Pumpkins Stuffed with Vegetable Couscous

Preheat the oven to 375°F. Grease a baking sheet. Cut the lid off the pumpkins and remove the seeds and fibers. Rub the inside of each of the pumpkins with 1-2 tablespoons of oil, and prick several times with a fork. Season with salt and place on the baking sheet. Bake until tender, 25-30 minutes (baking time will vary depending on the size of the pumpkins).

             

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Snack Foods:

United States

3,737.9

3,471.5

3,211.3

 

616.6

732.3

667.8

 

Growth

8%

8%

 

% of sales

16%

21%

21%

 

International

1,827.9

1,582.5

1,003.7

 

171

202.1

137.4

 

Growth

16%

58%

 

 

 

 

 

Restaurants:

United States

6,258.4

5,540.9

4,684.8

 

479.4

447.2

356.5

 

Growth

13%

18%

 

% of sales

8%

8%

8%

 

International

868.5

684.8

565.9

 

96.2

75.2

57.8

 

Growth

27%

21%

 

% of sales

11%

11%

10%

 

 

 

 

 

 

 

 

 

Data extracted form exhibit 4 attached to the case

 

Exhibit 2A

Shares of total food expenditures

 

Year

Food at home

Food away from home

 

 

Percent

 

1963

71.44

28.56

 

1964

70.96

29.04

 

1965

70.16

29.84

 

1966

69.04

30.96

 

1967

67.89

32.11

 

1968

66.92

33.08

 

1969

66.71

33.29

 

1970

66.59

33.41

 

1971

66.24

33.76

 

1972

65.77

34.23

 

1973

65.29

34.71

 

1974

65.90

34.10

 

1975

64.19

35.81

 

1976

62.84

37.16

 

1977

62.19

37.81

 

1978

61.47

38.53

 

1979

60.96

39.04

 

1980

60.99

39.01

 

1981

60.49

39.51

 

1982

59.91

40.09

 

1983

59.27

40.73

 

1984

58.97

41.03

 

1985

58.70

41.30

 

1986

57.80

42.20

 

1987

57.49

42.51

 

1988

56.80

43.20

 

1989

56.78

43.22

 

1990

56.97

43.03

 

1991

56.92

43.08

 

1992

56.10

43.90

 

Source: USDA, ERS Food Expenditure

 

Exhibit 3A

Average U.S. System Sales Per Unit (thousands)^a

 

 

1986

1987

1988

1989

1990

1991

5-Year % Growth^b

 

 

 

 

 

 

 

 

PH

$468

$490

$520

$570

$607

$613

5.5

TB

560

579

589

686

771

814

7.8

KFC

529

558

597

607

650

675

5.0

 

 

 

 

 

 

 

 

 

^aExcludes sales from kiosks and other special concepts

^bThese are compounded annual growth rates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 8 California Pizza Kitchen, Inc., and Subsidiaries, Consolidated Statements of Operations, Fiscal Years Ended June 30, 1991 and July 1, 1990 (in $ thousands)

 

 

 

 

 

 

 

 

 

 

 

 

1991

1990

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

Sales

$33,638

$21,696

 

 

 

 

 

Management and license fees

414

183

 

 

 

 

 

 

34,052

21,879

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of sales

17,920

11,379

 

 

 

 

 

Operating expenses

8,343

4,993

 

 

 

 

 

Depreciation and amortization

1,900

1,132

 

 

 

 

 

General and administrative expenses

4,822

3,574

 

 

 

 

 

Equity in loss of limited partnerships and joint ventures, net

4

154

 

 

 

 

 

 

32,989

21,232

 

 

 

 

 

Operating income

1,063

647

 

 

 

 

 

Interest expense, net

260

102

 

 

 

 

 

Income before income taxes and extraordinary item

803

545

 

 

 

 

 

Income taxes

318

279

 

 

 

 

 

Income before extraordinary item

485

266

 

 

 

 

 

Extraordinary item

226

236

 

 

 

 

 

Net income

$711

$502

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: PepsiCo

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of resturants form the case

25

From case

 

 

