PepsiCo moves in on mealtimes, puts ‘zero sugar at the center of portfolio transformation’

23-Feb-2023 - Last updated on 23-Feb-2023 at 21:34 GMT

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As the beverage and snack leader looks to expand its global market share and profits in the coming years, PepsiCo sees an opportunity to grow the company by homing in on meal occasions, tapping into health and better-for-you consumer trends, and optimizing its business processes.

Per 2021 Euromonitor numbers on retail sales, PepsiCo owns an 8% market share in the $599bn global convenient foods market and 9% in the $626bn global beverage industry, PepsiCo Chairman and CEO Ramon Laguarta shared at this week’s Consumer Analyst Group of New York conference. But PepsiCo still has plenty of room to grow, he added.

"In the US, PepsiCo Foods North America ... [has] a huge opportunity to broaden their portfolio, not only to continue to gain occasions in existing categories ... [but at] the same time moving our portfolio closer to food, being part of meals."

Bringing snack foods to mealtime

To expand its snack brands, PepsiCo is “giving consumers the opportunity to buy our products beyond a bag in a much more holistic food experience,” Laguarta noted.

For example, PepsiCo snack brands be an “accompaniment to a meal but also [be] part of the recipe of the meal," he said, adding PepsiCo is “experimenting with how Lays can substitute potatoes in many dishes around the world,” and “how Doritos can be part of how you make a pizza."

Additionally, PepsiCo is “investing a lot in food trucks” and providing more opportunities for consumers to have meals with PepsiCo products with initiatives like its Tosticentro food trucks and carts in Mexico, which serve street food dishes like Tostilocos or Dorilocos.

“We’re moving … closer to food solutions with things like walking tacos, where consumers can kind of add ingredients to our tortilla chips or some other products and create their own mini meals.”

Revamping the PepsiCo portfolio with “positive choices”

Like many brands across the industry, PepsiCo is embracing the demand for healthier, better-for-you snacks and beverages and transforming its portfolio with what Laguarta calls “positive choices.”

On the beverage side, PepsiCo is “putting zero sugar at the center of portfolio transformation,” while also “innovating in non-sugar brands like Lifewater brands like Propel [and] … Bubly.” In its fourth quarter, PepsiCo saw Pepsi Zero Sugar volume sales grow 26% from the quarter, and it reinforced the brand with marketing at the Super Bowl and a new formulation.

In snacks, PepsiCo is “working on sodium reduction, fat transformation, [and] also new substrates,” Laguarta said. The company is “emphasizing a couple of cooking methods like baking or popping that are healthier for consumers” and releasing products like multigrain Sun Chips and rice-and-pea chips with Eaten Path, he added.

“We've continued to reduce sodium the same way as we've … [changed] the beverage portfolio from full sugar to zero sugar and asking the consumer to make very little sacrifice to go from a very refreshing full sugar beverage to a zero-sugar beverage.”

Boosting A&M, streamlining IT to leverage AI

PepsiCo also is looking to bolster capacity, streamline processes, and boost advertising and marketing (A&M) activities to grow the business even further.

"Our priority number one ... is investing appropriately in our business. Within this business, [it] has so much ground for growth that we need to continue to invest in capacity, utilization, optimization, and creating new layers of advantage for our business."

To get the word out about new products, PepsiCo will continue to invest in A&M, which it increased by 24% from $4.2bn in 2018 to $5.2bn in 2022, Laguarta said. With sugar-free at the center of the portfolio, PepsiCo is "disproportionately,” putting “A&M behind zero sugar," he said.

The brand also is focusing on “capturing the value of our investments in IT especially,” which then it doesn’t have to spend so much on in the future. One area PepsiCo hopes to do this is by migrating its systems applications and processes to the cloud, providing the company with "more harmonized data" and the ability to leverage AI and data analytic capabilities, PepsiCo Vice Chairman and CFO Hugh Johnston explained.

With a cloud-based SAP system, PepsiCo can then perform "precision selling," using AI to predict appropriate product assortment and volume for stores to reduce waste, Johnston said.