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.

No comments: