Rough ride for PepsiCo smoothies

PepsiCos decision to slash the price of its PJ Smoothies brand and reduce its product range may well prompt a lift in sales but critics argue that repeated revamps have confused consumers and resulted in PJs losing its mojo.

f2_120x120PepsiCo’s decision to slash the price of its PJ Smoothies brand and reduce its product range may well prompt a lift in sales but critics argue that repeated revamps have confused consumers and resulted in PJ’s losing its “mojo”.

It emerged last week that PepsiCo is to reposition PJ’s as a more mainstream offering by cutting its price by 30% and reducing the size of the range by half in an effort to lure new customers to the fast-growing smoothie category.
PepsiCo claims that price is a major barrier to consumption across the sector. It wants to position PJ’s as an alternative to supermarkets’ own-label offerings and its 250ml smoothies will now cost 99p. This is in sharp contrast to rival Innocent, which charges between £1.79 and £1.99 for the same size bottle.

PJ’s founded the smoothie market in 1994 but has seen its dominance shattered by Innocent, which has a UK market share of more than 70%. PJ’s market share fell to 13% in the year to September 8, 2007, according to IRI Infoscan.

PepsiCo is backing the move with a marketing campaign from Abbott Mead Vickers.BBDO later this year. A spokesman says: “In a recent survey, price was the biggest barrier to smoothie consumption. By removing this barrier, we hope PJ’s can open the smoothie market to consumers not currently buying into the category.”

To help finance the strategy change, exotic fruits will be replaced with cheaper, more mainstream fruits such as apples and oranges. And flavours such as Rainforest Acai will be replaced by four, more traditional combinations: Orange, Mandarin & Guava; Strawberry & Banana; Apple, Kiwi & Lime; and Strawberry, Apple & Rhubarb.

The move marks a change in strategy for PepsiCo, which acquired the brand in 2005. The brand was originally called Pete & Johnny’s but was renamed PJ Smoothies when it was relaunched with a more corporate look that replaced its original simple and quirky design. When this failed, the brand relaunched again, moving back towards its original design.

Derek Johnston, creative director of Landor Associates, which worked on both redesigns, says: “The first redesign was all about appealing to the mass market. Although it helped improve sales, the brand lost a lot of its quirkiness. The strategy is now to inject more fun into the brand.”

While retail insiders have broadly backed the move to reduce prices and believe the brand is still a significant player across the category, some observers claim the latest rethink is risky and that PJ’s will have a fight on its hands to wrest sales from supermarket own-label smoothies.

Claire Nutall, client director at brand agency Dragon, says: “It will be interesting to see how much additional brand power PJ’s has over own-label if it offers the same simple range for the same price. Taste is such a powerful driver in this area and retailers are pretty good at developing great tasting new flavour variants.”

Innocent, which some say imitated PJ’s original quirky marketing style, claims to be unsurprised by the move, arguing that its rival has not been performing well of late and adds that it is “unclear what the brand now represents”.

While sales of PJ’s were up almost 7% to more than £24m in the year to October 2007, sales of Innocent surged more than 60% to over £130m, according to Nielsen.

But while PepsiCo maintains it is committed to the brand, some question just how important PJ’s, which was reportedly acquired for just £20m, is to its US owner, whose portfolio includes Walkers Crisps, Tropicana and Pepsi cola.

Sales of PepsiCo’s market-leading pure juice brand Tropicana hit £200m in the UK in 2006, dwarfing that of PJ’s, and the company has another successful juice brand, Copella, in its line-up.

One former PepsiCo employee says that big corporate companies and smoothie brands are not natural bedfellows. He adds: “For PJ’s, getting a share of the voice among the company’s monolithic brands has been an issue. I am not sure the smoothie market lends itself to the corporate style. Innocent’s success has been down to its style, being informal and non-corporate.”

While Tropicana has enjoyed vast marketing support, Nielsen Media Research figures show the PJ’s marketing budget was reduced from £1m in 2006 to less than £150,000 for most of 2007.

PepsiCo has successfully launched brand extensions to Tropicana, including Tropicana Go aimed at the children‘s market, and has a smoothie range in the US, which observers say is likely to be launched in the UK this year. Pepsi-Co has tried and failed to do this before. But if PepsiCo can succeed this time, another of its brands could end up further eroding PJ’s sales.

The latest PJ’s rethink has polarised the industry, with some calling it a last-gasp attempt to grow its market share and others hailing it an astute move that has wrong-footed rivals.

Mark Rae, business development director at Brandhouse, says: “Smoothies are perceived as a bit of a treat and expensive. Reducing the price could give PJ’s more appeal. The challenge is to manage the price cut so there is no change in the perception of quality or health benefits.”

Rae adds that reducing a brand’s range may not indicate weakness, pointing to the success of the Proctor & Gamble-owned Head and Shoulders brand, which saw sales grow 10% when P&G cut the number of variants of Head and Shoulders from 26 to 15.

Others believe the brand has “lost its way” and think PepsiCo should better engage with consumers. Jonathan Gabay, founder of Brand Forensics, says: “One way for PepsiCo to be distinctive is to concentrate on its Tropicana brand. However, the smoothie market is now so important it must also find something for PJ’s which turns the drink into a complete brand experience.”

He suggests one way of achieving this would be to add an extra ingredient that sets it apart from competitors. PJ’s could also engage better with the market on healthy issues, according to Gabay.

PepsiCo can point to the appointment of former health secretary Alan Milburn to its recently established UK board of advisers as an effort to bolster its health and wellness credentials (MW May 10, 2007).

Such a move indicates that the company recognises the growing importance of health when marketing its products, but whether it can halt the rise of Innocent in what is still a niche market, and reinvigorate interest in its UK smoothie brand is an entirely different proposition.

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