PepsiCo on CSDs: How it thinks it can kick the industry’s Achilles’ heel

By Rachel Arthur contact

- Last updated on GMT

'Show me the mini,' proclaims Pepsi
'Show me the mini,' proclaims Pepsi

Related tags: Mountain dew, Pepsico, Soft drink

PepsiCo’s 2015 launches will see an increased focus on products with health benefits, while it will push smaller packages to make the most of growth in its on-the-go business. 

Speaking at the Consumer Analyst Group of New York conference (CAGNY), Al Carey, CEO Americas Beverages, PepsiCo, said these categories would grow in strength, offering different opportunities to standard size carbonated soft drinks. 

“When I first came back to Pepsi about three years ago, I thought: boy, you just can't sell enough of these other drinks like tea, coffee, sport drinks, and Naked Juice to make up for the decline in the carbonated soft drinks,” ​he said.

“The answer is: yes, you can; and we are seeing that now. So I would say that these other brands -and then [the success of carbonated soft drink] Mountain Dew contributing - gives us a chance to grow the business.”

Good things come in small packages

Carey eyes up a trend on small packages, and says the company has been innovating in this department.  

“The thing that has really improved…. is what I call our single-serve business, our on-the-go business or on-premise, all those smaller packages,” ​he said. “Our business for the last eight quarters has improved dramatically.”

Driving this trend is PepsiCo’s product and package innovation in small packages, Carey added.

“Our R&D investments are starting to pay off. If you take a look at some of these products and some of the ones that were introduced in 2014, they are on their second and third year of good growth. We are staying with those products.

“Lipton Pure Leaf, for example, is up 40% on top of 40%. And the same thing with Kickstart from Mountain Dew.”

On-the-go products offer PepsiCo better margins, Carey said. Its customers make more money on products as well, providing an incentive to stock them, he added.

“We really want to see all of our new products in smaller packages, not dependent on the 12-pack, 12-ounce cans, and the 2-liters,” ​he said.

Kickstart_large
Mountain Dew Kickstart's new flavors

As an example, Mountain Dew Kickstart’s new flavour (launched in January​) comes in 12oz cans, smaller than the original 16 oz cans. At the time of the launch, PepsiCo explained this was because its target consumer “really enjoys a smaller, sleeker, can.”

Growth comes from new packs

When asked at CAGNY about the pressure on soft drinks, Carey said: “On the colas and the other CSDs, there is some growth now back into the CSD sugared side of the business.​ And it's coming from mini cans, glass bottles, different packs that weren't in existence before.

“And in fact, flavored CSDs is growing; so that includes Mountain Dew and other flavors of products that we've got out there. In fact, our Cherry Pepsi was up double digit last year.”

Coconut water, electrolytes, and less sugar

Mountain Dew Kickstart’s new flavour launch also gestures to another key point for PepsiCo’s 2015 portfolio of product launches: tempting consumers who are concerned about health.

The Mountain Dew flavors (Strawberry Kiwi and Pineapple Orange Mango) are made with coconut water and have a higher juice content than original Mountain Dew Kickstart (10% as opposed to 5%); and contain 60% less sugar.

“Most all of the products that we are launching this year have health benefits beyond our normal portfolio,” ​said Carey. “For example, juices: sugar reduced, zero calorie, and even portion controls.

“Most of them just going out the door right now, and almost all of them have improved health benefits. So we have very high hopes for our product news from a profitability standpoint.”

Other product launches in this category include Propel Electrolyte Water (the same electrolyte content as Gatorade with zero calories) and low calorie Lipton Sparkling Tea. 

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