CEO Indra Nooyi said the company (whose divisions include snack maker Frito-Lay) was faced with a change in consumers’ perspectives on what food was “good.”
“We’ve never seen the consumer as confused as they are today. And I use the word confused in a neutral way, not a negative way,” she said during yesterday’s earnings call.
The company had divided its products into three buckets: Fun for You, Better for You and Good for You, but believes the boundaries are now blurring.
The “challenge these days” is a change in consumers’ views on what “Good for You” stands for.
“A few years ago people were moving to diet sodas. Now they view real sugar as good for you. They are willing to go to organic non-GMO products even if [they have] high salt, high sugar, high fat,” said Nooyi.
This was “unprecedented,” she said, adding millennials especially have very different definitions of Good for You versus Fun for You.
Nooyi said: “So I think the best way to think about this is to think about the fruit and vegetable corridor, a protein corridor, a grains corridor and then sort of a predominantly carb corridor. And then within that just vary our strategy based on what the consumer is thinking about.”
Strong performance from Frito-Lay North America
The company reported a better-than-expected quarterly profit, helped by higher demand for its Frito-Lay snacks in North America and beverages in the Americas.
Sales in its Frito-Lay business rose 3.1% to $3.32 billion while revenue from the beverage business rose marginally to $4.43 billion.
Chief financial officer Hugh Johnston said demand was weak in Europe, where the company raised prices as a result of currency impacts.
PepsiCo’s net revenue fell 3.2% to $12.22bn in the first quarter, for the first time in four quarters. The company attributed the decline to a strong dollar and said revenue rose 4.4% organically.
It said Frito-Lay North America delivered a quarter of strong results. Organic revenue grew 4% and core constant currency operating profit rose 7%.
The US salty snacks category continued to show solid growth and Frito market share again posted steady sequential improvement supported by both volume growth and price realisation.
Good performance from Lays, Doritos and Cheetos
Key brands saw sales growth, including particularly good performance from the Lays, Doritos and Cheetos brands, it said.
The company launched products including Cheetos Sweetos, the first sweet version of the cheese-powdered snack, in the US as well as Cheetos appetizers and Doritos Jacked 3D.
Quaker Food North America delivered “commendable” results despite continued challenges across central food categories, it said.
During the quarter it gained or held value share in the US in all three of key categories: hot, ready-to-eat cereal and snack bars while expanding gross margin.
These value share gains are driven by innovation such as the launch of Quaker 3 minutes Steel Cut Oats in the quarter, which have cook time reduced from 30 minutes to three minutes. It also launched gluten free varieties of Quaker Popped Rice Crisps.
In developing and emerging markets it saw double-digit organic revenue growth in China and Turkey and mid-single digit organic revenue growth in Mexico, Egypt and India.
In June this year the company will celebrate the 50th anniversary of PepsiCo, the coming together of PepsiCo and Frito-Lay.