 

 

 

Avearge location revenue

$1,345.52

 

 

 

 

 

Diagnosis

                PepsiCo has an opportunity to pursue two restaurant related businesses.  California Pizza Kitchen; a casual dining restaurant chain is one of the businesses being considered for acquisition.  Another is Carts of Colorado; a cart manufacturer of mobile carts for the restaurants and food industry.  Both businesses have demonstrated good growth in the last few years and PepsiCo higher management is trying to decide whether to proceed with the acquisition/investment in these companies and whether the investment would help PepsiCo increase its restaurant segment’s market share.   In addition, if the companies are acquired how they would fit in the existing culture and management approach of PepsiCo.

Analysis

PepsiCo is entertaining the idea of acquiring Carts of Colorado and California Pizza Kitchen for the reasons below.

PepsiCo’s soft drink segment grew only 3 % in 1991 (exhibit 1A), lower than the average growth of USA soft drink industry.  Part of the reason of the decline in growth is that PepsiCo’s competition with its own customers (restaurants’ chains) eventually caught up with PepsiCo.  The loss of big accounts such as Burger King and Wendy in 1991 had negative impact on PepsiCo’s soft drinks sale and growth.  Soft drink operating profits is fairly higher in the United States when compared to restaurants (exhibit 1A), but the restaurant industry is one of the main outlets for the sale of the soft drinks.  The loss of such big accounts is putting pressure on PepsiCo to expand and grow PepsiCo’s restaurant segment to provide additional sales outlets for the soft drinks. This partially would be pushing PepsiCo to consider such acquisition.   

                In addition PepsiCo’s restaurant business units have shown very healthy growth rate in the last few years both in the United States and internationally (exhibit 1A). PepsiCo is looking to grow its restaurant business even further and looking at strategic options to achieve this goal.  According KFC president John Cranor “the days of our building 600 brand-new full-size restaurants on corner lot in suburbia are over” (case page 10, paragraph 3) .  This new expansion strategy by PepsiCo restaurants is another compelling factor that is pushing PepsiCo’s upper management to entertain this acquisition and similar ones as well.   

PepsiCo also had several set-backs in expanding its restaurants’ business.  Expanding into the casual dining segment by PepsiCo was a failure.  Considering some of the failures and setbacks PepsiCo faced in the past such as “Salsa Rio Grill” & “Pizza Hut Café” is pushing PepsiCo to consider this acquisition particularly when it comes to California Pizza Kitchen. 

Recommendations:

PepsiCo should not fully acquire Carts of Colorado.  I suggest that PepsiCo enters into partnership with Carts of Colorado by both agreeing to add value for each other.  PepsiCo could control around 50% and Gallery brothers should continue to be the partners in the company and should be fully engaged in running the company.  PepsiCo’s deal with Carts of Colorado should be clear on the expectation and the outcomes of the deals such as cutting ties with competitors to avoid conflicts of interest and fully engage PepsiCo management that would hired in Carts of Colorado to train them on as well share companies manufacturing secrets and process.

When PepsiCo enter into this partnership, PepsiCo needs to have fast and aggressive expanding plan to for its restaurants’ businesses within the United States and internationally.  PepsiCo should have the plan in place to expand to as many strategic locations within 24 months.  

PepsiCo should also partially acquire California Pizza Kitchen. PepsiCo should be partner in California Pizza Kitchen and have the existing management in place. In addition PepsiCo should inject some of its own people in the management of California Pizza Kitchen.  The partnership should be clear to share secrets and best practices on running restaurants in the midscale segment.  PepsiCo should provide the needed capital to grow the California Pizza Kitchen.  For both of the Cart of Colorado and California Pizza Kitchen, PepsiCo should have in the contract an option to fully buy in the future if this partnership proofed to be hugely successful for PepsiCo .

 

Justifications

Since the acquisitions are aimed at expanding the restaurant segment of the business, then implicitly indicates we should list the reasons why the restaurants segment should get special attention to be expanded.  Based on the data provided by the USDA (exibit 2A), eating away from home is a trend and growing strong for the last 15 years which presents a great opportunity to focus on this segment of the business. The case states that the food service industry expected to double in the next 10 years from existing 250 billion in 1991  (case page 5 last paragraph).

