‘Baby boomers unlikely to buy much 24-pack Pepsi’: Al Carey warns

PepsiCo Americas Beverages boss keen to scrap ‘old industry growth paradigm’

By Ben BOUCKLEY contact

- Last updated on GMT

Vanilla-flavored Pepsi Cola on Target shelves in July 2014: Al Carey said flavors are resonating well with millennials, while 'real sugar' also appeals to consumers (Mike Mozart/Flickr)
Vanilla-flavored Pepsi Cola on Target shelves in July 2014: Al Carey said flavors are resonating well with millennials, while 'real sugar' also appeals to consumers (Mike Mozart/Flickr)

Related tags: Pepsi, Pepsico, High-fructose corn syrup

PepsiCo Americas Beverages CEO Al Carey says he wants to spend less on soda promotions where sales are declining and more on spurring growth in faster-growing portfolio areas.

Speaking at the Barclay’s Back to School Conference last week, Carey, who has spent 33 years at PepsiCo, defined promoted packs in liquid refreshment beverages (LRBs) as “every imaginable way you can pack 12oz cans and two liter”,​ and warned that the “old industry paradigm of growth through CSD pack promotion no longer holds".

Where carbonated soft drinks (CSDs) sold on promotion represent around 20% of the industry sales mix it represents about 30% of PepsiCo’s beverage sales in North America, but across the industry sales of CSDs on promotion fell 3% on a CAGR from 2010-2013.

Within the same timeframe the rest of PepsiCo’s Americas beverage business grew at a CAGR of 4.2%, and Carey told the conference in Boston the company had spent significant amounts of money shoring-up soda sales on promotion that would be better spent on investing to boost this figure.

'We need to move with consumers, away from these promoted packs' - Al Carey

“It’s unlikely Baby Boomers want to buy a lot of 24-pack Pepsi. I think we need to move the business in a direction where the consumer is going and that’s away from these promoted packs,”​ he said, noting that different beverages, single-serve CSDs and other profitable pack sizes could all profit instead.

PepsiCo’s CSDs that aren’t sold on promotion are growing at 2.5%, Carey said, noting Mountain Dew’s success and that of 7.5oz mini cans and glass bottles.

“So if you take a look at a glass bottle of Pepsi, we sell 12oz of glass Pepsi for $1. We sell 12oz of Pepsi in a 12oz can for $0.35,”​ he said.

“So as we move the mix to these kind of packages, it gives us tremendous opportunity to improve the overall margins for us and then also for our retailers as well.”

What might PepsiCo invest in instead of promotions? Turning to the bright spots in its portfolio, Carey said sports drinks market leader Gatorade grew strongly in H1 2014 and is “making good progress at going back to basics to be a drink for the sports occasion, the point of sweat”.

PepsiCo keen to stabilize diet CSD sales

New Mountain Dew products and merchandising strategy was feeding growth for that brand with Kickstart a $250m business after only two years, he added, while IRI data showed that the brand was second-highest beverage sales growth brand for US retailers.

If you take a look at a glass bottle of Pepsi, we sell 12oz of glass Pepsi for $1. We sell 12oz of Pepsi in a 12oz can for $0.35. So as we move the mix to these kind of packages, it gives us tremendous opportunity to improve the overall margins for us and then also for our retailers as well. ​(Al Carey, CEO, PepsiCo Americas Beverages)

The same IRI MULOC data to June 15 showed that Starbuck’s branded RTDs (which PepsiCo produces) and Lipton took the fifth and ninth spots respectively, with Naked in 11th​ and Aqaufina in 12th​.

Carey also insisted that Pepsi’s CSD business was stabilizing even if diets were not (here he promised the firm was “working on several solutions”​) where the success of Wild Cherry Pepsi showed that young people, millennials in particular, liked flavored products.

“We’ve launched a real sugar product this summer which includes both vanilla and cherry. No high fructose corn syrup, all real sugar, and it’s doing very well,”​ Carey said.

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1 comment

A Commodity Beverage that A Specialty within Specialties

Posted by Michael Reines,

Why not move into a new innovative beverage category like healthy coffee in a RTD format. Low in acid appeals to over 60% of all coffee drinkers plus the minerals naturally available are the missing in Americans diets. It is also the ideal product for weight management.

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