Turning Snacks into Beverages

PepsiCo looks to reinvent a category

PURCHASE, N.Y. -- PepsiCo is embarking on a strategy of creating liquid snacks as it seeks to recharge its sluggish beverage business, according to a report in the Financial Times. Speaking at an industry conference on Monday, CEO Indra Nooyi did not elaborate on what snack products could be turned into drinks but cited a drinkable oatmeal sold in Brazil as an example, along with the company's line of Naked juice drinks, which are packed with calories, vitamins and sometimes protein.

"A way to grow the beverage business is to take foods and drinkify them," Nooyi said. "There's a whole range of products we have in the pipeline that are value-added products that can be snacks made into beverages."

Nooyi's remarks are another sign that she continues to oppose breaking up the company into separate snacks and drinks businesses, according to the report. Some analysts have suggested that PepsiCo shareholders would benefit if the company's faster-growing snacks business was split from the slow-growing beverage unit.

"The fact that PepsiCo is a food and beverage company gives us a more holistic view of the consumer, what foods they eat, what do they like to drink, what parts of what they eat are they willing to drinkify," Nooyi said.

PepsiCo has been working to boost its beverage business as part of the corporate "reset" that Nooyi unveiled nearly a year ago. The company planned to invest an additional $500 million to $600 million in marketing and advertising this year.

PepsiCo has been under pressure to make changes after missing earnings forecasts and losing market share to rival Coca-Cola in recent years.

Nooyi said that PepsiCo is on track to meet its targets of cutting costs and returning money to shareholders this year.

Nooyi has been criticized for losing focus on the core carbonated soft drink brands in favor of more nutritious products. But on Monday she said that with more research and the development of better sweeteners, the company would be able to reverse a fall in sparkling drinks sales, according to the report.

"When you have a secular trend and consumer fatigue with a category, I think it's a great opportunity to reinvent that category," Nooyi said.