“We’ve never seen consumers as confused!” PepsiCo asks what – exactly – is ‘good for you’
PepsiCo groups its beverages and snacks into ‘good for you,’ ‘better for you,’ and ‘fun for you’ buckets. Broadly, these refer to nutrition, low calorie / low fat, and traditional products respectively.
But consumers – particularly millennials – now have different definitions and preferences, said PepsiCo Chairman and CEO Indra Nooyi, as the food and beverage giant reported its first quarter 2015 results yesterday.
‘Fruit and veg corridor’
“We’ve never seen the consumer as confused as they are today,” Nooyi said, in response to a question (during yesterday's earnings call) from John Faucher of JPMorgan, who asked how the company had seen the buckets change.
“And I use the word confused in a neutral way, not a negative way. If you had asked me a few years ago - people were moving to diet sodas. Now they view real sugar as good for you. They're willing to go to organic non-GMO products even if [they have] high salt, high sugar, high fat.
“So I think we have a challenge these days to really think about what is the definition of good for you from a consumer perspective. And this is unprecedented and the old definition of good for you is being challenged right now.
“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, vary our strategy based on what the consumer is thinking about.”
Nooyi highlighted PepsiCo’s health and wellness innovation, citing the recent introduction of additional Naked Juice flavors such as chia cherry lime, chia sweet peach and bright beets. Tropicana Farmstand Tropical Green – a fruit and vegetable juice blend with no added sugar - is another example.
In the ‘real sugar’ category she pointed to the launch of Mountain Dew Dewshine.
PepsiCo’s ‘good for you’ portfolio – ‘nutritious products that include fruits, vegetables, whole grains, low-fat dairy, nuts, seeks and key nutrients’ includes Naked Juice, Tropicana Farmstand juice blend, Muller Greek Corner yogurt, and Quaker oatmeal.
‘Better for you’ means ‘snacks baked with lower fat content, and beverages with fewer or zero calories and less added sugar’ – such as Pepsi Next and Lay’s baked chips. ‘Fun for you’ includes Pepsi, Doritos, and Lay’s Classic.
Carbonated soft drinks: under 25% global revenue
In its first quarter results for 2015, organic revenue for PepsiCo grew 4.4%.
Net revenue was down 3% compared to the previous quarter, at $12.2bn (12 weeks ended March 21 2015) instead of $12.6bn for the same period in 2014.
However, Nooyi warned that foreign exchange translation and transaction headwinds persist.
“Today our portfolio is positioned well,” she said. “Our annual net revenue is nearly split evenly between the US and countries outside the US. And just over half of our global revenue is derived from snacks, with the remainder from beverages.
“In aggregate, carbonated soft drinks comprised less than 25% of our 2014 total global revenue. And while we are proud to have the Pepsi name on the door, coolers represented less than 15% of our total revenue mix, and this speaks exactly to how we’ve transformed and will continue to transform our portfolio to address ever changing consumer needs and preferences.”