Earnings

PepsiCo’s DTC Sales Nearly Double In Q3

Food-and-beverage giant PepsiCo reported Thursday (Oct. 1) that its eCommerce sales almost doubled during the third quarter, and that the company plans to invest in the channel in a big way to strengthen online and direct-to-consumer sales. 

PepsiCo will be “making the necessary investments in our manufacturing capacity, go-to-market systems and digital initiatives such as improving our presence and scale in our e-commerce business, which nearly doubled during the third quarter,” Chairman and CEO Ramon Laguarta said in a conference call with analysts. 

Laguarta said “despite the measured reopening of economies and activities in certain areas since May,” the company’s North American snacks and food businesses “continued to deliver robust growth as at-home consumption trends have remained strong.” 

Those gains came in the wake of the May launch of PepsiCo's Snacks.com and PantryShop.com direct-to-consumer (D2C) sites. Both aim to capitalize on the trend of consumers increasingly turning to eCommerce to meet their food-and-beverage needs during the health crisis. PepsiCo is using the sites to promote its Pepsi, Frito-Lay, Gatorade, Quaker Oats and other popular brands. 

PepsiCo’s traditional soft-drink sales in particular have suffered during the pandemic as consumers stopped going to offices, bars, restaurants, sporting events, concerts and other venues where they’d buy beverages. 

The company isn’t alone in trying to adjust to changing consumer habits and harness new ways to grow its business. An August survey by PYMNTS and sticky.io of more than 2,100 U.S. consumers found that 54 percent are using D2C channels to shop for consumer packaged goods. The study showed that while the pandemic has been a catalyst for change, those new purchasing habits look likely to be permanent. 

“Consumers who used D2C channels are most likely to maintain their new shopping habits: 73.2 percent of those who used such channels to purchase retail products plan to maintain some of their new habits and 10.1 percent plan to keep all of them,” the report found. 

It’s all part of what experts see as a necessary extension of omnichannel sales, where brands aggressively maximize every consumer touchpoint and shift their selling strategies to match shifts in customers’ buying habits. 

“It’s not just about being at Target or being at Walmart or being at Costco,”  sticky.io Chief Operating Officer Ro Bhatia recently told PYMNTS. “It’s also about being at all those channels plus being on Amazon, plus having your own offering, plus being on social channels that the consumers are interacting with.” 

But as much as there’s a push to meet customer demand in new places, the battle to refresh old markets such as restaurants is also changing and intensifying. Add in increased customer concern about affordability amid a weak economy and an existing downtrend in sweet carbonated beverages and you have a backdrop calling for an unprecedented response. 

Coca Cola’s July launch of its Bluetooth-enabled Freestyle soft-drink ordering app is a prime example of consumer packaged goods (CPG) brands stepping up with using new technology. Freestyle offers a touchless update to the longstanding practice of customers filling up their own cups of soda in restaurants. 

But no matter how creative and adaptive CPG companies get in finding new ways to sell their goods, there’s only so much that can be done amid the pandemic’s uncertainty. 

To that point, on a macroeconomic level, PepsiCo Vice Chairman and Chief Financial Officer Hugh Johnston painted a mixed global picture for the coming quarter and full year. 

“We do expect our North America businesses to remain resilient for the balance of this year, [but] the recoveries across international markets will likely remain uneven across both developed and developing and emerging markets,” Johnston said. 

All in, PepsiCo reported better-than-expected third-quarter sales and earnings, thanks in large part to the strong demand for snacks from consumers working and studying at home. 

The company said total revenue grew 5.3 percent to $18.09 billion, led by a huge increase in its direct to consumer businesses. That beat the $17.23 billion that analysts expected. Earnings per share also hit $1.66, exceeding the $1.49 analysts had been expecting. 

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