PepsiCo management believes that investors and the general public may not appreciate just how much they have redirected the company toward better-for-you products and away from Pepsi and other “junk food” holdovers that have threatened to make PepsiCo seem like a dinosauric relic of the Big Food era.
So CEO Indra Nooyi reminded everyone on PepsiCo’s quarterly earnings conference call this week that the maker of Frito-Lay snacks, MountainDew, Naked juices and Quaker Oats now gets less than 25 percent of its global sales from soda—and just 12 percent of sales comes from Pepsi lines
She also pointed out that what PepsiCo calls “guilt-free products”—those with fewer than 70 calories per 12 ounces of beverage and snacks with low levels of sodium and saturated fat—now account for about 45 percent of its portfolio by revenue. And “everyday nutrition” products such as bottled water and unsweetened tea now account for almost 25 percent.
Nooyi didn’t indicate how these percentages compared with a previous years but her point was clear.
“We’ve … been future-proofing our product portfolio,” she said on the call, “reshaping it to capitalize on consumers’ increasing interest in health and wellness.”
Under Nooyi, PepsiCo also has been reshaping its portfolio with higher profitability in mind. That’s why, for example, it has been putting Pepsi in smaller and higher-profit containers, and why it has backed the introduction of its 1893 artisanal soda brand, which carries higher margins than the troubled and commoditized Pepsi line. Coca-Cola has been taking some of the same steps for some of the same reasons.
Nooyi said the company also has “increased the efficiency and effectiveness of new-product launches by leveraging our global scale.”
She isn’t too optimistic about the globe in general, however, noting tough going in Brazil and Russia, two key PepsiCo markets, as well as a growing sense of economic deceleration worldwide. This will make it more difficult for PepsiCo to intensify its shift to better-for-you fare, but there’s no going back.