Pepsico

1.OVERVEIW

Pepsi-Cola

Type Cola

Manufacturer PepsiCo.

Country of origin  United States

Introduced 1903

Related productsCoca-ColaRC Cola

Pepsi Cola, is a cola soft drink produced and manufactured by PepsiCo. It is sold worldwide in stores, restaurants and from vending machines. The drink was first made in the 1890s by pharmacist Caleb Bradham. The brand was trademarked on June 16, 1903. There have been many Pepsi variants produced over the years, including Diet Pepsi, Crystal Pepsi, Pepsi Max, Pepsi Samba, Pepsi Blue, Pepsi Gold, Pepsi Holiday Spice, Pepsi Jazz, Pepsi Nex (available in Japan and South Korea), Pepsi Ice Cucumber (available in Japan as of June 12, 2007).

PepsiCo is a world leader in convenient foods and beverages, with 2006 revenues of more than

$35 billion and 168,000 employees.

The company consists of Frito-Lay North America, PepsiCo Beverages North America, PepsiCo International and Quaker Foods North America. PepsiCo brands are available in nearly 200 countries and territories and generate sales at the retail level of about $92 billion. Some of PepsiCo's brand names are more than 100-years-old, but the corporation is relatively young. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo merged with The Quaker Oats Company, including Gatorade, in 2001.PepsiCo offers product choices to meet a broad variety of needs and preference -- from fun-for-you items to product choices that contribute to healthier lifestyles.PepsiCo’s mission is “To be the world's premier consumer products company focused on convenient foods and beverages.  We seek to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate.  And in everything we do, we strive for honesty, fairness and integrity.”

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Shareholders

PepsiCo (symbol: PEP) shares are traded principally on the New York Stock Exchange in the United States. The company is also listed on the Amsterdam, Chicago and Swiss stock exchanges. PepsiCo has consistently paid cash dividends since the corporation was founded.

Corporate Citizenship

At PepsiCo, we believe that as a corporate citizen, we have a responsibility to contribute to the quality of life in our communities. This philosophy is expressed in our sustainability vision which states: “PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic -- creating a better tomorrow than today.”Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company.

PepsiCo Headquarters

PepsiCo World Headquarters is located in Purchase, New York, approximately 45 minutes from New York City. The seven-building headquarters complex was designed by Edward Darrell Stone, one of America's foremost architects. The building occupies 10 acres of a 144-acre complex that includes the Donald M. Kendall Sculpture Gardens, a world- acclaimed sculpture collection in a garden setting.The collection of works is focused on major twentieth century art, and features works by masters such as Auguste Rodin, Henri Laurens, Henry Moore, Alexander Calder, Alberto Giacometti, Arnaldo Pomodoro and Claes Oldenberg. The gardens originally were designed by the world famous garden planner, Russell Page, and have been extended by François Goffinet. The grounds are open to the public, and a visitor's booth is in operation during the spring and summer.

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2. History

Pepsi soda in a cup with ice cubes.

Origins

Pepsi was first made in New Bern, North Carolina in the United States in the early 1890s by pharmacist Caleb Bradham. In 1898, "Brad's drink" was changed to "Pepsi-Cola" and later trademarked on June 16, 1903. There are several theories on the origin of the word "pepsi".

The only two discussed within the current PepsiCo website are the following:

1. Caleb Bradham bought the name "Pep Kola" from a local competitor and changed it to Pepsi-Cola. 2. "Pepsi-Cola" is an anagram for "Episcopal" - a large church across the street from Bradham's

drugstore. There is a plaque at the site of the original drugstore documenting this, though PepsiCo has denied this theory.

The word Pepsi comes from the Greek word "pepsi", which is a medical term, describing the food dissolving process within one's stomach. It is also a medical term, that describes a problem with one's stomach to dissolve foods properly.

Another theory is that Caleb Bradham and his customers simply thought the name sounded good or the fact that the drink had some kind of "pep" in it because it was a carbonated drink, they gave it the name "Pepsi".

As Pepsi was initially intended to cure stomach pains, many believe Bradham coined the name Pepsi from either the condition dyspepsia (Greek: stomach ache or indigestion) or the possible one-time use of pepsin root as an ingredient (often used to treat upset stomachs). It was made of carbonated water, sugar, vanilla, rare oils, and kola nuts. Whether the original recipe included the enzyme pepsin is disputed.

