PepsiCo: Banking On Nutrition

Dec. 14, 2005
PepsiCo retools its image by offering healthier products.

In recent years parents and health advocates have targeted soft-drink makers for contributing to childhood obesity and unhealthy lifestyles. In some instances, they have even tried to have soda vending machines banned from schools. So it wasn't surprising in November when Purchase, N.Y.-based PepsiCo Inc., the world's second-largest soft-drink manufacturer and one of IndustryWeek's IW 50 Best Manufacturing Companies for 2005, acquired two product lines that are considered healthy alternatives to traditional snack foods.

On Nov. 21 the company said it purchased Stacy's Pita Chip Co. for an undisclosed amount. Stacy's is the largest U.S. maker of pita chips with sales approaching $60 million in 2005. The addition of Stacy's will complement PepsiCo's growing portfolio of healthy snack options, the company said in a Nov. 21 press release.

Stacy's will report to the company's Frito-Lay unit Chairman and CEO Irene Rosenfeld."Stacy's enables Frito-Lay to be a leader in the pita chips category, while supporting our plans to expand our snack offerings to meet consumers' changing needs and lifestyles," Rosenfeld said in the November statement.

The following day, PepsiCo said it would buy Sara Lee Corp.'s European nuts business in the Netherlands, Belgium and France for 130 million euros (US$153.8 million). The business unit sells products under the Duyvis brand in the Netherlands and Belgium and the Benenuts brand in France, the leading nut brands in their respective markets.

PepsiCo Inc.
At A Glance

PepsiCo Inc.
Purchase, N.Y.
Primary Industry: Beverages
Number of employees: 153,000
2004 In Review
Revenue: $29.3 billion
Profit Margin: 14.4%
Sales Turnover: 1.0
Inventory Turnover: 9.1
Revenue Growth: 8.5%
Return On Assets: 16.6%
Return On Equity:35.5%
PepsiCo also is making changes to its current brands. On Dec. 1 the company introduced a new cereal called Life Vanilla Yogurt Crunch. The new cereal is made with whole grain Quaker Oats and features crunchy oat clusters covered with vanilla-flavored yogurt.The cereal delivers nine essential vitamins and minerals and provides 4 grams of fiber per serving. It will be available nationwide in January 2006.

Further promoting its move toward healthier products, is PepsiCo's S.M.A.R.T. lifestyle marketing program, which the company launched Nov. 4.

S.M.A.R.T. stands for:

  • Start with a healthy breakfast
  • Move more
  • Add more fruits, vegetables and whole grains
  • Remember to hydrate
  • Try to lower calories or fat

PepsiCo kicked off the campaign in conjunction with the nonprofit organization KaBOOM!, a charitable organization that helps build new playgrounds, by building a playground in Washington, D.C., with supermodel Cindy Crawford among the participants.

The campaign complements the company's Smart Spot product labeling program that it started last year. PepsiCo now includes a Smart Spot symbol on products that meet a nutritional criteria based on statements from the Food and Drug Administration and the National Academy of Sciences.

All this comes amid a lawsuit that a group of lawyers plan to file in Massachusetts in the next few months against PepsiCo, its rival Coca-Cola and their local bottlers, the New York Times reported in a Dec. 7 article. The suit will focus on the sale of unhealthy beverages in high schools and the companies' marketing methods to students. But the soft-drink companies are fighting back. According to the Times article, the American Beverage Association, a lobbying group for the beverage industry, released a study that shows the average student consumes just one 12-ounce non-diet soda a week from school vending machines.

About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.

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