Speaking at last Thursday’s Consumer Analyst Group of New York (CAGNY) Conference, CEO, John Compton said: “We have a unique opportunity to brand, not price promote, our beverage and snacks brands together, giving us a competitive advantage with shoppers when they make their purchase decisions.”
Chairman and CEO Indra Nooyi said that the $66bn turnover firm’s core business of convenience foods and beverages were complementary, sharing common customers, resources and capabilities.
Last September, the PepsiCo formed its ‘Power of One – Americas Council’ to co-ordinate food and beverage operating systems, and focus on creating opportunities in complementary products across the categories that appealed to cosumers and retailers.
Nooyi said:“We have the number one global food brand with Lay’s and the number two global beverage brand with Pepsi. Today, over a third of our portfolio is in fast-growing or emerging markets, and we are roughly evenly balanced between snacks and beverages.”
Snacks grow share
In tandem with a 50/50 balance in business between developing and developed markets over the next 10 years, Nooyi also predicted that snacks (currently worth $102bn in the US) would become a bigger part of its overall portfolio.
And Tom Greco, president of Frito-Lay North America (brands include Lay’s, Doritos, Tostitos, Cheetos) told delegates that PepsiCo saw potential in relating its Max brand more closely to snacks.
“Pepsi Max is a brand that is all about maximum taste with zero calories. It’s targeted to young males, and as you know, for young males, taste is king. Ruffles targets the exact same consumer with what we call ‘dude food on a chip’, it’s a product experience about maximum taste,” Greco said.
“So we tested a proposition that unites Pepsi Max and Ruffles Max and we found a great opportunity, as 50% of Pepsi Max consumers are also consumers of Ruffles. You’ll see this great combination in the back half of this year.”
Consumers connect brands
John Compton, PepsiCo’s CEO said:“It’s a simple fact that consumers think about our beverage and snack brands together. When she makes her list, she plans them together. When she goes to the store, she buys them together.”
Compton said that snacks and beverages were often the largest categories on retail sale, and carbonated soft drinks and snacks were bought together 30% of the time, generating $12bn of revenue.
“Retailers consistently asked us to increase that co-purchase. Why? Because of the margin and cash flow generated,” Compton said, and he added that PepsiCo’s predominance in salted snacks meant retailers turned to them for solutions.
“We’ve been talking about Power of One for around 13 years, and over this time we’ve built customer teams, established perfect pairs for price promotion and done occasional big holiday promotions. All this will remain…but we think we’ve unlocked the bigger idea.”
Consistent brand association
Compton said PepsiCo had thought about whether it was possible to create a consumer identity across two of the largest brands in the world, with the result that consumers thought about Lay's and Pepsi together every day of the year, not simply during promotional periods.
Starting at this year’s Indianapolis superbowl in early February, he said that PepsiCo had rolled-out its new ‘identity’ – advertising showing streamers emerging from both Lay’s and Pepsi branded products – to “celebrate” what the brands could do together.
He said:“We’ll be using this branding across our brands across multiple occasions, birthday parties, football games, different cohorts (Hispanic, Boomers). And we’ll be launching an integrated media campaign this summer on media and digital billboards.”
“We’ve standardised a tool kit for our sales teams across the country…customised to that local market using these identities. From early summer this identity will be unavoidable, on our permanent equipment [store furniture] and temporary equipment.
“We think the identity allows us to bring together the co-purchase of these brands but maintain their uniqueness,” he added