Focusing on PepsiCo, overall the restaurant segment has been the fastest growing segment in PepsiCo in the recent couple of years (exhibit 1A) and PepsiCo should focus more on these. Focusing on this segment of the business would definitely have a positive impact on the soft beverages revenue since restaurant considered a major outlet for profitable fountain drinks and the expanding the restaurant segment could make up the loss in revenue caused by losing Burger King and Wendy’s accounts.

Carts of Colorado

The downsized restaurant concept can significantly reduce the capital spending for expanding the restaurants chains in PepsiCo; in addition, the downsized modules align with PepsiCo strategy.  In early 1990’s John Martin introduced this concept to Taco Bell and 50 units were in operation. In addition, Cranor, KFC CEO, stated “the days of our building 600 brand-new restaurants on corner lots in suburbia are over” (case page 10).  Cranor introduced 50 downsized modules in early 1990’s with plan to quadruple this number in 1993.  It is clear that PepsiCo’s new strategy for expansion substantially incorporate this model and PepsiCo would need a reliable supplier of these carts and kiosks.

Food Cart manufacturing is not PepsiCo’s core business and PepsiCo does not have the expertise in running such cart manufacturing business.  PepsiCo had several acquisition failures in the past for businesses where they had no expertise, one to mention is La Petite, where PepsiCo took 11 million dollars in losses and   Wilson Sporting goods, where sales dropped and PepsiCo sold the business to Wersay capital (http://articles.latimes.com/1985-05-21/business/fi-7896_1_wilson-sporting-goods) . The Gallery brothers have been doing a very decent job running this business and they have the knowhow of the business and technology.  PepsiCo should inject it is management’s people at different aspects of the process to learn and grow their skills in this area rather than steering the business as a whole. It could be argued that PepsiCo could fully acquire the Carts of Colorado and re-hire the current management instead of entering into partnership, although this option sounds feasible, management might not have the same incentive to continue the current innovation & the success of the company.  The Gallery brothers do not just do management the company, but they know the technology and the secrets to the process.

Actually, I also suggested that PepsiCo not fully acquire the Carts of Colorado because of very likely resistance by the Gallery brothers of fully sell the business. This can be sensed by the first acquisition of cart of Colorado by venture capital where the Gallery brothers still wanted to be in control managing the company.     

By partnering with the Carts of Colorado, PepsiCo could influence many decisions in operating Cart of Colorado than could proof beneficial to restaurant segment expansion.  PepsiCo could influence the carts of Colorado to cut business ties with PepsiCo’s competitors and prevent other competitors such as Coca cola, Dominos, Burger King and Wendy’s from having access to these carts.  In addition, PepsiCo could have influence on the design of the carts to better fit its restaurants processes. 

Also carts of Colorado is small company, although it is growing it very likely it has specific capacity of production, and for a good business management such as the Gallerys; they would diversify their customer’s base.  As of now Carts of Colorado provides only 20% of their order to fulfill PepsiCo’s needs of these carts.  Very likely with PepsiCo’s new strategy and direction of having more kiosk and other types of restaurants, PepsiCo demand would increase for these carts and PepsiCo partnership would allow it to influence Carts of Colorado to give priority to PepsiCo’s orders and fully fulfill  those first. When Carts of Colorado have PepsiCo to its side as a partner, it would be assured that major decision made to serve PepsiCo needs first would also serve Carts of Colorado’s interest since they are partners.   In the process PepsiCo would give Cart of Colorado more exposure and marketing within the United States and internationally. This would be a win-win situation for Carts of Colorado and PepsiCo. 

The recommendation that PepsiCo have quick large expansion of its kiosk and kiosk locations (2 years),  stemes from the fact that Cart of Colorado has 18 months lead in their technology and operation in that industry.  PepsiCo should utilize this head start by moving fast with the expansions of the restaurants’ locations while preventing competitors access to this technology.  The time lag could proof fruitful to the expansion effort to secure as many hard-to-reach and strategic locations before other competitors realize PepsiCo’s strategy and try to catch up with PepsiCo. In addition PepsiCo and Cart of Colorado should work in keeping the competitive advantage of their cart technology.

California Pizza Kitchen

Pizza Hut expects the café concept to generate 1.2 million in sales compared to traditional unit of 700,000 thousand, $500,000 in additional revenue (case page 7).  It is clear the dine-in and midscale concepts would generate more revenue because of larger check per customer per visit.  Unfortunately PepsiCo had several setbacks in introducing midscale and dine-in concepts to its restaurant businesses.  As Reinemund, Pizza Hut president, conceded that they do not know much about midscale segment (case page 7 , paragraph 4).   PepsiCo could use this acquisition as a stepping stone into the midscale restaurant segment.  PepsiCo should develop California Pizza Kitchen and Pizza Hut to be even more distinct and grow each business model further.  California Pizza Kitchen customers’ segment is in upscale neighborhoods looking for pleasant white-cloth dining experience; nevertheless Pizza Hut and Taco Bell could greatly benefit from the management practices and insights of California Pizza Kitchen to expand the dine-in business and help the success of Pizza Hut café and dine-in Mexican segment to generate more revenue.    In addition PepsiCo could provide California Pizza Kitchen with the much needed capital for expansion to grow the business and increase its market share and revenue.  The average sales of California Pizza Kitchen restaurant is significantly more than that of typical pizza hut, Pizza Hut average sales per store is $600,000-$700,000 while that of California Pizza Kitchen is 1.3 million (exhibit 3A), this is another reason PepsiCo should consider this investment.

By partially acquiring California Pizza Kitchen, PepsiCo is essentially bringing a competitor to its side.  Although Pizza Hut and California Pizza Kitchen serve different market segment, they are both in the food service and still somewhat competitors to each other.  Having this partnership could align strategy and vision for both chains to grow them to their maximum potential.     

                Flax and Rosenfield, California Pizza Kitchen’s founders, stated that they want to continue to be involved in the management and ownership of California Pizza Kitchen, because of this and lack or PepsiCo experience in mid-scale and dine concept, PepsiCo should seek partnership with the founder rather than fully acquiring the business.  PepsiCo should keep the current management intact while injecting PepsiCo’s management personal from the different restaurants chain to learn the mid-scale and dine-in concept.

                The decentralized management model of PepsiCo’s restaurants and “unwillingness” to unify the processes to reduce overhead costs and eliminate duplication processes, might be another reason to enter into partnership initially with California Pizza Kitchen.

 Risk

If PepsiCo demand for the food carts and kiosk prove to be less than what would compensate for the lost revenue from the accounts the Cart of Colorado stops serving (Coca cola, Burger King,…etc) and not enough to continue the Carts of Colorado growth, the Gallarys brothers might consider exiting this partnership and taking control of the company again similar to what happened with the joint venture partnership in 1987.

                Although California Pizza Kitchen and Pizza Hut are somewhat distinct business models, there is a chance that could cannibalize each other’s in the areas where they would co-exist.

                PepsiCo’s expansion to new locations could also back fire with and cause restaurants to switch to Coca cola fountain similar to what happened in the case of Burger King and Wendy’s.

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 1A

 

 

Revenue

 

 

 

Operating Profits

 

 

 

 

91

90

89

 

91

90

89

Soft Drinks:

United States

$5,171.5

$5,034.5

$4,623.3

 

$746.2

$673.8

$577.6

 

Growth

3%

9%

 

% of sales

14%

13%

12%

 

International

1,743.7

1,488.5

1,153.4

 

117.1

93.8

98.6

 

Growth

17%

29%

 

% of sales

7%

6%

9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Snack Foods:

United States

3,737.9

3,471.5

3,211.3

 

616.6

732.3

667.8

 

Growth

8%

8%

 

% of sales

16%

21%

21%

 

International

1,827.9

1,582.5

1,003.7

 

171

202.1

137.4

 

Growth

16%

58%

 