In 1903, Bradham moved the bottling of Pepsi-Cola from his drugstore into a rented warehouse. That year, Bradham sold 7,968 gallons of syrup. The next year, Pepsi was sold in six-ounce bottles and sales increased to 19,848 gallons. In 1924, Pepsi received its first logo redesign since the original design of 1905. In 1926, the logo was changed again. In 1929, automobile race pioneer Barney Oldfield endorsed Pepsi-Cola in newspaper ads as "A bully drink...refreshing, invigorating, a fine bracer before a race".

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In 1929, the Pepsi-Cola Company went bankrupt during the Great Depression- in large part due financial losses incurred by speculating on wildly fluctuating sugar prices as a result of World War I. Assets were sold and Roy C. Megargel bought the Pepsi trademark. Eight years later, the company went bankrupt again. Pepsi's assets were then purchased by Charles Guth, the President of Loft Inc. Loft was a candy manfuacturer with retail stores that contained soda fountains. He sought to replace Coca-Cola at his stores' fountains after Coke refused to give him a discount on syrup. Guth then had Loft's chemists reformulate the Pepsi-Cola syrup formula.

Rise in popularity

During The Great Depression, Pepsi gained popularity following the introduction in 1934 of a 12-ounce bottle. Initially priced at 10 cents, sales were slow, but when the price was slashed to 5 cents, sales went through the roof. With twelve ounces a bottle instead of the six ounces Coca-Cola sold, Pepsi turned the price difference to its advantage with a slick radio advertising campaign, featuring the jingle "Pepsi cola hits the spot / Twelve full ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for you,", encouraging price-watching consumers to switch to Pepsi, while obliquely referring to the Coca-Cola standard of six ounces a bottle for the price of five cents (a nickel), instead of the twelve ounces Pepsi sold at the same price. Coming at a time of economic crisis, the campaign succeeded in boosting Pepsi's status. From 1936 to 1938, Pepsi Cola's profits doubled.

Pepsi's success under Guth came while the Loft Candy business was faltering. Since he had initially used Loft's finances and facilities to establish the new Pepsi success, the near-bankrupt Loft Company sued Guth for possession of the Pepsi Cola company. A long legal battle then ensued, with Guth losing. Loft now owned Pepsi, and the two companies did a merger, then immediately spun the Loft company off.

Niche marketing

1940s advertisement specifically targeting African Americans. The young boy is Ron Brown.

Walter Mack was named the new President of Pepsi-Cola and guided the company through the 1940s. Mack, who supported progressive causes, noticed that the company's strategy of using advertising for a general audience either ignored African Americans or used ethnic stereotypes in portraying blacks. He realized African Americans were an untapped niche market and that Pepsi stood to gain market share by targeting its advertising directly towards them. To this end, he hired Hennan Smith, an advertising executive

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"from the Negro newspaper field" to lead an all-black sales team, which had to be cut due to the onset of World War II. In 1947, Mack resumed his efforts, hiring Edward F. Boyd to lead a twelve-man team. They came up with advertising portraying black Americans in a positive light, such as one with a smiling mother holding a six pack of Pepsi while her son (a young Ron Brown, who grew up to be Secretary of Commerce) reaches up for one. Another ad campaign, titled "Leaders in Their Fields", profiled twenty prominent African Americans such as Nobel Peace Prize winner Ralph Bunche and photographer Gordon Parks.

Boyd also led a sales team composed entirely of African Americans around the country to promote Pepsi. Racial segregation and Jim Crow laws were still in place throughout much of the U.S. and Boyd's team encountered a great deal of discrimination as a result. Not only did they have to ride on segregated trains and stay in black-only hotels, but they faced insults from Pepsi co-workers and even endured threats from the Ku Klux Klan. On the other hand, they were able to use racism as a selling point, attacking Coke's reluctance to hire blacks and the support of segregationist Governor of Georgia Herman Talmadge by the chairman of Coke. As a result, Pepsi's market share as compared to Coke's shot up dramatically. After the sales team visited Chicago, Pepsi's share in the city overtook that of Coke for the first time.

