Company name: pepsi company logo

Threats

1. Stiff Competition: PepsiCo’s profitability and market share are threatened by stiff competition from Coca Cola, Nestle, Dr. Peppers, Unilever, and so on. The competition also threatens long-term sustainability and profitability because it increases the cost of protecting market share through adverts, promotions, and discounts to retain customers.

2. Economic Slowdown or Recession: Even though food and beverage consumer markets are going strong, the possibility of a slowdown or recession soon cannot be ruled out. In case of a recession, PepsiCo can incur losses because its product portfolio is concentrated with products, which are usually among the first expenses to be dropped by consumers during economic hardship. In the 2008-09 recession, Pepsi had to cut over 3300 jobs due to a decrease in soft drink sales. The company was forced to scrap its full-year forecast for the 2020-2021 fiscal year due to uncertainties in the market. It scrapped its projection of 4% revenue growth for the year in the first quarter of 2020 after its net income fell to $1.34 billion from $1.41 billion a year earlier.

3. Competitors Adopt Technology More Effectively: In the current technologically advanced and highly competitive business arena, the success or failure of businesses depends on the adoption rate of emerging technologies. PepsiCo can lose competitive advantage to competitors if they adopt game-changing technologies more effectively.

4. Changes in Demographics: Changes in demographics and economic situation transforms target markets, which can impact businesses negatively. For example, the demographics of Nordic nations such as Sweden (median age 41.1 years) have shifted with an increase in older consumers and a decreased number of youths. These changes can threaten PepsiCo’s profitability and sustainability because a large portion of its customer base consists of the youth.

5. Increase in Trade Tensions: Uncertainty and instability impede effective operations. In the past two years, US-China trade tensions have increased uncertainty and instability in global markets. PepsiCo’s global operations can be undermined if trade tensions escalate, leading to trade war, isolationism, and protectionism in the company’s markets overseas.

6. Government Laws and Regulations: In the recent past, governments have increasingly adopted pro-health regulations to reduce lifestyle diseases and illnesses attributed to junk and unhealthy products. Escalation of this trend in the future can undermine profitability, sustainability, and even the existence of PepsiCo since its product portfolio consists mainly of unhealthy soft drinks and snacks.