 

 

 

 

Restaurants:

United States

6,258.4

5,540.9

4,684.8

 

479.4

447.2

356.5

 

Growth

13%

18%

 

% of sales

8%

8%

8%

 

International

868.5

684.8

565.9

 

96.2

75.2

57.8

 

Growth

27%

21%

 

% of sales

11%

11%

10%

 

 

 

 

 

 

 

 

 

Data extracted form exhibit 4 attached to the case

 

Exhibit 2A

Shares of total food expenditures

 

Year

Food at home

Food away from home

 

 

Percent

 

1963

71.44

28.56

 

1964

70.96

29.04

 

1965

70.16

29.84

 

1966

69.04

30.96

 

1967

67.89

32.11

 

1968

66.92

33.08

 

1969

66.71

33.29

 

1970

66.59

33.41

 

1971

66.24

33.76

 

1972

65.77

34.23

 

1973

65.29

34.71

 

1974

65.90

34.10

 

1975

64.19

35.81

 

1976

62.84

37.16

 

1977

62.19

37.81

 

1978

61.47

38.53

 

1979

60.96

39.04

 

1980

60.99

39.01

 

1981

60.49

39.51

 

1982

59.91

40.09

 

1983

59.27

40.73

 

1984

58.97

41.03

 

1985

58.70

41.30

 

1986

57.80

42.20

 

1987

57.49

42.51

 

1988

56.80

43.20

 

1989

56.78

43.22

 

1990

56.97

43.03

 

1991

56.92

43.08

 

1992

56.10

43.90

 

Source: USDA, ERS Food Expenditure

 

Exhibit 3A

Average U.S. System Sales Per Unit (thousands)^a

 

 

1986

1987

1988

1989

1990

1991

5-Year % Growth^b

 

 

 

 

 

 

 

 

PH

$468

$490

$520

$570

$607

$613

5.5

TB

560

579

589

686

771

814

7.8

KFC

529

558

597

607

650

675

5.0

 

 

 

 

 

 

 

 

 

^aExcludes sales from kiosks and other special concepts

^bThese are compounded annual growth rates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 8 California Pizza Kitchen, Inc., and Subsidiaries, Consolidated Statements of Operations, Fiscal Years Ended June 30, 1991 and July 1, 1990 (in $ thousands)

 

 

 

 

 

 

 

 

 

 

 

 

1991

1990

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

Sales

$33,638

$21,696

 

 

 

 

 

Management and license fees

414

183

 

 

 

 

 

 

34,052

21,879

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of sales

17,920

11,379

 

 

 

 

 

Operating expenses

8,343

4,993

 

 

 

 

 

Depreciation and amortization

1,900

1,132

 

 

 

 

 

General and administrative expenses

4,822

3,574

 

 

 

 

 

Equity in loss of limited partnerships and joint ventures, net

4

154

 

 

 

 

 

 

32,989

21,232

 

 

 

 

 

Operating income

1,063

647

 

 

 

 

 

Interest expense, net

260

102

 

 

 

 

 

Income before income taxes and extraordinary item

803

545

 

 

 

 

 

Income taxes

318

279

 

 

 

 

 

Income before extraordinary item

485

266

 

 

 

 

 

Extraordinary item

226

236

 

 

 

 

 

Net income

$711

$502

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: PepsiCo

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of resturants form the case

25

From case

 

 

 

 

 

Avearge location revenue

$1,345.52

 

 

 

 

 

 

 

 

 

for 25-30 minutes convection bake (depending on the size of the pumpkins).

Rinse the zucchini, halve lengthwise, and cut into 1-inch pieces. Rinse and halve the peppers lengthwise, remove the seeds and white ribs, and cut into bite-size pieces.

Rinse the scallions and the celery and cut both on the diagonal into 1/2-inch thick pieces. Rinse the chile cut off the top, remove the seeds and cut into thin rings. Peel and finely chop the garlic and ginger.

In a saucepan bring the broth to a boil, remove from the heat, add the couscous, cover and let stand until the broth has been absorbed, about 10 minutes.