How PepsiCo's Product Mix Is Changing
Beverage maker looks to 'future-proof' its product portfolio via package sizes and consumer trends
PURCHASE, N.Y. -- Two key ideas echoed through PepsiCo's latest earnings conference call this past week: volume mix and health and wellness.
Move to Single-Serve
In running down first-quarter earnings statistics--including volume up 1% and revenue up 2% in PepsiCo's North American Beverage arm--chairman Indra Nooyi underscored a significant transition to single-serve beverages that reflects growth in the convenience-store channel.
"In North America over the past five years, we have shifted approximately 6% of our carbonated-soft-drink (CSD) volume/mix from traditional 2-liter and 12-ounce multipack packages to higher-margin, more profitable single-serve and alternative multi-celled packages," she said April 18. "These efforts have been driving higher net-price realization for us and our retail partners."
That's good news for CSDs, the largest packaged-beverage category in c-stores.
Investing in Healthier
But PepsiCo is hardly counting on CSDs from all manufacturers to come out of a 10-year sales slump driven by consumers' desire for healthier beverages. In fact, the Purchase, N.Y.-based company has doubled-down on its efforts to reach those consumers, an effort Nooyi called "future-proofing our product portfolio."
"[We are] reshaping it to capitalize on consumers' increasing interest in health and wellness," Nooyi said, citing two significant measures that suggest the company is on the right track:
- Everyday nutrition, which includes products that provide positive nutrients such as grains, fruit and vegetables, and protein, plus products that are naturally nutritious such as water and unsweetened tea. "These products account for almost 25% of our portfolio by revenue," Nooyi said.
- Second is a segment Nooyi calls "guilt-free products." These include "the everyday nutrition products plus diet beverages and other beverages that are below 70 calories per 12 ounces."
Guilt-free products, she said, "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," she said. "And we've had a significant amount of activity underway to transform our portfolio."
For example, Nooyi cited efforts to broaden the company's beverage portfolio "to lessen our reliance on colas, and today we have the leading noncarbonated-beverage portfolio in the United States."