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.

McDonalds: 4th Quarter shows They are Solid for the Long Run

This was originally written for Gerson Lehrman Group

Summary:

1) McDonald's Profit is up VS last years Quarter 4 in a difficult environment

2) Discounting by other chains feed into a "Value War" McDonald's is likely to win

3) McDonald's is positioned for long term revenue and profit growth



Analysis:

Strong Quarter
McDonald's reported a quarter where they managed to earn $1.22 Billion dollars with it's home market, the US, being one of the weakest performing parts of the business. The US economy has high unemployment and aggressive price competition occurring from other large players, so McDonald's had a challenging environment to cope with here at home. New initiatives like the McCafe coffee line and the upscale "Angus burger" widened out the menu appeal to consumers who might not be regular McDonald's consumers.

Value Leaders
McDonald's has been entrenched in the "Value" portion of the business for roughly
3 years now, and the McDonald's operational model can sustain this for as long as competitors want to come into the "$1.00 item" arena.

McDonald's has been the driver of "Value" in the QSR Sector, and has consistently offered a good variety of products at the Value level. This has played well in the challenging economic environment of the US, and has forced other players to come in with items to compete at that price point, with Burger King now actively advertising their "Double Cheeseburger" after having steered largely clear of price-oriented competition. McDonalds has cost control and marketing message in the value arena down to a science, and while others may come and try, it seems unlikely they can be dislodged either operationally or perceptually as the value leaders.

Long-term outlook: Good
This shows McDonald's is positioned for long-term revenue and profit growth. When the US recovery hits full swing, McDonald's seems likely to be a prime beneficiary of the increased employment and more confident consumer a recovery will bring, adding strength to strong international results. McDonald's wasn’t afraid to become a "Pricer" early in the down cycle, and has managed that initiative to position itself for greater growth down the road.

Convenience Not Inconvenience

This was the lead Story in the January 25, 2010 Edition of Condevco's "Meter" Newsletter

Darcee and I were in Pittsburgh over the Christmas Holiday, to spend the Holidays with our extended families. While the circumstances aren’t important, we ended up at about 2:00PM on Christmas Day in a borrowed car heading for a visit. The snow was falling lightly and we Floridians were cold!!

We were hungry and knew our Christmas dinner wasn’t scheduled until about 6:30 that night. We were out in a rural area, no fast-food was around. So, we stopped into a convenience store to see what we could get to tide us over. Not one of the great chains that operate around Pittsburgh; no Sheetz or GetGo was close enough. As we pulled into the little store with two dispensers and 4 parking spots, we weren’t feeling too optimistic about our prospects. Maybe some Twinkies and a Slim Jim...

And, we walked into what the best of convenience can be! Two nice ladies were staffing the store, the one behind the counter dressed as Santa Claus, and freshly made and packed sandwiches (and good!) were in the cooler case for $2.99 each. The other employee offered us cookies from a tray one of her friends had just brought in! The store was clean, the staff was friendly , and it really affirmed what our business is all about.

They made working on Christmas into a gift and not a chore. You couldn't train what was going on there, just nice people who were doing the task they had to complete to the very best of their ability.!

Cumberland Farms Subsidiary Gulf Oil Acquires Brand Rights for Entire U.S.

Gulf Oil L.P., a wholly owned subsidiary of Cumberland Farms Inc., Is ready to make a significant geographic brand expansion now that the company has acquired all rights, title and interest to the Gulf brand in the U.S. The Gulf brand has been in existence for almost 110 years. For the last 20 years, Gulf-branded gasoline in the continental U.S. has only been available in an 11-state region in the Northeast through a licensing agreement between Gulf Oil L.P.'s parent company and Chevron U.S.A. Inc., according to a news release. The Cumberland Farms subsidiary now controls the right to market the brand throughout the United States and its territories. This acquisition enables Gulf Oil to expand its use of the Gulf brand throughout the U.S. for the first time since it first acquired certain rights to the brand in 1986, the company stated.

Framingham, Mass-based Gulf Oil currently distributes motor fuels through a network of more than 2,000 branded gasoline retail centers and 12 proprietary oil terminals.

With Gulf Oil already supplying roughly 10 percent of the retail fueling stations in its 11-state market region, the petroleum marketer and subsidiary of Cumberland Farms Inc. was approaching saturation -- and feeling some geographic constraints. But with the acquisition of all rights, title and interest to the Gulf brand in the U.S. from Chevron Corp., the fishbowl just became much larger for the company.

For the last 20 years, Gulf-branded gasoline in the continental U.S. has only been available in an 11-state region in the Northeast through a licensing agreement between Gulf Oil L.P.'s parent company and Chevron U.S.A. Inc. The new deal, which became effective Jan. 12th between Chevron and Gulf gives the Massachusetts-based company the right to market the brand throughout the United States and its territories, enabling Gulf Oil to expand its use of the Gulf brand throughout the U.S. for the first time since it first acquired certain rights to the brand in 1986, the company stated.

Looking to add Orphaned Chevron Mid-Atlantic Sites
While Gulf Oil wanted the rights to the mark when it began an overhaul of the brand in 2005, it was when Chevron announced its decision to pull out of 10 mid-Atlantic markets in late 2009 that the pieces fell into place for Gulf to expand its agreements with the major oil company. Gulf decided they wanted to purchase the rights to market the brand in the states where Chevron had announced it was pulling out, and it eventually progressed to the national marketing acquisition.

Super Jobber on the Way?
As for the immediate future, Gulf is looking to pick up stations that lost the Chevron brand in those mid-Atlantic states. It’s a natural extension of the current market area. Gulf has no terminals in that region currently. Primarily, it will focus on the distribution channel in the area to fuel its network growth, rather than real estate or company-operated locations, he added. Gulf is seeking well established, tenured distributors in the new markets it is entering.