Retail

Pepsi: Junk Food Wins Despite Healthy Efforts

When caught deciding between a bag of Cheetos and a Sabra hummus pack — both owned by PepsiCo — which are Americans choosing? They’re saying one thing and doing another.

Pepsi is trying its darndest to get Americans to eat and drink better, but it’s not working out that way. Consumers just want the junk food: Call it “going with your gut,” literally.

For Pepsi, it’s good problem to have, some may say. But the company’s executives say otherwise.

Indra Nooyi, Pepsico’s chief executive, said the Fritos, Cheetos and Lay’s maker wants to steer consumers to healthier items like Sabra hummus and Quaker oatmeal, but while consumers say they may want to choose a more wholesome option, deep down they want and pick the chips. Despite all efforts to expand the healthier lines and offerings, PepsiCo says the sales of savory, greasy options continue to rise.

Certain semi-lighter spin-offs of junk food staples like Doritos chips and Cheetos puffs have helped buffer and show profit margins expanding for 15 quarters continuously. The company even set a record high stock price over the summer.

The irony is that as Americans say they want to be health-focused, the buying trends for Pepsi’s products don’t seem to reflect that.

There have been some healthier food wins, but some items like True North nuts, Pepsi Next and Müller Quaker yogurt never really took hold. The company admittedly reported falling behind in its plans to reduce the average amount to fat, sodium and other junk food ingredient staples. Instead, sugars added during manufacturing have actually increased.

But the financial upticks and success don’t seem to be coming from the drinks on which the company was originally built.

Indeed, the Purchase, N.Y.–headquartered company — and other soft drink companies, for that matter — have seen a 10-plus-year decline as more consumers seek healthier beverage alternatives, such as juices and flavored waters. However, that trend does not translate to the same with diet sodas, which, despite lacking sugar, contain artificial sweeteners like aspartame.

Two years ago, the industry started moving from aspartame to sucralose (better known as Splenda), and accordingly Pepsi swapped it into its Diet Pepsi products. Then last year Pepsi launched an organic Gatorade and touted its Tropicana juice brand as being GMO-free. On top of that, the company rolled out Naked Juice drinks and some versions of healthier products like baked Lay’s. They rolled out Sabra ready-to-eat hummus kits (as well as others) and then introduced special nutrition-focused vending machines called Hello Goodness.

No doubt Pepsi, as well as its competitor Coca-Cola, has tried hard to build momentum with millennials. But it hasn’t worked the way each has hoped. Some say the rivals’ inability to grab younger customers is one of the few things the two have in common. As for who is buying the brands, Connexity’s and Adweek’s data respectively show that Pepsi seems to perform better with people who lean slightly to the political left, while more Coke drinkers lean conservative.

More Coke fans tend to have a college degree than Pepsi drinkers, who are reportedly shown to be in the low-income bracket. Agewise, Coke bubbled up better with those ages 35 to 44, while Pepsi’s skewed ages 65 and older. Both came in as less popular with the 18-to-24-year-old age group.

As for what’s next for Pepsi?

According to the Wall Street Journal, the company expects adjusted earnings per share to flourish 10 percent, which is 1 percent more than previously released. Looking outside the U.S., Nooyi said Pepsi is “cautiously optimistic” about emerging markets as it generates about half of its sales abroad.

In terms of immediate plans regarding healthier options Stateside, Pepsi has healthy plans to get into the meal kit delivery business and launch a premium bottled water brand called Lifewtr (to rival Coke’s Smartwater).

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