PepsiCo Embraces Indulgent Brands

PepsiCo executives are still committed to promoting "better for you" versions of their product lines, following a decade of business strategy that has seen the company drive hard into health-conscious product development. Maybe it's just the holiday spirit, but now PepsiCo is ready to pay closer attention to its traditional "indulgent" products and brands, including long-time favorites under the Pepsi and Frito-Lay banners.

"We cannot forget about what I call the indulgent core businesses," Albert Carey, chief executive of PepsiCo Americas Beverages, said at an industry conference this week, according to the Financial Times. "If you're going to do the healthy, you have to do the core, because we still have a very strong business in the core." Examples, he said, include Frito-Lay "bar food" snacks such as taco-flavored Doritos and hot-wing-flavored Ruffles.

Depending on how hard astern PepsiCo wheels, this could mark a significant turnabout.

Under CEO Indra Nooyi and even before, the strategic focus of the company has been to build up and acquire better-for-you products and brands, ranging from Frito's Flat Earth vegetable chips to SoBe beverages. Nooyi's underlying long-term goal was understood to be a transformation of PepsiCo into a sort of U.S.-based version of Nestle, which while the purveyor of chocolate bars also arguably has become the world's most successful and prominent better-for-you food company.

But realities have intruded on Nooyi's strategy in a huge way. While she has been focusing on relatively nichey healthy opportunities, the performance of the flagship Pepsi brand has been flagging, until it got to the point last year that both of Coca-Cola's top drinks, Coke and Diet Coke, outranked Pepsi in sales for the first time. PepsiCo's increased marketing attention to Pepsi this year, including nabbing primary sponsorship rights on Simon Cowell's U.S. version of The X Factor, was designed to answer that criticism and re-energize sales.

Yet more investors have begun pressing Nooyi on the effectiveness of her strategy, some suggesting that she split up the company into one housing traditional "old" brands and businesses and a start-up-type operation that would be more devoted to health-and-wellness plays, similar to what Kraft is in the midst of doing.

PepsiCo is supposed to release a revitalization plan early next year. Until then and well beyond, expect the debate over its strategy to continue.