Cash Flow Productivity at PepsiCo: Communicating Value to Retailers

Posted: 28 Feb 2012

See all articles by Francisco de Asis Martinez-Jerez

Francisco de Asis Martinez-Jerez

University of Notre Dame - Department of Accountancy

Lisa Brem

Harvard Business School

Date Written: March 28, 2011

Abstract

PepsiCo developed a new metric that better measured the value added by Pepsi products than did gross margin, the traditional metric used by retailers to determine shelf space and promotional activity. The new metric, cash flow productivity, captured the value of Pepsi's Direct-Store-Distribution (DSD) service and the strong attraction of its nationally advertised brands. Pepsi managers believed that their full service distribution service saved customers money and their strong brands generated more traffic and sales, but that most retailers, looking only at gross margins, missed this added value. Pepsi managers struggled to craft a strategy that would convince retailers to adopt cash flow productivity as a metric for making merchandising decisions in their stores.

Learning Objective: Examine how various metrics can affect distribution systems and the relationships between suppliers and customers.

Suggested Citation

Martinez-Jerez, Francisco de Asis and Brem, Lisa, Cash Flow Productivity at PepsiCo: Communicating Value to Retailers (March 28, 2011). Harvard Business School Accounting & Management Unit Case No. 111-069. Available at SSRN: https://ssrn.com/abstract=2012699

Francisco de Asis Martinez-Jerez (Contact Author)

University of Notre Dame - Department of Accountancy ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States

Lisa Brem

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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