the market. Coca-cola has vowed to address product safety and quality concerns from its customers by adhering to established laws and regulations that govern the quality and safety of the products released to the market by the company.
The company’s performance deteriorated in 2020 compared to 2019, which was mainly attributed to the pandemic. The net operating revenues decreased by 11% compared to the 2019 performance (Cocacola, 2022). During the pandemic, a shift in consumer demand lowered the demand for beverages, resulting in low sales. The company’s consolidated net operating revenues decreased by 2%, which was attributed to the fluctuating foreign exchange rates. The US dollar was more robust compared to other currencies globally. Therefore, this affected the sales realized in other countries outside the US. Other factors that affected the company’s net operating revenue were product price, acquisitions, and geographic mix. The company mainly relies on its operating profits and revenues for financing its production activities. Moreover, the company sources funds through borrowing loans from established financial institutions. It also has reliable and trusted suppliers who provide raw materials for Coca-Cola to ensure an uninterrupted production process to meet the market needs and demands.
In general, both companies incurred losses from the covid19 pandemic. The companies’ activities were interrupted, and they had to adapt to the new measures put in place. However, both Coca-cola and Pepsi were concerned with the safety of their employees and customers. The two companies prioritized curbing the spread of the pandemic by adhering to the set measures and regulations instead of increasing the company sales. Though they experienced losses and low performance, the companies are still determined to meet their customer’s needs and demands. However, the companies are slowly transitioning to keep up their operations in the new normal market environments and realize profits. They are both committed to improving their performance by implementing new strategies and practices to get back on track. They are also involved in undertaking market research to establish the changing consumer behavior and attitudes in order to design products that perfectly meet their needs.
References
Cocacola. (2022). Retrieved from https://investors.coca-colacompany.com/filings-reports/annual-filings-10-k
Pepsico. (2022). Retrieved from https://www.pepsico.com/docs/album/annual-reports/pepsico-inc-2020-annual-report.pdf?sfvrsn=d25439e4_4
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