PepsiCo Says Company Will Shift Focus Away From Colas
NEW YORK — PepsiCo Inc. is turning another cheek and shifting the company’s focus away from colas and toward “guilt-free” product lines, such as diet beverages and low-in-sodium snacks, according to its CEO.
Indra Nooyi told investors the move away from colas is part of a wider effort to reduce the company’s reliance on colas through innovation across its beverage portfolio, FoodBev Media reported.
“Globally, just 12 percent of our revenues come from trademark Pepsi and less than 25 percent comes from carbonated soft drinks on a global basis,” Nooyi said during an earnings conference call.
The announcement coincides with fiscal first-quarter results that showed that outside of North America, PepsiCo’s Naked Juice brand grew by 60 percent, Sunbites by 42 percent and Lipton ready-to-drink tea by 10 percent.
“We’ve been future-proofing our product portfolio, reshaping it to capitalize on consumers’ increasing interest in health and wellness,” Nooyi said.
She continued by saying the company tracks two sets of numbers. First, its views products that include everyday nutrition like nutrients, grains, fruits and vegetables, and protein, as well as naturally nutritious products like water and unsweetened tea. Those products, she said, account for almost 25 percent of the company’s portfolio by revenue.
Secondly, the company views guilt-free products as those with everyday nutrition, as well as diet beverages and other beverages that are less than 70 calories per 12-ounces, and snacks low in sodium and saturated fat. These guilt-free products account for approximately 45 percent of the company’s portfolio by revenue.
“The growth of our everyday nutrition products, which accounts for a quarter of our global net revenue, is outpacing the growth of the balance of the portfolio,” the executive commented. “And we’ve had a significant amount of activity underway to transform our portfolio.”
This transformation has begun with shifting its core marketing focus to lower-calorie products in order to accelerate growth in strategic sub-categories, the news outlet reported.
It has also tailored its product innovation to be centered on strong nutritional profiles, with products such as Smartfood Delight growing in volume by more than 75 percent during Q1, and reduced-fat Doritos growing by 30 percent.
To extend its focus on better-for-you foods, PepsiCo is “building and investing in new capabilities to win in high-growth channels,” Nooyi said.
By doing so, the company will increase the out-of-home availability of everyday nutrition products — both snacks and beverages — through the targeted placement of approximately 20,000 Hello Goodness vending machines across North America.
The company has also consolidated its foodservice resources into one team, putting an emphasis on the importance the foodservice channel plays in PepsiCo’s sales growth. This will enable the company to “creatively leverage the breadth of our product portfolio with our customers and consumers,” according to Nooyi.
Additionally, the company has increased the amount it spends on advertising and marketing. Its percentage of annual sales from 5.2 percent in 2011 grew to 6.3 percent in 2015, FoodBev Media reported. However, its net revenue has fallen by 5 percent in that time.