PepsiCo are famous for their range of food and drink brands including Pepsi, Walkers, Mountain Dew and Tropicana. Their European HQ is in Geneva, and they have a large number of offices and factories all across Europe. They have achieved great market growth through the acquisition of food and drink brands.
PepsiCo had recently completed a $3 billion acquisition drive to buy up brands. They added dozens of household brands to their portfolio. They also acquired the manufacturing plants associated with the brands.
To maximise the revenue for these brands, PepsiCo centrally planned all of their purchasing centrally. This could be months and years in advance. As many of these purchases are connected to market commodities, they ran the risk of fluctuations in the stock market and exchange rates. As a result they hedge their billions of dollars of purchasing spend each year.
The hedging process was a time intensive, paper based process. Managing it took thousands of hours each year. No tool existed to run so many hedge funds. Especially from so many brands, spread over so many countries.
As a result, a hedge fund management tool needed developing from scratch. However, PepsiCo did not have a set specification for the project. A project like this had not been attempted before and there were a lot of moving parts. As a result, PepsiCo decided to develop the tool in Excel, as it was the most flexible.
We worked with PepsiCo, for nearly a year, at their offices around Europe to draw up a specification. After which we developed a multi-part Excel hedge fund management tool.
Each manufacturing plant had a tool for gathering data on its projected purchasing needs. They would enter their projected purchasing needs, cash flow and forecasted exchange rates.
A central hedge fund management tool would then gather the data entered by each plant. Once gathered it processed the data to ready it for use in reports. This in turn would allow the user to generate reports and issue any required paperwork.
The tool would allow the user to decide what hedge funds needed purchasing, how long they were needed for and when they should be purchased. Once these choices were entered, the tool would send the details to PepsiCo’s bank in New York to transact.
Once purchased, the hedge fund management tool would import the details of the transaction as received from the bank in New York. Each month data on the hedge fund was imported into the tool. This would allow the tool to monitor the performance of the hedge funds against the original forecasts.
PepsiCo now use the tool to manage the hedge funds for nearly a hundred production plants across Europe. They have seen many additional benefits since they started using the tool including;
- Increased accuracy in forecasting
- Commonality across all the brands in Europe
- Fewer missed deadlines for legally time sensitive tasks
- Easier auditing purposes
- Approximately 2,500 man hours saved a year
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