Besides racism, the sales team faced obstacles laid down by Coke personnel. Wall Street Journal writer Stephanie Capparell's book The Real Pepsi Challenge details efforts by Coke deliverymen to tear down Pepsi advertising or dirty Pepsi bottles by wiping them with oil rags. They even started a rumor that a black man drowned in one of Pepsi's syrup tanks, leading to a boycott of the cola in North Carolina.

This focus on the African American market caused some consternation within the company and among its affiliates. They did not want to seem focused on black customers for fear that whites would be pushed away. In a meeting at the Waldorf-Astoria Hotel, Mack tried to assuage the 500 bottlers in attendance by pandering to them, saying, "We don't want it to become known as the nigger drink." After Mack left the company in 1950, support for the black sales team faded and it was cut.

New advertising strategy

New President Alfred Steele completely changed direction with the marketing of the product to alter the "econo-brand" image of Pepsi. Postwar inflation put an end to the "Twice as much for a nickel" pricing and marketing strategy anyway, with some bottlers switching to 10 or even 8 ounce bottles at the nickel price, while others kept the 12 ounce bottles but at a higher price, and still others switched to 6 ounce bottles for seven cents. Pepsi's formula was also slightly changed, this time removing some of the sugar content. This was tied into their new image of Pepsi as "The Light Refreshment" and was followed by attempts to market Pepsi as a more affluent beverage. This was the "Be Sociable" campaign and wasn't particularly successful. Pepsi's next strong marketing success didn't occur until they targeted the youth market. First with the "Think Young" campaign in 1961, then more famously with their "Pepsi Generation" advertising two years later.

By the early 1960s, competitor Royal Crown Company was having strong success with their Diet Rite Cola. At that time, The Pepsi-Cola company had branched out into producing other flavors, under their Patio line, and in response to the success of Diet Rite, they added Patio Diet Cola. Success with Patio Diet Cola encouraged them to instead market it as Diet Pepsi in 1964. This was the also the year that Pepsi purchased the Mountain Dew brand from the southeast region Tip Corporation.

In 1965, the Pepsi-Cola Company merged with Frito-Lay, forming PepsiCo.

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3.Marketing

A large advertisement made to resemble a Pepsi cup at the Mall of America.

The first of many new designs of Pepsi cans were released in 2007.

In 1975, PepsiCo introduced the Pepsi Challenge marketing campaign where PepsiCo set up a blind tasting between Pepsi-Cola and rival Coca-Cola. During these blind taste tests the majority of participants picked Pepsi as the better tasting of the two soft drinks. PepsiCo took great advantage of the campaign with television commercials reporting the test results to the public.

In 1996, PepsiCo launched the highly successful Pepsi Stuff marketing strategy. By 2002, the strategy was cited by Promo Magazine as one of 16 "Ageless Wonders" that "helped redefine promotion marketing."

In 2007, PepsiCo announced that Pepsi's cans would be redesigned again.

Celebrity endorsers

Main article: Pepsi spokespersons

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Unlike Coca-Cola, Pepsi and its associated beverages have had various celebrity endorsers and continue to use them. Joan Crawford married Al Steele who was director of the company, she filled Al's place on the board of directors after he died.

Slogans

1939: "Twice as Much for a Nickel" 1950: "More Bounce to the Ounce" 1958: "Be Sociable, Have a Pepsi" 1961: "Now It's Pepsi for Those Who Think Young" 1963: "Come Alive, You're in the Pepsi Generation". 1967: "(Taste that beats the others cold) Pepsi Pours It On". 1969: "You've Got a Lot to Live, Pepsi's Got a Lot to Give". 1973: "Join the Pepsi people (feeling free)". 1975: "Have a Pepsi day". 1979: "Catch that Pepsi spirit". David Lucas composer 1981: "Pepsi's got your taste for life". 1983: "Pepsi's Now!" 1984: "The Choice of a New Generation". 1986: "We've Got The Taste" (Commercial with Tina Turner) 1991: "Gotta Have It." 1995: "Nothing Else is a Pepsi". 1997: "GeneratioNext". 1999: "Ask for More"/"The Joy of Pepsi-Cola". 2003: "It's the Cola"/"Dare for More". 2005: "Wild Thing"/"Ask For More" (With Jennifer Lopez & Beyoncé Knowles) 2007: "More Happy"/"Taste the one that's forever young".

