Tuesday, March 23, 2010

Convenient and Healthy? PepsiCo to focus on healthier foods, cuts salt

PepsiCo, largely known for junk-food brands and C-Store stalwarts like Doritos and Pepsi, is setting out to triple its sales of healthier fare in the next decade. PepsiCo Inc. announced the new goal for brands such as Tropicana, Dole, Quaker and Tazo teas on Monday, March 22nd at an investor event. The company also backed its forecast for long-term earnings growth.

Government Pressure to Change
Governments all over the world are exerting pressure on food makers to improve nutrition. Pepsi is also making the case that it's just as much consumer demand that's driving the healthier changes. PepsiCo expects more shoppers to buy based on nutrition as Baby Boomers age and people in developing countries get wealthier. Currently, about 18 percent of PepsiCo's revenue comes from the lines it considers healthier, including Tropicana, Dole, Quaker and Tazo teas. PepsiCo wants to triple the $10 billion in revenue from such brands are producing now to $30 billion by 2020.

That may be a huge boost, but the nutritional food business is still small compared with the company's less-healthy food, now being called "fun for you" foods, like Lay's potato chips and soda, worth $50 billion a year. PepsiCo believes the two businesses require different approaches. The chips, soft drinks and other brands grow quickly and can have many different versions of brands, such as lime-flavored Tostitos. But the nutrition business' brands must not have too many variations so the brand remains the focus, and they must be led by people who have experience in marketing healthier foods.

Making Snacks and Sodas healthier

PepsiCo said Monday it plans to cut sodium in each serving of its key brands by one-fourth in five years. It also set two goals for the next 10 years: to cut the average added sugar per serving in drinks by 25 percent and saturated fat per serving by 15 percent, in addition to adding more whole grains, fruits, vegetables and low-fat dairy into product lines.

Other food makers are announcing similar goals. Last week Kraft Foods Inc. pledged to cut salt in its products sold in North America by an average of 10 percent over the next two years. ConAgra Foods Inc. and Campbell Soup Co. have also announced sodium cuts. Many health leaders have urged food makers to make such changes. First Lady Michelle Obama has made the fight against childhood obesity a top priority. Last week Mrs. Obama asked the nation's largest food makers, at a meeting of the Grocery Manufacturers Association to put less fat, salt and sugar in foods.

Last week, PepsiCo also said it would remove full-calorie sweetened drinks from schools worldwide by 2012. PepsiCo is investing in science to improve nutrition, including developing a new salt and more lower-calorie or zero-calorie sweeteners. The new salt dissolves more quickly in the mouth, so people don't have to eat as much to get the same effect. Pepsi changed the salt's size and crystal structure so the taste on a potato chip stays the same.

At the same time, PepsiCo isn't ignoring its soft-drink business. It’s core soft-drink business, and industrywide though all brands, has been slumping as people switch to healthier juices and teas or limit their purchases in the recession. In order to help the beverage results, the company completed its $7.8 billion acquisition of Pepsi Bottling Group and PepsiAmericas last month.

Getting pinched at the Pump? Gasoline pump prices highest since October 2008

Does it seem like you and your customers spending more at the pump? Gasoline pump prices lingered at a 17-month high on Monday following a steady climb in recent weeks. Nationwide average retail prices remained flat at $2.82 per gallon, the highest level since October 2008. Prices are up 18.6 cents in the past month, according to AAA and OPIS, the Oil Price Information Service.

That matched the national average in the Energy Information Administration's weekly report, up 3 cents from a week ago and 86 cents above a year ago. California had the highest average pump price — $3.09 a gallon — and the Gulf Coast region was the lowest at $2.69 a gallon. Many experts and the EIA think average gasoline prices will hit $3 or more this spring or summer before easing later in the year. More expensive gasoline blends to cut pollution in the warmer months, and the fact that more drivers take to the road, adding to seasonal demand, should keep pump prices up.

When gas averages $3 per gallon, an average driver using 50 gallons of gasoline a month will spend $150 on fuel. A year ago, prices were at $2 a gallon. The price rise isn’t good news, as it comes as the economy continues its slow recovery from the current recession and deals with stubbornly high unemployment.

US Drivers Not Alone

Pump prices could potentially ease a couple of pennies later this week, since the month long rally in oil prices stalled at the end of last week. The price of crude oil is the major component of the cost of a gallon of gasoline. Crude oil prices gained little ground Monday. The April contract, which expires Monday, rose 57 cents to settle at $81.25 a barrel on the New York Mercantile Exchange. Most of the trading moved to the May contract, which added 63 cents to settle at $81.60. This means there will no large downward move in gasoline prices in the short-term. In London, Brent crude rose 66 cents to settle at $80.54 on the ICE futures exchange, so European drivers are experiencing the same price increases. In other Nymex trading in April contracts, heating oil rose 0.7 cent to settle at $2.0837 a gallon, and gasoline gained 0.06 cent to settle at $2.2562 a gallon.