PepsiCo focuses on building brands, innovation

15 February 2010

PURCHASE, New York: PepsiCo will focus on "refreshing" its core beverage brands and launching a variety of new products, as it seeks to drive growth in both mature and emerging markets.

The company's chairman, Indra Nooyi, predicted that the "cautious consumer" would continue to be the norm in regions like the US and Western Europe this year, largely due to rising unemployment.

PepsiCo's objectives for 2010 will thus include "maintaining the right value equation" for shoppers in these areas, while also placing an increased emphasis on "product differentiation" and innovation.

More specifically, the Purchase-based firm will be "stepping up our investment in renovating our core products, launching of new innovations in our North American beverage business and innovative sustainability initiatives," Nooyi said.

"The actions we are taking to refresh our brands across the entire beverage category will enable us to accelerate top line growth and also improve our profitability," she added.

"We are in a unique position with retailers across the globe because we can leverage to extraordinary consumer categories: snacks and beverages."

One of its major activities to date has been pulling back from advertising in the Super Bowl in favour of promoting the Refresh Everything campaign for its trademark cola, which has a strong social media element.

As part of this programme, individuals, businesses and not-for-profit organisations can apply for grants, ranging in value from $5,000 to $250,000, to fund projects benefitting local communities.

In the first 72 hours following the launch of this scheme, PepsiCo received more than 1,000 online proposals, demonstrating the "relevance" of this platform to consumers.

More broadly, the company plans to enhance its position as a "lifestyle business", with the aim of expanding revenues from its "good-for-you" operations from $10 billion to $30bn in the next decade.

Tropicana, Quaker and Gatorade are among its top-performing properties in this category, and will be the subject of a variety of brand extensions in different markets.

"We're going to augment the organic growth of these platforms through an increasing stream of science-based innovations," Nooyi said.

Recent examples of this process have included the launch of Trop 50, an orange juice line with reduced sugar, in the US last year, a product that has already reached nearly $100 million in sales.

In 2010, PepsiCo will attempt to build on this momentum with Tropicana Juicy Rewards, providing consumers with discounts on items like tickets to theme parks, and money off products made by Adidas.

Similarly, having recently repositioned Gatorade to more heavily emphasise its athletic credentials, a new range called G Series, which aims to provide nutrients for before, during and after exercise, will be added to its sports drinks stable.

"In 2010, we will … support our innovations with increased advertising and marketing," Richard Goodman, PepsiCo's chief financial officer, said.

Frito Lay North America was also the fastest-growing consumer packaged goods company in "measured channels" in the US last year, indicating the possibilities in the "macrosnacks" segment.

It increased the use of price promotions on Fritos and Cheetos in 2009, as well as introducing Rancheritos and Tostitos salsa, targeted specifically at Hispanic shoppers.

Looking to emerging economies, fresh offerings have included Nimbus Lemon in India, and a localised variant of Tropicana in China, which Nooyi identified as a key target market going forward.

"We are looking at the period between 2010 and 2015 as a period of tremendous investment in China beverages and the market's still growing in leaps and bounds," she said.

"In snacks, the market is wide open. The unbelievable thing in China is a snacking culture and they snack on many, many interesting items, and they like the Western brands because we are a mark of quality."

"We're off to a good start with Lay's and the Quaker brands. We're going to add a lot more products under those umbrellas to grow the snacks business."

Data sourced from Seeking Alpha; additional content by Warc staff