PepsiCo to move focus away from colas, CEO Indra Nooyi says

PepsiCo will increase its focus on what it has called “guilt-free” product lines such as diet beverages and low-in-sodium snacks, according to the company’s CEO.

Indra Nooyi told investors that the move away from colas formed part of a wider effort to reduce the company’s reliance on colas through innovation across its beverage portfolio.

“Globally, just 12% of our revenues come from trademark Pepsi and less than 25% comes from carbonated soft drinks on a global basis,” Nooyi said in a conference call this week.

The announcement coincided with first-quarter results that showed that, outside of North America, PepsiCo’s Naked Juice brand had grown by 60%, Sunbites had added 42%, and Lipton ready-to-drink tea had grown by 10%.

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“We’ve been future-proofing our product portfolio, reshaping it to capitalise on consumers’ increasing interest in health and wellness,” Nooyi said. “Just to give you an idea, we track two sets of numbers. First, what we view as everyday nutrition, which includes products that provide positive nutrients, like grains, fruit and vegetables, and protein, plus those products that are naturally nutritious, like water and unsweetened tea. Now these products account for almost 25% of our portfolio by revenue.

“Second, what we view as guilt-free products, these include the everyday nutrition products plus diet beverages and other beverages that are below 70 calories per 12oz, and snacks with low levels of sodium and saturated fat. Guilt-free products account for approximately 45% of our 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. And we’ve had a significant amount of activity underway to transform our portfolio.”

The company has already shifted its core marketing focus to lower-calorie products in order to accelerate growth in strategic sub-categories.

It has also embarked on a programme of product innovation centred around strong nutritional profiles, with products such as Smartfood Delight growing in volume by more than 75% during the first quarter and reduced-fat Doritos growing by 30%.

PepsiCo now wants to extend its focus on better-for-you foods by “building and investing in new capabilities to win in high-growth channels”.

It will be increasing the out-of-home availability of our 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 consolidated its foodservice resources into one team, as the importance that the foodservice channel plays in PepsiCo’s sales continues to grow. This will enable the food giant to “creatively leverage the breadth of our product portfolio with our customers and consumers,” Nooyi said.

And the firm has increased the amount that it spends on advertising and marketing as a percentage of annual sales from 5.2% in 2011 to 6.3% in 2015 – though its net revenue has also fallen by 5% in that time.