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Thompson−Strickland: Strategic Management: Concepts and Cases, 13th Edition

23. PepsiCo’s Acquisition of Quaker Oats

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© The McGraw−Hill Companies, 2002

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case

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PepsiCo’s Acquisition of Quaker Oats
John E. Gamble
University of South Alabama

In 2001, PepsiCo was the world’s fifth-largest food and beverage company, with such brands as Lay’s, Tostitos, Mountain Dew, Pepsi, Doritos, Aquafina, and Lipton contributing to revenues of approximately $26 billion. PepsiCo’s revenues had reached $31 billion in 1996, but a new corporate strategy embarked upon in 1997 slimmed the company’s portfolio from a collection of fast-food restaurants, snack foods, and beverages to a sharply focused lineup of convenience foods and beverages. Between 1997 and 1999, CEO Roger Enrico spun off Kentucky Fried Chicken (KFC), Taco Bell, and Pizza Hut as one independent, publicly traded company; created a stand-alone softdrink bottling business through an initial public offering; and entered additional snack and beverage categories with the acquisitions of Cracker Jack and Tropicana. Enrico’s focus on convenience foods and beverages placed PepsiCo in food and beverage categories that grew at twice the 2 percent industry growth rate and gave it a 2-to-1 market share lead over its nearest competitor in the convenience food and beverage industry. Roger Enrico and Quaker Oats Company’s CEO, Robert Morrison, jointly announced on December 4, 2000, that PepsiCo would acquire Quaker Oats. The move would combine PepsiCo’s 13 brands (with retail sales of more than $1 billion each) with Quaker’s market-leading Gatorade sports drinks and Quaker granola bars and hot breakfast products. The merger was approved by the U.S. Federal Trade Commission in August 2001 and gave PepsiCo a platform to continue to lead the food and beverage industry not only in revenue growth but also in

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