Pepsico’s transition back to core snack brands

Following a brief dalliance with health food innovations, Pepsico has returned to its core bestsellers – Pepsi, Lays, and Doritos – but with a strategy to make its products less of a guilty pleasure.

Why it matters

Although major CPG brands have had to focus on maintaining their margins for snack foods, there is the double threat of private labels and guilt. With greater concerns over products high in fat, sugar and salt, there is the possibility of less volume.

Pepsico’s current strategy rests on innovating its core products to try to make them healthier and therefore more permissible, while retaining the flavour that people like.

What’s going on

The company argues that this is a good thing for public health. CEO Ramon Laguarta’s logic, as told to the WSJ, rests on the idea that healthier products provide little impetus for making core snacks and soda pop better for people’s health. With a renewed focus on these, however, the company says it has set about reducing the salt, fat, and sugar in the products.

• To do this, the company has put together a “sensory panel” of tasters whose job it is to reduce these ingredients without consumers noticing.
• Experimental techniques include new salt crystals, different herb combinations, and new varieties of potato.
• It comes as both Pepsico and Coca-Cola start to move in other directions such as ‘hard’ or alcoholic variations of some of their biggest brands, like Pepsico’s Mountain Dew.

Marketing

From a marketing perspective, recent years of brand investment chimes with this increased R&D and manufacturing spend – effectively, this is all geared toward volume.

There’s also interesting detail about the company’s shift away from the trend of zero-based budgeting, which had led to some underinvestment in its core brands, especially in the US. To remedy this, the company now often adds market share growth targets to performance reviews.

Sourced from WSJ, WARC