Depending on who’s telling the story, PepsiCo is either a company looking for more snack angles or it’s a company being torn in two very different directions.
Since Chief Executive Indra Nooyi took the reins in 2006, the company has been put on a mission to deliver healthier snack options for customers everywhere. She felt healthier snacks were one of PepsiCo’s “biggest growth opportunities,” as well as an ethical position for the maker of decidedly unhealthy items like Cheetos, Fritos and Ruffles.
Finding Slippery Footing in Health Food Markets
Although PepsiCo’s core competencies typically involved more sugar, fat and sodium than are generally recommended in quantity, Nooyi is a staunch believer that she can make PepsiCo better in the short term.
Her PepsiCo has launched numerous healthier snacks, many of which have fizzled dramatically, since she came on board in 2006. These risky launches eventually resulted in her having to cut profit outlooks twice in 2011 and issue a warning in 2012. Investors accused her of ignoring the profitable “bad for you” brands in favor of her charge to make PepsiCo more responsible.
The reality is a bit more difficult to tease out than the drama would make one believe. While Nooyi has been focusing efforts on developing brands that appeal to healthier eaters, she’s also been instrumental in the creation of healthier versions of the foods that have steadily kept PepsiCo in revenues topping $60 billion. Healthier products like Quaker Real Medleys, instant oatmeal with nuts and fruits, and Mountain Dew Kickstart, a juice-based energy drink with half the calories of soda, have been huge hits for the company.
Success for PepsiCo is Different
Defining success from a PepsiCo standpoint is much different from the standard other healthy snack companies maintain.
A product that brings in $50 million from a small company is a massive success, but for PepsiCo, that product is a failure and will be scrapped sooner rather than later. This is because of how the company has its infrastructure arranged.
PepsiCo has many huge factories dedicated to the production of just one or two types of snacks, like the 24/7 Frito-Lay plant in Irving, Texas. This factory takes in 20 tons of potatoes every couple of hours, then ships chips out to stores that same day.
This type of efficiency isn’t possible with smaller run snack lines, even if they’re worth $50 million. Those are the smallest potatoes by PepsiCo standards, making it so much harder to develop a healthy snack that will also work within the confines of the manufacturing and distribution system.
For now, PepsiCo is focusing on improving existing products, but will continue to give some attention to new and innovative products. Off the Eaten Path Mosaic Veggie Crisps are promised in 2017, for example. PepsiCo hasn’t given up healthy snacks entirely, but it’s probably going to be more cautious about them moving forward.