Paulo “Pops” Gigliotti emigrated from Italy and settled in Dayton, Ohio. In Italy, Mr. Gigliotti
had earned both a bachelors and masters degree in food chemistry and worked for several food
processing 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 of
Italian cuisine for the American market. Although he enjoyed working with family members, he
did not feel challenged by his new job and therefore began tinkering with various “experiments”
Mr. Gigliotti was fascinated by the variety of carbonated beverages available in America. He
enjoyed the refreshing sensation caused by carbonation, but felt all of the American soda pops
were too sweet and none of them provided the depth of flavor to which he had been accustomed
with non-carbonated beverages in Italy. After much experimentation, Mr. Gigliotti developed a
formula for a semi-sweet, multiple-fruit-flavored carbonated beverage. After sampling his
creation, friends and family alike responded in an overwhelmingly positive manner. Many of
them encouraged him to bottle the beverage and sell it locally. Indeed, Mr. Manganaro was so
excited 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’s
Punch and began marketing it in the Dayton area. Consumer response was very strong. Within
AICPA Professor/Practitioner Case Development Program Case No. 2003-04: Pop’s, Incorporated ? 2
five years Pop’s Punch was selling well throughout the Midwest region. To keep up with
demand, and to develop a more focused marketing strategy, the cousins detached the beverage
operations from Manganaro Foods and established Pop’s, Incorporated. To compete more
directly in the non-cola carbonated soft drink market; Mr. Gigliotti developed several individual
fruit-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 steady
growth in both sales and profits from the base line-up. During this time period, the company
achieved a respectable 4.7% share of the non-cola market and subsequently made its first public
offering. After nearly 35 years in business Mr. Gigliotti and Mr. Manganaro both retired and
sold all of their holdings. For the next eight years Mr. Gigliotti’s son, Paulo, Jr., served as chief
executive officer, but was recently forced to resign after failing to achieve unit and dollar sales
growth. Michael Newberg, formerly the firm’s chief financial officer, has been appointed CEO
and charged with growing the company.
Upon assuming his new responsibilities, Mr. Newberg and his management team performed a
thorough S.W.O.T. analysis. The corporate history and culture had long emphasized slow
gradual change. They concluded the company possessed neither the core competencies nor the
capacity 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 within
the soft drink industry.
The team carefully considered several alternative ways of revamping its strategy within the noncola
market, but none of them seemed to have the potential for the magnitude of growth the team
desired. The team then began to consider the “unthinkable” – the possibility of entering the cola
market. Although the risks were high, so were the possible rewards with each market share
percentage point in the domestic soda market worth approximately $500 Million in annual retail
sales. Under Mr. Newberg’s leadership, Pop’s, Inc. began the process of developing a strategy
with which to compete directly with the giants of the Cola industry.