PepsiCo remains a leading global brand, specializing in the making of packaged drinks and foods. Commonly recognizable PepsiCo products include Fritos, Cheetos, Lay’s, and Pepsi, all similar due to either their high fat content, high salt content or sugar, all unhealthy options in flavoring food. However, consumers are on an increasingly health conscious diet, where high fat, sodium, and sugary foods are shunned for healthier alternatives. It is the consideration that PepsiCo Chief Executive Indra Nooyi seeks the transformation of the company into a healthy foods juggernaut. Commitment to the healthy foods cause has witnessed the company’s expansion of its “good for you” portfolio, with products such as Quaker oatmeal, Sabra hummus, as well as Naked juice. Nonetheless, and despite a growing array of healthy offerings, PepsiCo still lagged behind its self-set goal of 2010, to triple revenue from its nutritious offerings to $30 billion within a decade (Esterl Par 4). Moreover, while the company remains dedicated to improving its product offerings, the company still lags on self-imposed targets of reducing fat and sodium from its major brands. Interestingly, sugars added during the manufacturing process are on the increase, contrariwise to the company’s planned reduction.
While the global public clamor for healthier alternatives continues to rise, especially on the back of increased lifestyle diseases, a majority of consumers still prefer the tastier, unhealthy options such as Fritos and Chips. This observation reflects on the company’s bottom-line, where brands such as Doritos Chips and Cheetos Puffs contributed to increased sales volumes as well as rising profit margins for 15 consecutive quarters (Esterl Par 6). The market dominance of the less healthy choices is so compelling that PepsiCo stock price set a record high in July 2016, earning the company plaudits even from shareholders as well as activists. The case of PepsiCo reflects the general truth that big food conglomerates have to deal with, that of taste being the primary consideration in snack purchase. 66% of baby boomers, as well as 53% of millennials, support this position, with Alix Partners consultants submitting that when people gather they snack on chips and pretzels as opposed to healthier options such as granola bars (Esterl Par7).
PepsiCo CEO views the company’s venture into healthier products as both an opportunity as well as an ethical obligation for the company. The healthy foods transformation continues to underwhelm, economically, with Nestle SA for instance, after going big on its healthier products offering announced that it would miss revenue growth projections for the fourth year running. Zein Abdalla, a former deputy to Ms. Nooyi prior to retirement observed the rush to make this transformation by industry players as premature, given the market’s inability to support it in an economically viable manner. Despite the gloomy outlook, PepsiCo through its CEO continues in its drive towards healthier alternatives, acquiring KeVita Inc, specializing in fermented probiotic drinks, attempted a merger with Nestle, known for its dedication towards healthier eating, as well as amplifying research and development efforts for healthier foods (Esterl Par 10).
The CEO’s bold incursion into healthier eating has not been without consequences, especially given a difficult global economy, as well as rising product prices. PepsiCo surrendered a significant share of its market to Coke, while the Frito-Lay North America unit also reported slowed sales growth. Following profit warning for two years, 2011 and 2012, pressure began mounting for the company, with a section of shareholders criticizing the company for ignoring products that were bad for the consumer, but good for the shareholder. The criticism attracted Mr. Nelson Peltz, a shareholder activist, who began accumulating shares in a campaign to split the company. Nonetheless, the company re-strategized, giving precedence to the key products, bringing the company back to profitability (Esterl Par 13). The current strategy employed concerning healthier alternatives rests on the back of the success key products. For PepsiCo to retain a product line, revenues generated are as important as the nutritional value, where shelf space priority is for the fast selling brands.
As a medical provider or a consumer health advocate, the position would be slightly different, where the primary concern would be to consumer health, translating to a preference for products with recommended amounts of the targeted additive. Further, compelling the company towards developing a healthy foods line would also be a priority, affording consumers with a choice for either healthy or the less healthy options. While the position of a medical practitioner leans towards healthier eating, the market demands sugary, salty, and tasty offerings. The two positions are almost similar in my view, exemplified by the approach taken by Ms. Nooyi since her assumption of the role of CEO. PepsiCo embarked on an aggressive push towards popularizing healthier eating, during which period the company’s earnings plummeted. However, with a return to focus on the major brands, the company has enjoyed massive returns, enabling it to invest further in research and development for market sound, healthier alternatives.
Works Cited
Esterl, Mike. "PepsiCo Wants to Sell Healthy Food, Consumers Want Chips." The Wall Street Journal (2016): Text. Web. <http://www.wsj.com/articles/pepsico-wants-to-sell-healthy-food-consumers-want-chips-1481481896>.