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4.Types of Pepsi

Crystal Pepsi was one of the unpopular Pepsi variations.

There are many types of Pepsi-Cola all differing in taste, price and appearance. Diet Pepsi is one of the most popular variations of the drink, containing no sugar and zero calories. Other popular low calorie variations of the drink include Pepsi Max, Pepsi ONE, Caffeine-Free Pepsi and Caffeine-Free Diet Pepsi. In Japan there is Pepsi NEX, which is believed to be the equivalent of Pepsi MAX.

PepsiCo has marketed many different fruit flavors of the drink including: Wild Cherry Pepsi (1988), Diet Wild Cherry Pepsi (2005), Pepsi Lime (2005) and Diet Pepsi Lime (2005) and Pepsi Jazz diet cola with three flavors, Caramel Cream (2007), Strawberries & Cream (2006) and Black Cherry French Vanilla (2006). Pepsi Jazz was invented by Schwab Amin as part of a customer "What's Yo' Flava?" contest in 2006. PepsiCo also rivaled Coca-Cola's lemon-flavored products with Pepsi Twist. Pepsi Twist has been successfully marketed in Brazil (with lime instead of lemon), where a limited-edition version is also sold, the Pepsi Twister, with an even stronger lime flavor. Pepsi A-ha, with a lemon flavor, was launched in India in 2002 but was not successful. Another type, Pepsi Samba, was released in Australia in the 3rd Quarter of 2005; it is Pepsi with a tropical taste of tamarind and mango.

PepsiCo has introduced many variant versions of Pepsi over the years that differ from the original version in either flavor, appearance or both. Crystal Pepsi, a clear cola free of caffeine, sodium and preservatives, was introduced in 1992 and phased out the following year. Similarly, the blue-colored berry cola Pepsi Blue was introduced in mid-2002 to a mixed response. PepsiCo withdrew it from the market in 2004. In 2006, Pepsi Gold was released.

PepsiCo has introduced coffee-flavored variations of the drink. In 2005, Pepsi Cappuccino was released in Romania and Bulgaria with another coffee-flavored cola called Pepsi Tarik in Malaysia and Pepsi Cafechino in India. In late 2005/early 2006 in the UK PepsiCo released Pepsi Max Cino, a cappuccino variant of its popular Pepsi Max beverage.

Many types of the drink have only been produced or sold for a limited time, such as Pepsi Holiday Spice, a spicy Christmas seasonal finish of ginger and cinnamon. Pepsi X is another variation which contains more caffeine than regular Pepsi-Cola and in addition also contains turbine and guaranine. It is similar to other energy drinks such as Red Bull.

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Pepsi Perfect Logo from in the movie Back to the Future Part II

PepsiCo markets Pepsi ONE in the US in place of Pepsi X (sold only outside the US and not currently available for import), as both are sweetened with SPLENDA® No Calorie Sweetener, and Pepsi ONE contains 4.6mg of caffeine per ounce without the added turbine and guaranine (Pepsi X has 2.5mg of caffeine and regular Pepsi has 3.13mg per ounce).

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5.Criticisms

Main article: PepsiCo#Criticisms

In 2003 and again in 2006, the Centre for Science and Environment (CSE), a non-governmental organization in New Delhi, found that soda drinks produced by manufacturers in India, including both Pepsi and Coca-Cola, had dangerously high levels of pesticides in their drinks. Both PepsiCo and The Coca-Cola Company maintain that their drinks are safe for consumption and have published newspaper advertisements that say pesticide levels in their products are less than those in other foods such as tea, fruit and dairy products. In the Indian state of Kerala, sale and production of Pepsi-Cola, along with other soft drinks, has been banned. Five other Indian states have announced partial bans on the drinks in schools, colleges and hospitals. On September 22, 2006, the High Court in Kerala overturned the Kerala ban ruling that only the federal government can ban food products.

Iran state television broadcasted anti-Pepsi propaganda, saying that the PEPSI letters stood for Pay Each Penny Save Israel. PepsiCo has a bottling plant in Iran.

Long-term health effects

Some nutritionists assert that the phosphoric acid component of Pepsi-Cola, and other similar soft drinks, may be deleterious to bone health in both men and women, with some studies finding the effects to be more notably pronounced in female subjects. See phosphoric acid in food.

