POP’S, INCORPORATEDMANAGERIAL ACCOUNTING AS A STRATEGIC DECISION TOOLXXXXX XXXXXXAssistant Professor of AccountingCedarville University, Cedarville, OhioJon AustinAssociate Professor of MarketingCedarville University, Cedarville, OhioKenneth SchappellFinance Group ManagerThe Procter & Gamble Company, Cincinnati, OhioBACKGROUNDPaulo “Pops” Gigliotti emigrated from Italy and settled in Dayton, Ohio. In Italy, Mr. Gigliottihad earned both a bachelors and masters degree in food chemistry and worked for several foodprocessing companies. Pops came to the United States when his cousin, Guiseppe Manganaro,offered him the position of senior food chemist at Manganaro Foods, a growing producer ofItalian cuisine for the American market. Although he enjoyed working with family members, hedid not feel challenged by his new job and therefore began tinkering with various “experiments”at home.Mr. Gigliotti was fascinated by the variety of carbonated beverages available in America. Heenjoyed the refreshing sensation caused by carbonation, but felt all of the American soda popswere too sweet and none of them provided the depth of flavor to which he had been accustomedwith non-carbonated beverages in Italy. After much experimentation, Mr. Gigliotti developed aformula for a semi-sweet, multiple-fruit-flavored carbonated beverage. After sampling hiscreation, friends and family alike responded in an overwhelmingly positive manner. Many ofthem encouraged him to bottle the beverage and sell it locally. Indeed, Mr. Manganaro was soexcited about the beverage that he offered to provide the necessary production equipment,facilities, and capital.After much discussion, Mr. Gigliotti and Mr. Manganaro decided to call the beverage Pop’sPunch and began marketing it in the Dayton area. Consumer response was very strong. WithinAICPA Professor/Practitioner Case Development Program Case No. 2003-04: Pop’s, Incorporated ? 2five years Pop’s Punch was selling well throughout the Midwest region. To keep up withdemand, and to develop a more focused marketing strategy, the cousins detached the beverageoperations from Manganaro Foods and established Pop’s, Incorporated. To compete moredirectly in the non-cola carbonated soft drink market; Mr. Gigliotti developed several individualfruit-flavored sodas, which were marketed under the Pop’s (Orange / Grape / Strawberry /Cherry) Soda brand name. This strategy proved to be highly successful and after five years,Pop’s, Inc. began selling its beverages on a nation-wide basis.Over the next 20 years, Pop’s, Inc. failed to introduce any new products, but experienced steadygrowth in both sales and profits from the base line-up. During this time period, the companyachieved a respectable 4.7% share of the non-cola market and subsequently made its first publicoffering. After nearly 35 years in business Mr. Gigliotti and Mr. Manganaro both retired andsold all of their holdings. For the next eight years Mr. Gigliotti’s son, Paulo, Jr., served as chiefexecutive officer, but was recently forced to resign after failing to achieve unit and dollar salesgrowth. Michael Newberg, formerly the firm’s chief financial officer, has been appointed CEOand charged with growing the company.CURRENT SITUATIONUpon assuming his new responsibilities, Mr. Newberg and his management team performed athorough S.W.O.T. analysis. The corporate history and culture had long emphasized slowgradual change. They concluded the company possessed neither the core competencies nor thecapacity to change that would be necessary to diversify into an entirely new industry.Accordingly, Pop’s, Inc. would need to devise a new strategy by which to achieve growth withinthe soft drink industry.The team carefully considered several alternative ways of revamping its strategy within the noncolamarket, but none of them seemed to have the potential for the magnitude of growth the teamdesired. The team then began to consider the “unthinkable” – the possibility of entering the colamarket. Although the risks were high, so were the possible rewards with each market sharepercentage point in the domestic soda market worth approximately $500 Million in annual retailsales. Under Mr. Newberg’s leadership, Pop’s, Inc. began the process of developing a strategywith which to compete directly with the giants of the Cola industry.The research
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