Food manufacturing giants such as PepsiCo, Coca Cola and Nestle SA are injecting more healthy foods into the market. For example, Diet Coke and Pepsi Zero Sugar produced by Coca Cola and PepsiCo respectively have less amount of calories and promise consumers nutritious benefits. But how is the push for more healthy products faring in the market? Are consumers ready to abandon taste for more healthy products? After analyzing the profit margins of the two categories of products one will realize that tasty products trump healthy products. This essay thus presents a review of an article that summarizes PepsiCo attempts of filling stores’ shelves with more healthy products.
The appointment of Indra Nooyi as the company’s CEO back in 2006 ushered in a new era for PepsiCo (Esterl par. 12). A company that has long been associated with the not-so-healthy products such as Doritos and Cheetos will be making a move to invest in healthy, “good for you” products such as protein bars and drinks, vegetable crisps and oatmeal (Esterl par. 12). Ms. Nooyi appeared determined about making PepsiCo. a healthy business, as her first actions in office, were to send R&D teams to Iceland, India, Africa and the Amazon to study seaweed, Ayurvedic medicine, ancient grains, fruit, and berries respectively (Esterl par.14). In her early years in office, she pushed for production of healthy products and acquisitions of businesses that were making similar attempts such as KeVita Inc (Esterl par. 7). Ms. Nooyi even went ahead to propose a merger with Nestle SA, which the latter was opposed to fearing the move will hurt its corporate image. Amidst these healthy business strides that Ms. Nooyi was pushing for, she had to cut the profit targets of the company, two years in a row.
The company’s profitability took a hit. Some of the highest performing divisions of the company such as Frito-Lay North America had their sales take a nose dive. It wasn’t long before the issue angered shareholders. The CEO’s talk about healthy products was a “distraction” that was affecting the company’s performance. Investors including Mr. Peltz, a principal of Trian Fund Management, began a campaign to split PepsiCo (Esterl par. 17). Following the push from investors, Ms. Nooyi stopped talking about healthy products and shifted focus to the highly performing brands. Once the company was back on track and most of its performance and profit targets had been met and surpassed, the pressure from investors subsided. Former executives of the company acknowledge that the healthy food industry is a multi-billion industry, but investments in the industry have to be done with great caution (Esterl par. 20).
As a rational shareholder, my investment strategies would be guided by the principle of wealth maximization. I would advise the company to pursue any avenues that would increase my value of stock and divest away from projects that will hurt the stock price. In summary, I would be of the opinion that the company should concentrate on the “bad for you” products that will put more money in my pocket and those of other shareholders. However, my position would change if I were a medical provider or consumer health advocate. In such a scenario, I would advise the company to operate ethically and socially responsible and play its role in reducing the level of obesity in the society. I would recommend the company to focus more on healthy foods such as granola bars instead of non-nutritious salty chips.
Work Cited
Esterl, Mike. "Pepsico Wants To Sell Healthy Food, Consumers Want Chips". WSJ, 2016, https://www.wsj.com/articles/pepsico-wants-to-sell-healthy-food-consumers-want-chips- 1481481896.