Pepsi and other similar products contain a lot of sugar. An excessive intake of sugar has been suspected as a contributing factor in certain kinds of diabetes. Sugar is also a leading contributor to tooth decay.

In addition, both 'diet' and non-diet variants are highly acidic, which is a cause of degradation of tooth enamel, making decay due to subsequent sugar intake more likely. This is particularly exacerbated when a drink is sipped at frequent intervals throughout the day.

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6.Rivalry with Coca-Cola

According to Consumer Reports, in the 1970s, the rivalry continued to heat up the market. Pepsi conducted blind taste tests in stores, in what was called the "Pepsi Challenge". These tests suggested that more consumers preferred the taste of Pepsi (which is believed to have more lemon oil, less orange oil, and uses vanillin rather than vanilla) to Coke. The sales of Pepsi started to climb, and Pepsi kicked off the "Challenge" across the nation.

In 1985, The Coca-Cola Company, amid much publicity, changed its formula. Some authorities believe that New Coke, as the reformulated drink came to be known, was invented specifically in response to the Pepsi Challenge. However, a consumer backlash led to Coca-Cola quickly reintroducing the original formula as Coke "Classic".

Overall, Coca-Cola continues to outsell Pepsi in almost all areas of the world. Saudi Arabia, Pakistan (Pepsi has been a dominant sponsor of the Pakistan cricket team since the 1990s), the Canadian provinces of Quebec and Prince Edward Island and the U.S. state of Michigan are the exceptions.

By most accounts, Coca-Cola was India's leading soft drink until 1977 when it left India after a new government ordered The Coca-Cola Company to turn over its secret formula for Coke and dilute its stake in its Indian unit as required by the Foreign Exchange Regulation Act (FERA). In 1988, PepsiCo gained entry to India by creating a joint venture with the Punjab government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint venture marketed and sold Lehar Pepsi until 1991 when the use of foreign brands was allowed; PepsiCo bought out its partners and ended the joint venture in 1994. In 1993, The Coca-Cola Company returned in pursuance of India's Liberalization policy. In 2005, The Coca-Cola Company and PepsiCo together held 95% market share of soft-drink sales in India. Coca-Cola India's market share was 60.8%.

Pepsi had long been the drink of Canadian Francophones and it continues to hold its dominance by relying on local Québécois celebrities (especially Claude Meunier, of La Petite Vie fame) to sell its product. "Pepsi" eventually became an offensive nickname for Francophones viewed as a lower class by Anglophones in the middle of the 20th century. The term is now used as an historical reference to French-English linguistic animosity (During the partitionist debate surrounding the 1995 referendum, a pundit wrote, "And a wall will be erected along St-Laurent street [the traditional divide between French and English in Montréal] because some people were throwing Coke bottles one way and Pepsi bottles the other way").

In the U.S., Pepsi's total market share was about 31.7 percent in 2004, while Coke's was about 43.1 percent.

In Russia, Pepsi once had a larger market share than Coca-Cola. However, Pepsi's dominance in Russia was undercut as the Cold War ended. PepsiCo had made a deal with the Soviet Union for scale production of Pepsi in 1972. When the Soviet Union fell apart, Pepsi, was associated with the old Soviet system, and Coca Cola, just newly introduced to the Russian market in 1992, was associated with the new system. Thus, Coca-Cola rapidly captured a significant market share away from Pepsi that might otherwise have needed years to build up. By July 2005, Coca-Cola enjoyed a market share of 19.4 percent, followed by Pepsi with 13 percent.

In the same way that Coca Cola has become a cultural icon and its global spread has spawned words like "coca colonization", Pepsi Cola and its relation to Russia has also turned it into an icon. In the early 1990s, the term, "Pepsi-stroika", began appearing as a pun on "perestroika", the reform policy of the Soviet Union

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under Mikhail Gorbachev. Critics viewed the policy as a lot of fizz without substance and as an attempt to usher in Western products in deals there with the old elites. Pepsi, as one of the first American products in the Soviet Union, became a symbol of the relationship and the Soviet policy.

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7.Ingredients

The Pepsi-Cola drink contains basic ingredients found in most other similar drinks including carbonated water, high fructose corn syrup, sugar, colorings, phosphoric acid, caffeine, citric acid and natural flavors. The caffeine free Pepsi-Cola contains the same ingredients minus the caffeine.

