PepsiCo hails broad portfolio

14 October 2011

NEW YORK: PepsiCo, the food and snacks group, believes its broad portfolio of products should serve as a "unique differentiator" that helps drive revenue growth going forward.

On a conference call, Indra Nooyi, the firm's chief executive, argued a high-profile break-up, like that implemented by Kraft, would be less effective than PepsiCo's "Power of One" unified model.

"I firmly believe that PepsiCo's value is maximised as one company," she said. It was created as an integrated snack and beverage business, and its success is tied to this combination. This has been true in the past and will remain in the future."

"Power of One, I think, is the unique differentiator for PepsiCo. We are an integrated snack and beverage company."

In many markets outside the Americas, the firm is able to acquire scale via its beverages operations, which attracts retailers and consumers alike, and thus acts as an outrider for its snacks portfolio.

Turning to North America, Nooyi stated PepsiCo had streamlined back office functions, procurement and IT between its food and drinks arms, and was also able to yield enormous benefits in areas like R&D.

"[We can make] innovation calls that utilise our full portfolio to share unique shopper and consumer insights and provide cross-category product and merchandising solutions," she said.

"Even in those areas where we find the benefits of focus to outweigh scale, like manufacturing and marketing, we're able to realise the Power of One benefit by sharing best practices and the transfer of ideas and talent between these two businesses."

One inherent advantage of the additional scale resulting from PepsiCo's existing model is the ability to make cost savings, a goal that also lies at the heart of the Power of One programme.

"We focus a lot on productivity, and we look at every aspect of the cost structure of the company," said Nooyi. "The priority is investment in the brands ... driving innovation and making sure our businesses are well supported first, and then it is on covering commodities."

Among the areas of focus for PepsiCo here are beverage ranges like its eponymous cola, Mountain Dew, Gatorade and Sierra Mist. Nooyi suggested its current targeted approach was delivering results.

"Brand by brand, we're beginning to work on brand investments," she said. "We are [also] beginning to think about creative ways to implement revenue management and price/pack [initiatives] without creating a problem with retailers, with consumers trading down."

Data sourced from Seeking Alpha; additional content by Warc staff