PURCHASE, N.Y. -- On the strength of innovation from brands such as Frito-Lay, Doritos and Cheetos, PepsiCo’s revenue increased 1.3% for the quarter ending Sept. 9, with snack volume rising 3.2%, offsetting a 3.4% drop in beverage volume. On the whole, PepsiCo’s revenue amassed $16.24 billion, below analysts’ estimates of $16.31 billion.
Innovation in snacks at PepsiCo is happening around an emphasis on healthy and portable offers, led by recent rollouts such as Doritos Blazin’ Buffalo Explosion Mix and Mac n’ Cheetos in Creamy Cheddar and Flamin’ Hot flavors.
A key driver of PepsiCo’s snack revenue acceleration is the shift to what PepsiCo dubs “guilt-free products,” a transformation of its portfolio toward healthier products, according to a recent Forbes report. PepsiCo now derives approximately 45% of its revenue from the guilt-free basket.
And healthier, premium products are fueling revenue and margin growth, according to Forbes. In concentrating on these brands, the intent is to trigger a shift from low-priced, high-volume products (where volumes are slowing) to higher-priced, lower-volume products, which have a tendency to boost margins.
Amazon’s recent acquisition of Whole Foods also holds positive implications for PepsiCo snack brands, according to Bloomberg, as Frito-Lay releases its new line of organic and "free-from" products marketed under the Simply brand name. This new label includes organic versions of 11 core chip brands, including Doritos, Lay’s, Cheetos and Tostitos.
According to PepsiCo executive Jonathan McIntyre, quoted in the Bloomberg report, the products meet requirements necessary to be considered in Whole Foods stores.
Across both snacks and beverages categories, PepsiCo is making inroads to reduce calories and sugar, and cut salt and fat by 2025. As it adapts to changing consumer preferences, PepsiCo believes healthier products are key for long-term growth. According to the company, its “everyday nutrition” products will experience the swiftest rate of sales growth by 2025.