CASE STUDY - CORPORATE LEVEL STRATEGY
Why would Procter and Gamble (P&G), a company with 300 brands, five billion customers in 140 countries, and more food and beverage patents than the combined total of the three largest U.S. food companies, want to team up with another company to sell fruit juice?
P&G recently announced a joint venture that combines resources with the Coca-Cola Company. The two firms, each contributing different resources and expertise, will jointly own the new company. P&G will bring Pringles potato chips, Sunny Delight, and Punica fruit juices. Coke will add its line of beverages including Minute Maid, Hi-C, Fruitopia, Cappy, Kapo, Sonfill, and Qoo.
Through the joint venture, both companies hope to accomplish what each would find difficult to do without the combined resources of the endeavour. They believe the venture will bring three key synergies:
- Revenue growth for Pringles using Coke's distribution channels. Distribution points will increase from the current 150 000 to 16 million. The firms estimate this will increase Pringle's revenue by an additional $120 million.
- Revenue growth of the companies' combined juice product lines, primarily through P&G's Sunny Delight. As with Pringles, the revenue growth will come from increased distribution using Coke's established channels. This should provide an additional $ 30 million in sales revenue.
- Decreased costs by combining manufacturing, and administrative costs. The firms estimate $ 50 million in annual cost savings.