The primary driver of PepsiCo‘s revenues in Q1 2017 was its portfolio of healthy snacks and beverages. The company’s organic revenues grew by 2% in the quarter and Mexico and Russia saw high single digit organic revenue growth. As PepsiCo works towards transforming itself to adapt to the changing customer preferences of healthier lifestyles and aims to limit its environmental footprint, the company has adopted a motto of “Performance with Purpose.” In order to meet the evolving needs of customers globally, the company is shifting its portfolio to a wider range termed as “Everyday Nutrition Products.” These products contain nutrients such as grains, fruits, vegetables, or protein, and the portfolio falls under a broader category of “Guilt Free Products” which also includes beverages which have less than 70 calories from sugar and small serving snacks with low sodium. The company now derives 45% of its revenues from these Guilt Free Products, indicating that it has transformed its portfolio towards healthier products according to changing customer preferences.
Investment in R&D, Advanced Technology Key In Portfolio Transformation
In order to make its product portfolio healthier, PepsiCo has been investing continually in research and development to identify new ingredients, recipes, and sweeteners which can help improve its products. Further, PepsiCo is investing in advanced manufacturing technologies to make its products healthier. One such innovation on the manufacturing front is its proprietary frying innovation which can reduce the amount of fat in potato chips by 20%.
Demand for healthier food is on the rise, and PepsiCo has a clear strategy in place to transform its product portfolio towards Guilt Free Products. PepsiCo’s R&D efforts in this direction are showing results. According to EuroMonitor, global sales of health food are likely to reach $1 trillion in 2017. Allied Market Research estimates that the Asian healthy “guilt free” snacks segment is likely to grow at a CAGR of 14.5% over 2016-2022. With its focus on healthy products, PepsiCo is well poised to capture a portion of this growth, and healthier snacks and beverages are likely to drive a significant amount of the company’s long term growth.
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