Pepsi ‘future proofs’ brand as it increases focus on ‘guilt-free’ products

Pepsi is increasing its focus on low-calorie and “nutritional” innovations in a bid to “future proof” the company and respond to consumer appetite for health and wellness products.

Speaking on an earning calls following the company’s first quarter results, which saw organic revenue grow 3.5% and net revenue decline 3%, PepsiCo’s CEO Indra Nooyi said the company was “aggressively moving towards products with fewer calories” in a bid to transform its product portfolio. Besides owning Pepsi, the company also looks after brands such as Lays, Tropicana, Quaker and Gatorade.

She said: “We are future proofing our product portfolio by responding to the increased appetite for health and wellness. ‘Everyday nutrition’ products that include grains, fruit and vegetables, plus those that are naturally nutritious like unsweetened tea and water, currently make up 20% of our revenue portfolio.

Nooyi added that the company’s “guilt-free products”, which include diet beverages and products that have less than 70 calories per 12 ounces, account for 45% of the portfolio by revenue.

“The growth of our everyday nutrition products is outpacing the balance of the portfolio. We have undertaken significant activity to transform our portfolio, and broadened it so we’re less reliant on colas. Globally, just 12% of our revenues comes from trade mark Pepsi,” she said.

To accelerate growth, the company is investing in research and development and is “aggressively moving” towards products with fewer calories. Figures supplied by the company show that volume sales of “nutritional products” including reduced fat Doritos and gluten-free Quaker oats grew 30% in the first quarter.

“We are feeling pretty good about the transformation efforts of our portfolio,” commented Nooyi.

Besides moving towards health-focused products, the company also stepped up its level of investment in marketing. According to Nooyi, it accounted for 6.3% of sales in 2015, as Pepsi looks to invest “more dollars in consumer-facing advertising and marketing campaigns”.

In a bid to cut costs, Nooyi added it has now “fully implemented a zero-based spending programme throughout the company”. Pepsico isn’t the only company to have used zero-based budgeting – last year Unilever announced it would also be implementing the model, which sees its marketers justify spending on all new brand activity rather than budgets being based on the previous year’s spend.

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