PepsiCo Results Show Coronavirus Is Adding Fizz To These Trends

In one of the latest readings of coronavirus’s economic impact, soda giant Pepsi

PEP
Co reported a 15% decline in second-quarter profit on Monday, hurt by some additional $400 million in pandemic-related spending. 

On the sales front, governments’ stay-at-home orders hurt PepsiCo’s global beverage sales at convenience stores, gas stations and other away-from-home premises even as consumers eating in were buying more Frito-Lay snacks and Quaker Foods items. 

The Purchase, New York-based company, like many others, isn’t giving a financial outlook as the U.S. grapples with spikes of infection cases in some states.  To keep costs in check, PepsiCo said it will reduce non-essential advertising and marketing. It’s also simplifying its product portfolio to focus on better-performing items, part of a growing industrywide trend.

Amid the uncertainty, expect these trends to have staying power:

CPG companies doubling down on ecommerce: Since March 1, stay-at-home U.S. consumers have spent more online than even what they bought during the holiday season in in November and December, Adobe

ADBE
reported on Monday.

It’s no surprise that increased online grocery orders played a key part. 

“Whoever wins in ecommerce now and is able to capture those families that are trying this e-grocery service for the first time is going to win those families in the future,” said PepsiCo CEO Ramon Laguarta on the company’s call Monday. “We’re investing heavily in trying to be the first in that channel…. Ecommerce is a key area where we think we can gain market share.”

In one telling example, PepsiCo in May introduced PantryShop.com and Snacks.com to allow shoppers to order an assortment of its products directly. 

Immunity rising to be a key grocery-aisle pitch? Just as many household items with antibacterial claims have been coveted by consumers during the pandemic, items that may boost your immune system may become trending. 

“We’re seeing that consumers are looking for immunity more,” Laguarta said, adding its juice business is “booming.” PepsiCo, parent of brands including Tropicana juice and Naked smoothies, can “come up with other beverages and even snacks that go against that need,” he said. 

Snacks become part of the meals: As more consumers cook and eat at home, PepsiCo said they are including brands like Tostitos chips, Sabra dips and some Quaker products as part of their meals.

“We’re going to obviously move our advertising and our consumer support in terms of giving them recipes and helping them with solutions that kind of go incentivize that habit,” Laguarta said. 

Organic sales, which exclude the impact of acquisitions and other items, rose 6% at Frito-Lay North America, helped by demand for salty and savory snacks including Tostitos, Fritos and Cheetos. Quaker Foods organic revenue surged 23%, thanks to consumers eating more breakfast and dinners at home and baking more. 

Do-it-yourself soda machine is in?: While PepsiCo’s global beverage sales declined with consumers going out less and many places that they traditionally consume soda shut down or close in-store dining, Bubly flavored seltzer water posted gains as part of the increased demand for what consumers perceive as healthier choices. That, coupled with the stay-at-home trend and environmental-conscious pitch against single-use plastic bottles, means a potential big growth opportunity for PepsiCo’s $3.2 billion purchase in 2018: sparkling water maker SodaStream. 

“SodaStream is a beautiful business for this situation we’re living today,” Laguarta  said, adding the company is investing “substantial amounts.” “Consumers don’t have to leave their houses. They have perfect choices. We’re putting our Pepsi brands in the SodaStream model in Europe, and it’s working very well.”

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