Things aren’t so bubbly for PepsiCo and other drink and snack giants. Shifting consumer habits have left traditional retail with less and less to stand on, and it turns out that consumer products companies have similarly had the rug pulled out from under them.
PepsiCo and Coca-Cola Co. may have led the charge on distribution with a powerful brick-and-mortar and vending machine strategy, but they’re lagging in the online direct sales marketplace. PepsiCo’s saving grace might be its snack selection, which sells better online than beverages, analysts said.
PepsiCo’s “huge distribution reach and agility arguably make it less vulnerable,” Bloomberg Intelligence analyst Ken Shea projected.
By comparison, Coca-Cola has found itself a civilian casualty of the dying retail industry: As shoppers forgo the mall experience, they’re also presented with fewer opportunities to purchase Coke at a vending machine or food court, CEO James Quincey told Bloomberg in May.
Target and retail analysts have long seen that people are spending more online and on health or experiences. Wall Street reflects that trend this year, with consumer staples across the board underperforming leisure and recreation stocks. Hotel and restaurant stocks have grown 25 percent since the beginning of 2016.
In the same period, consumer staples still saw growth, if a bit more modest at just 8 percent. Compared to apparel, which fell 18 percent, the category appears to be doing relatively well. But PepsiCo CEO Indra Nooyi’s comments on a Tuesday conference call with analysts suggested the company is feeling the squeeze.
Today, noted Nooyi, customers want to do more than they want to have. They’re looking for value. And though their health goals may vary, they place a high premium on products that can help them achieve their wellness goals.
They’re “seeking more premium experiences and at the same time seeking value,” Nooyi said on the conference call. “And across the spectrum, consumers continue to be interested in health and wellness but with differing definitions.”