Impact of Pepsi Value Chain

Research by Ema Montfajon, Filippo Trifone, Greta Zocchi, Jula Gekle and Maya Ben Abdelkader | Bachelor Students from ESCP Business School | Edited by Komoneed

Pepsi Value Chain

When discussing carbonated drinks, it is important to mention Pepsi, which holds a significant position in the industry. Therefore, it is necessary to evaluate its value chain in Germany and the DACH market:

1. Infrastructure: In terms of infrastructure, Torben Nielsen manages Pepsi’s operations in the DACH market, while a board of directors oversees decision-making. Local management teams are responsible for making decisions related to their respective operations. Major decisions affecting the region may be made at the European or global headquarters, in consultation with local management teams. In 2020, Pepsi achieved a turnover of nearly $270M on the German market
2. HR: Pepsi promotes diversity, equity, and inclusion in the workplace across the DACH region through various programs and initiatives, including employee resource groups, leadership development programs, and diversity and inclusion training. The company complies with local labour laws and regulations, ensuring that its employees are treated fairly and respectfully
3. Technology: Pepsi practices ethical business in the DACH market and has strict quality control procedures to ensure the safety, taste, and nutritional value of its products. The company also provides detailed information about its products’ ingredients on its website and prioritizes recycling
4. Procurement: Pepsi sources a variety of raw materials, including sugar from various countries in the DACH market and corn from Germany and Poland, to produce its carbonated drinks. The company also uses a range of flavours and extracts from suppliers around the world
5. Logistics Inbound and Outbound: In terms of logistics, Pepsi is working to make 100% of its packaging recyclable, compostable, or biodegradable by 2025. The company lightweight its packaging, increases its recyclability, and explores the use of renewable materials, such as plant-based plastics. Pepsi uses various transportation suppliers, such as trucks, rail, and sea, to transport its products, optimizing transportation routes and reducing fuel consumption
6. Operations: Pepsi tries to reduce its environmental impact globally and has implemented various initiatives and programs to address environmental concerns. The company is committed to reducing its greenhouse gas emissions by over 40% by 2030 across its value chain in Europe, focusing on sustainable agriculture, renewable energies, and reducing the use of virgin plastic according to PepsiCo France
7. Marketing and Sales: In the DACH market, Pepsi does a lot of communication to compete with the omnipresent competition in this market. They are working on a strategy to attract their targets using various means of communication. For example, they set up sponsorship of events, such as the Berlin International Film Festival. They also use influencer marketing with footballers and digital marketing with phone advertising
8. Customer services: In the DACH market, Pepsi needs to provide impeccable customer services. Indeed, customer experience is everything in customer satisfaction these days. So, they need to hire people who can reassure and advise customers. They want to show their concern for the environment by doing sustainable actions and reducing their carbon impact

Environmental Issues

The environmental problems that Pepsi has are the same all over the world and we will list them, at least the most obvious,

1. Packaging: Each year, Pepsi sells approximately 60Bn plastic bottles. During annual seawater, beach cleanups and other sources of water in 45 countries including the DACH market, cans of Pepsi are extremely recurrent. Studies indicate that Pepsi is responsible for 10% of all global plastic pollution. Pepsi hopes in the future to be able to reduce its waste but does not make itself responsible for what happens once their plastic bottles are purchased by the consumer. It should also be kept in mind that Pepsi produces again and again which means that the already current pollution that walks in our waters and seas will only increase in the coming years
2. CO₂ emission: Pepsi is counted among the top companies when it comes to CO2 emissions and toxic air pollution. PepsiCo uses nearly 2.3Bn tons of plastic each year for its bottles and packaging. The components of its virgin plastic are crude oil as well as natural gas in petrochemical plants that release toxic pollutants onto nearby communities. These plants produce as much CO2 as two large coal-fired power plants. Pepsi’s products are known and consumed around the world with diesel trucks, but Pepsi blames these massive emissions on “independent bottlers and distributors”
3. Water use: According to Pepsi’s 2020 Sustainability Report, the company used approximately 14Bn cubic meters of water in its global operations in 2019, which is a very large number given the global water stress we have been experiencing since 2019. This figure includes all of Pepsi’s operations, not just those related to the production of beverages but also of the food produced by the company. Pepsi also says water in its beverage manufacturing operations was 1.4 litres of water per litre of beverage produced in 2021. However, additional information is needed to be able to calculate exactly the specific amount of Pepsi beverages produced every year
4. Health risks: It is important to note that Pepsi is one of the most popular soft drinks in the world, that contains high levels of sugar and calories, and excessive consumption can lead to health problems such as obesity, diabetes, and dental issues. Especially since these are drinks that remain affordable in terms of price for young people, adolescents, or even older people

Environmental Initiatives

But Pepsi is trying to improve things by taking a few actions for the environment like the next ones that we will see,

1. Reduce carbon footprint: Pepsi’s goal with their use of carbon is to contribute to the fight against climate change by reducing or at least trying to reduce their greenhouse gas emissions within their value chain. Their goal is to reduce the usage of carbon by 20%, which might be ideal for contribution but still wouldn’t be enough
2. Packaging and Recycling: Pepsi also wants to change at all costs the way consumers use their packaging and help build a world where plastics are not thrown away but on the contrary are recycled. For example, by designing 100% recyclable, compostable or biodegradable packaging by 2025 or even increasing the amount of recycled plastic used in their plastic packaging by 25% by 2025. Pepsi would also like to reduce the content by 35% virgin plastic in our beverage range by 2025 and invest to increase the recycling rate in key markets by 2025
3. Reduce the water use: According to their site, Pepsi absolutely wants to promote water security to ensure the sustainability of its activities while trying to contribute positively to the life of communities. Their goal is to use water more efficiently and reduce consumption by 15% in their production . But also, to use water more efficiently and reduce consumption by 25% in their manufacturing operations

Pepsi is a big polluter, so these few environmental initiatives are strictly not necessary to solve the problems generated by the company.

The term “greenwashing” is frequently used to denounce some tricky business practices used by companies to clean up their image in front of people to show that they are cleaner for the environment than they really are. Pepsi over the years had several problems because of its greenwashing practices.

The best example to demonstrate Pepsi’s bad faith would be the funding of the American Diabetes Association and the Juvenile Diabetes Research Foundation. Even though they have taken measures to try to engage in the fight against pollution, Pepsi does not go far enough to fix and address the problems caused.

Sources Link

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• John Rae Cayabyab on Pexels