Speaking on the firm’s Q4 earnings call Thursday, CEO Indra Nooyi said that the beverage market was undergoing a “secular change” and that PepsiCo’s response was to “reinvent it with technology” rather than accepting the cola market is in some kind of terminal decline.
She added: “We have several great tasting cola product variations using zero calorie natural sweeteners blended with sugar that we’re testing in various markets in the world. And so far, these test results are promising.
“However, our U.S. launches of these sweeteners will begin this year, primarily with non-cola products, to build and test consumer acceptance before we launch low-calorie naturally sweetened cola products.”
Meanwhile, PepsiCo’s exposure to colas is “less than 25% of our total North American beverage portfolio, and less than 15% of our total North American business”, she said.
“We believe that the cola category is still relevant to consumers, but is going through a secular change as consumers look to address the twin issues of calories and artificial sweeteners.”
Pods: I think it’s too premature to commit without having a technology that actually works
Asked about Coke’s recent tie up with Keurig , she said: “In terms of single serve products at home, we are participating with multiple single serve home delivery product tests, and I think it’s very important that we ultimately commit and play with people where we know the technology is working.
“I think it’s too premature to commit without having a technology that actually works.”
Asked about splitting the business into two, she said: “And after an exhaustive analysis and review with our board of directors, we’ve concluded that North American beverages creates value and is optimized within PepsiCo’s structure today.
“Any structural separation would, among other things, result in loss of significant synergies, both between snacks and beverages in North America and between North American beverages and the balance of our international beverage operations.”
The results: Snack up, beverages down
PepsiCo said carbonated soft drink volumes fell by a mid-single-digit percentage in North America in the quarter ended December 28, while non-carbonated beverage volumes increased by a low-single-digit percentage. Snack volumes rose 3% in the Americas, but beverage volumes slid 2%. In Europe, snack volumes rose 2%, while beverages declined 2%.
For the full year, PepsiCo posed a 9% rise in net income to $6.74bn on net sales up 1% to $66.42bn.
Click here to read about Dr Pepper's plans for stevia-sweetened Dr Pepper, 7-Up and Canada Dry.
Click here to get full details of PepsiCo's Q4 results.