The original Pepsi-Cola recipe (which is pretty close to the original Coca-Cola recipe) was actually available from documents filed with the court at the time that the Pepsi-Cola Company went bankrupt in 1929. Note that the original formulation contained neither cola nor caffiene.

The Original Pepsi-Cola Recipe

Amount per 100mL

Energy 196.5 kJ

Fat 0 g

Sodium 0.98 mg

Carbohydrates 11.74 g

Sugar 11.04 g

Protein 0 g

Caffeine 10 mg

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8.Substitutes

1. Consider the markets for Coca Cola and Pepsi. Assume that a recent advertising campaign by Pepsi leads people to believe that drinking Pepsi (as opposed to Coke) is beneficial to your health. Using appropriate diagrams, explain the effects of this on the markets for Coke and Pepsi, explicitly stating what happens to demand, supply, equilibrium price and equilibrium quantity exchanged in each market, and why.

Whenever there's a disturbance to a market, I would like you to address the effect of that disturbance in the following way. Note, that I specifically talk about the demand, supply, equilibrium price, equilibrium quantity exchanged, and why. Also notice that I never have situations that involve more than one curve shifting at a time. If you think you have a situation where 2 curves are shifting, think again!

a) start with the argument/hypothesis

b)explain how the argument/hypothesis affects the market: typically this involves a shift in one of the curves (not always, as you will see in questions 2-5 below). Never talk about a curve shifting one way or the other. The terms you use indicate whether the curve is shifting: if you say there's an increase in the demand for coffee, I know that means that the demand curve shifted right; if you say there's an increase in the quantity demanded for coffee, I know that the market moved along a given demand curve.

c) explain what happens to the "other side" of the market: typically, part "b" involves a shift, which induces a price change, which then affects the "other side" of the market.

d) finally, explain the overall effect on the equilibrium price and quantity exchanged

In this case, we have 2 markets to look at. Start with the market for Pepsi:

a) argument: the advertising campaign leads to a change in tastes.

b) the change in tastes means there's an increase in the demand for Pepsi

c) the higher demand for Pepsi puts pressure on the price to rise. The higher price leads to an increase in the quantity supplied.

d) the market comes to an overall equilibrium at a higher price and a higher quantity exchanged.

Now, discuss the Coke market:

a) Coke and Pepsi are substitutes

b) the higher price of Pepsi leads to an increase in the demand for Coke (Note: you could equally argue here that the change in tastes from the ad campaign resulted in the demand for Coke falling-people go from consuming Coke to Pepsi because Pepsi is healthier)

c) the increase demand for Coke puts pressure on the price of Coke to rise, causing an increase in the quantity supplied

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d) the market for Coke comes to a new equilibrium at a higher price and a higher quantity exchanged.

The graphs:

2. In an attempt to increase the amount of exercise done by its citizens, the Ames City Council is considering imposing an effective price ceiling on Health Clubs that do business within the city limits. Using an appropriate diagram, explain the effects of such a policy on the market for Health Club services, explicitly stating what will happen to demand, supply, equilibrium price and equilibrium quantity exchanged.

A) Effective price ceiling causes a decrease in the price of health club services

b) the lower price of health clubs leads to an increase in the quantity demanded and a decrease in the quantity supplied

c) the difference between the quantity demanded and the quantity supplied leads to a shortage of health club services. The equilibrium price is lower, so is the equilibrium quantity exchanged

The graph:

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3. Like many states, Iowa is considering imposing a sales tax on purchases made through the World Wide Web. Assuming the tax is a fixed amount (say, $.50) per transaction, explain its effects on the demand, supply, equilibrium price and equilibrium quantity exchanged of WWW offered goods and services. Using an appropriate diagram, indicate the pre-tax price to consumers as PC0 , the pretax price paid to producers as PP0 , the pre-tax quantity demanded as QC0 ,and the pre-tax quantity supplied as QP0. In the same diagram, indicate the post-tax price to consumers as PC1 , the post-tax price paid to producers as PP1 , the post-tax quantity demanded as QC1 , the post-tax quantity supplied as QP1, and clearly show the amount of government revenue from the tax.

