The Homa Files

Key Takeaway: PepsiCo, a company whose only ties to health come through the athletes in its advertisements, is trying to make a push for a more balanced portfolio.

Throughout this period, the company has seen a sharp decline in sales for many of its hero brands. PepsiCo is still staying true to its healthy vision, as the R&D budget has increased by nearly 40% over a three year period.

As delicious as Pepsi Apple Slices may sound to some, Wall Street does not seem to be as favorable to the strategy as it holds PepsiCo’s stock price well below the soft drink giant, Coca-Cola 

* * * * *
Excerpted from BusinessWeek, “Pepsi Brings In the Health Police” by Nanette Byrnes, January 14, 2010

Over the past two years, Pepsi has hired a dozen physicians and PhDs, many of whom built their reputations at the Mayo Clinic, WHO, and like-minded institutions. Some researched diabetes and heart disease, the sort of ailments that can result in part from eating too much of what Pepsi sells.

Last year, technological improvements to an all-natural zero-calorie sweetener derived from a plant called stevia allowed Pepsi to devise several fast-growing brands, including Trop50, a variation on its Tropicana orange juice that has half the calories of the breakfast standby. Introduced in March, Trop50 has become a $100 million brand.

Chief Executive Nooyi says she has no choice but to move in healthier directions. For more than 15 years, consumers have gradually defected from the carbonated soft drinks that once comprised 90% of Pepsi’s beverage business. Many switched to bottled water. Meanwhile, the cloud of criticism shadowing Pepsi’s largest business, oil- and salt-laden Frito Lay snacks, grew steadily.

Coming off a tough 2009, during which once high-flying brands such as Gatorade slipped, Pepsi hasn’t convinced Wall Street that Nooyi’s plans will pay off. The company trades at a significant discount to its rival, Coca-Cola . While securities analysts say that healthier foods look like a good long-term market, for now, the slowdown in the company’s far larger traditional snack-and-soda portfolio cannot be ignored. “The consumer can move to baked chips, or pretzels, or Sun Chips, but they’re not yet giving up their chips for an apple or carrot stick,” says Bill Pecoriello, CEO of Consumer Edge Research, an independent stock-research firm in Stamford, Conn.

Pepsi built its empire on the manufacture and distribution of instantly recognizable products. It could get a bag of Lay’s or a can of Mountain Dew to customers practically anywhere in the world. So far, healthier options have produced only modest hits, including TrueNorth nut snacks and SoBe Lifewater.

Edit by JMZ

* * * * *

Full Article:
http://www.businessweek.com/magazine/content/10_04/b4164050511214.htm?chan=innovation_branding_top+stories

This entry was posted on January 29, 2010 at 7:30 am and is filed under Mktg - Product & Innovation, Mktg - Product Line Mgnt. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.