PepsiCo seeks to exploit shift to home cooking and immunity focus among comfort-craving consumers

By Oliver Morrison contact

- Last updated on GMT

Image: PepsiCo
Image: PepsiCo

Related tags: Pepsico, Pepsi, COVID, consumer behaviour

The drinks and snacks maker’s second-quarter earnings illustrate the consumer trends to have emerged from the global pandemic which the company aims to tap to drive future growth.

The group reported a drop in revenue in the quarter – with the group’s European sales down 9.2% -- as fewer consumers bought drinks at restaurants and convenience stores.

But PepsiCo’s food brands such as Quaker Oats witnessed strong growth as shoppers spent more time cooking at home, shopped online, became more health conscious, and sought out products perceived as immunity-boosting.

PepsiCo Chairman and CEO Ramon Laguarta said there was a “notable level of resiliency in our global snacks and foods business”.

In a conference call with investors, Laguarta added that the group’s international snacks and food businesses proved to be more resilient than beverages, with an increase in organic revenue growth of 2% in snacks versus a decline of 5% in beverages.

Its North American Quaker Foods unit rose by an even greater margin, with revenues up 23% to $664 million. Many categories within the Quaker business delivered double-digit revenue growth in Q2, driven by increased breakfast occasions, in-home dinners, and baking occasions.

Home cooking and immunity

Amid much discussion on whether the consumer trends to emerge in the COVID era will ‘stick’, Laguata hinted that the company was looking to quickly adapt to changing consumer needs to drive the business forward. “There are few spaces where we're trying to move quickly, immunity being one, and we're seeing that our consumers are looking for immunity more,”​ he said.

PepsiCo’s juice business is booming as consumers seek to boost their immunity, according to the CEO. He added the company will attempt to create beverage and snacks to further take advantage of this trend.

He added that he hoped PepsiCo’s snacks and food brands such as Quaker, Tostitos, Sabra, Lay's and Ruffles could capitalise on the rise in home cooking to continue to become incorporated into shoppers’ family home-cooked meals.

“Our snacks business are being part of meals,”​ he said. “We're seeing that more and more. Consumers are cooking more at home.”

PepsiCo’s snacks and food brands will look to incorporate this trend in packaging and marketing, he said.

“We're going to obviously move our advertising and our consumer support in terms of giving the recipes and helping them with solutions that incentivize that habit,”​ he said. “So there is a marketing element to this. There is also an innovation element to this in terms of packaging or other solutions that we can help consumers move into that space.”

A return to familiar foods

Laguata further observed a shift towards legacy brands among shoppers during the crisis. “We're seeing consumers going back to brands that they trust, and we have quite a lot in many markets that consumers trust,”​ observed the CEO, who revealed the company has been keen to invest in heritage brands to modernize them and keep them relevant to customers.

Of note here is SodaStream, which was given a global relaunch after its $3.2 billion purchase by PepsiCo in 2018. “SodaStream is a beautiful business for this situation we're living today,” ​Laguarta said, adding that the company is investing ‘substantial amounts’ in the soda machine.

“Consumers don't have to leave their houses. They have perfect choices. We're putting our Pepsi brands in the SodaStream model in Europe, and it’s working very well.”

Online grocery shopping

Laguarta added that online shopping is an area that is set for continued growth. He said the group was investing heavily in “trying to be the first in that channel”​. He said: “Whoever wins in e-commerce now and is able to capture those families that are trying this e-grocery service for the first time, I think, is going to win those families in the future… e-commerce is a key area where we think we can gain market share.”

Acting like a start-up

Laguarta added that the company was seeking to act with the agility and nimbleness of a start-up in order to innovate successfully. “Speed is a keyword, and we're trying to get better at that,”​ he said. “We're trying to be as close as we can to a start-up with the scale of a large company.”

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