A) tax causes an increase in the price to consumers and a decrease in the price to producers

b) the higher price to consumers leads to a decrease in the quantity demanded

c) the lower price to producers leads to a decrease in the quantity supplied

d) the market comes to a new equilibrium at a lower quantity exchanged, with the government collecting the difference between the price paid by consumers and the price received by producers.

The graph:

4. Out of concern for the well being of its citizens, the federal government is considering subsidizing health care by providing a $500/year subsidy to all families in the US. Assuming the subsidy can only be used to pay for medical expenses, explain its effect on the demand, supply, equilibrium price and equilibrium quantity exchanged of medical services. Using an appropriate diagram, indicate the pre-subsidy price to consumers as PC0 , the pre-subsidy price paid to producers as PP0 , the pre-subsidy quantity demanded as QC0 ,and the pre-subsidy quantity supplied as QP0. In the same diagram, indicate the post-subsidy price to consumers as PC1 , the post-subsidy price paid to producers as PP1 , the post-subsidy quantity demanded as QC1 , the post-subsidy quantity supplied as QP1, and clearly show the total amount of government subsidy to this market.

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A) subsidy causes an increase in the price to producers and a decrease in the price to consumers

b) the lower price to consumers leads to an increase in the quantity demanded

c) the higher price to producers leads to an increase in the quantity supplied

d) the market comes to a new equilibrium at a higher quantity exchanged, with the government paying the difference between the price paid by consumers and the price received by producers.

The graph:

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9.Commitment

Our Values reflect our aspirations -- the kind of company we want PepsiCo to be. We express our

values in the form of a commitment.

Our Commitment

Our commitment is to deliver sustained growth, through empowered people, acting with responsibility and building trust. Here’s what this means:

Sustained Growth is fundamental to motivating and measuring our success. Our quest for sustained growth stimulates innovation, places a value on results, and helps us understand whether today’s actions will contribute to our future. It is about growth of people and company performance. It prioritizes making a difference and getting things done.

Empowered People means we have the freedom to act and think in ways that we feel will get the job done, while being consistent with the processes that ensure proper governance and being mindful of the rest of the company’s needs.

Responsibility and Trust form the foundation for healthy growth. It’s about earning the confidence that other people place in us as individuals and as a company. Our responsibility means we take personal and corporate ownership for all we do, to be good stewards of the resources entrusted to us. We build trust between ourselves and others by walking the talk and being committed to succeeding together.

Guiding Principles

This is how we carry out our commitiment.We must always strive to:Care for customers, consumers and the world we live in. We are driven by an intense, competitive spirit in the marketplace, but we direct this spirit toward solutions that achieve a win for each of our

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constituents as well as a win for the corporation. Our success depends on a thorough understanding of our customers, consumers and communities. Caring means going the extra mile. Essentially, this is a spirit of growing rather than taking.Sell only products we can be proud of.The test of our standards is that we must be able to personally endorse our products without reservation and consume them ourselves. This principle extends to every part of the business, from the purchasing of ingredients to the point where our products reach the consumer’s hands.Speak with truth and candor. We speak up, telling the whole picture, not just what is convenient to achieving individual goals. In addition to being clear, honest and accurate, we take responsibility to ensure our communications are understood.Balance short term and long term. We make decisions that hold both short-term and long-term risks and benefits in balance over time. Without this balance, we cannot achieve the goal of sustainable growth.Win with diversity and inclusion. We leverage a work environment that embraces people with diverse backgrounds, traits and different ways of thinking. This leads to innovation, the ability to identify new market opportunities, all of which helps develop new products and drives our ability to sustain our commitments to growth through empowered people.Respect others and succeed together. This company is built on individual excellence and personal accountability, but no one can achieve our goals by acting alone. We need great people who also have the capability of working together, whether in structured teams or informal collaboration. Mutual success is absolutely dependent on treating everyone who touches the business with respect, inside and outside the company. A spirit of fun, our respect for others and the value we put on teamwork make us a company people enjoy being part of, and this enables us to deliver world-class performance.

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Stock chartPEP (COMMON STOCK)

Exchange NYSE (US Dollar)

Price $69.38

Change (%)    1.01 (1.48%)

Volume 8,667,353

Today's Open $69.68

Previous Close $68.37

Intraday High $69.82

Intraday Low $68.28

52 Week High $70.25

52 Week Low $61.15

Data as of 08/17/07 4:02 p.m. ET

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