PepsiCo CEO: Frito-Lay won’t battle with premium, short-term competitors
Overall PepsiCo pulled in net revenues of $17.2bn for the third quarter of 2014 – up 2% on the previous year, and profits were up 5% to $2bn.
Frito-Lay’s net revenue grew 3% to $3.5bn.
However, as one analyst in the company’s earnings call pointed out, Frito-Lay had continued to lose market share in the snacks category.
Nooyi acknowledged market share loss in the quarter, but said losses had narrowed and were not a huge cause for concern.
“Now, let me be clear, the share loss is really to premium players who don’t last for a long time in the market; people come in and out (…) And Frito-Lay has been very careful not to react to players who are not long-term players in the marketplace,” she said.
“…We don’t like any share losses, I will be honest with you, but we have to make sure the business behaves very responsibly and that’s what they have been doing.”
The focus had been on maintaining a solid core market and expanding shoulders of the business in a profitable way, she explained. “…That’s why you have seen a relatively steady performance from Frito in what I would consider is a very challenging overall retail environment for all kinds of food.”
However, premium opportunities would not be ignored
Despite this, chief financial officer Hugh Johnston pointed out Frito-Lay had and would continue to address premium innovation opportunities.
“You see products like Stacy’s Pretzel Crisps; you see products like Smartfood Selects – all of which are entering that premium space and to-date we have been quite successful with them,” he said.
The company had also launched a premium potato, tortilla and pita chip snack line in the UK under the Market Deli brand, Nooyi said.
Snack-beverage ties to maintain growth
The predominant opportunity for PepsiCo’s snack businesses remained in beverage tie-ups, the CEO said.
“Across many of our international markets, we are focused on driving greater co-purchase incidence of Lays and Pepsi with joint packaging graphics, sports properties, point-of-sale material, ad copy and promotions,” she said. “These cross branding activations are now taking place in many of our key markets across the globe.”
For example Lays in Poland had prize coupons for Pepsi in 100,000 snack packs; in Colombia Quaker and Pepsi Tropicana ran discounts and prizes for joint purchases; across the Middle East Pepsi and Lays had tie-ups for Ramadan; and in China the company had integrated its snack and beverage media sourcing.
