Ripple Sizzles, Retail Sales Fizzle And PepsiCo Makes Digital Deliver

PepsiCo turned some heads with its quarterly earnings call announcement that it would take some of its tax reform windfall and reinvest it in improving the firm’s eCommerce efforts.

According to PepsiCo CEO Indra K. Nooyi, that decision is entirely bottom line-driven – eCommerce was good for Pepsi last year. She told investors during the earnings call that Pepsi’s investment in “eCommerce across multiple channels, from e-grocery, to direct to consumer, to pure play, helped drive exceptional growth in 2017.”

Nooyi called out Pepsi’s use of predictive analytics, dynamic merchandising and use of digital to create tailored offers.

“As a result, our eCommerce business is now approximately $1 billion in annualized retail sales, and we are well-positioned to capitalize on what is sure to be a dynamic future in this space,” Nooyi told investors.

Well-positioned, Nooyi noted – but setting up to be better-positioned as it attempts to future-proof the various CPG brands under its umbrella to better compete in a digital world that, increasingly, does not appear to favor CPGs or their standard distribution chains.

Because, according to Deloitte’s most recent annual consumer products industry outlook, the retail reality on which CPGs have historically built their consumer outreach strategies is rapidly realigning around them.

CPGs aren’t necessarily in trouble today, Deloitte noted – sales of consumer product goods are expected to grow to $3 trillion worldwide by 2020, powered largely by the growing ranks of the global middle class.

But CPG marketing and market strategy is built around the world of bricks and mortar – particularly when it comes to traditional advertising and working out agreements with grocery retailers on how and where their products will be displayed in-store for maximum exposure to consumer eyeballs.

But that terrain, as Karen Webster noted in a commentary last year, has been changing rapidly over the last several years, as Target, Walmart, Costco, Wegmens, Kroger and a host of other major grocery players have been making a major push to bring their own private labels to the forefront of consumer attention.

That means CPG players – even in an era when customers are eating at home more – are finding themselves squeezed in the traditional grocery market that has largely disintermediated them out of their relationship with customers.

“Competing for that center-store share is a margin-eroding experience. It’s also one that limits their opportunity to build a direct relationship with their end customer. Those decisions are the domain of the Krogers, Walmarts and Stop and Shops, who drive more than 25 percent of their business,” Webster wrote. “And now, Amazon.”

Those deals – particularly for placement on store shelves – are less relevant in a world where there are fewer consumers going to the store to look at the shelf, according to Deloitte. And the numbers in this regard don’t lie: Physical retail is growing at a rate of about 3.6 percent a year, while digital channels are growing at a rate of 350 percent per year.

Racking up amazing growth is easy when one is small – and eCommerce is about 10 percent of commerce compared to physical retail’s 90 percent, or so we are told.

But, as PepsiCo’s CEO noted, the great digital shift underway is no longer a matter for debate, and brands like hers have no choice but to watch and be ready to respond – even if the correct response is a work in progress, because at this point, it’s not clear which of these emerging channels will stand the test of time.

What is known, however, said Nooyi, is that grocery is overbuild, and “all of these alternate channels are now beginning to challenge all the square footage in the marketplace.”

Which of those challengers and alternative channels to get involved in – and how to navigate them? There lies another challenge for CPG players, Deloitte noted in its survey, as firms of all kinds are now debating whether they want to use digital channels to sell directly to their customers – or start forming their next generation of partnerships with the various emerging channel players. Amazon is something like the older disintermediation that CPGs are already dealing with, along with a new element in the mix: That partnership deal requires giving up control over many components of the relationship, as well as many of the benefits of data collection, such as cross-selling and upselling.

And the stumbles of CPG brands during recent months give credence to the idea that the transition has proved to be a bit of a challenge.

Kellogg’s spent much of the backend of 2017 retooling its digital efforts by pulling all but its most popular SKUs from store shelves and making a massive investment indirect to consumer and online marketing in an effort to push more of their sales toward digital channels.

Coca-Cola, Pepsi’s main rival, noted that the last few years have been a struggle as they’ve had to think deeply about how to redesign their already highly designed product for “the Amazon shopper.”

“We’ve spent a lot of time and effort through the years on developing great-looking packaging for the consumers to really grab people’s attention at retail,” said John Carroll, Coca-Cola’s general manager of eCommerce. “The question becomes, how do you take this thinking and move it to online?”

That, for CPGs everywhere, is the $30 trillion-dollar question summed up succinctly – and the answers are still emerging. In Pepsi’s case, that means watching, learning and adapting as they go.

Is it the right solution? Early days – still too early to declare any CPG brand right or wrong.

Their observations thus far – and the reactions to them – has been worth about $1 billion in annualized retail sales. And that more than rates a Sizzle of the Week for CPGs getting it right.


Cashless in Venezuela: Turns out there are indeed beneficiaries when it comes to hyperinflation. In Venezuela, where prices are surging by quadruple digit percentages annually, cash is scarce, because ATMs have limits and the central bank has slowed down the printing of tangible notes. As a result, pretty much every good or service can be had via digital payments and the mobile apps that enable them, with an eye on keeping commerce going even during macro-economic stress.

Ripple creates ripple effects: Western Union says that it is in pilots with Ripple, and a deal is also in place with Saudi Arabia’s monetary authority. These are big payments players, of course, with millions of transactions crossing borders. The PR machine at Ripple is sizzling as more news of pilots begets more interest on the part of entrenched players, which begets more new announcements and, in turn, more news.

Mobile broadband subscriptions: In a word, they are soaring, and the sky’s the limit for data that, well, flies through the sky. The OECD reports that the number of subscriptions outnumbers the number of residents in developed nations, and points to sustained trends in affordable subscription plans, along with benefits from a competitive and regulated landscape. In other words, the quality of service is good and doesn’t cost too much, a pair of attributes that point toward sustained growth – commerce included.


Retail Sales: Biggest drop in a year, as consumers seem to pull back a bit on durables – not an auspicious start when so much is tied to happy, sustained wallet opening. Retail sales were off 30 basis points in January, measured year on year, and December numbers were adjusted down, too. Could a decrease in the estimate for consumer spending be in the cards?

Household debt: It continues to rise, according to the Federal Reserve Bank of New York, to the tune of $13 trillion. At the same time, consumer confidence declines, tied in part to a decline in consumers’ outlook on job and business prospects. This is a duality that one may not want to see … particularly not when credit card debt has grown by double-digit percentage points year over year – 13 percent annualized as of November.

Telegram bears bad news for crypto mining? News has been delivered that shows part of the process of making and sending the sausage – we mean cryptos – is not as secure as some might have hoped … and isn’t that part of the ostensible allure of these things? Telegram’s messaging app sported a vulnerability that let hackers load up on some cryptocurrencies, such as ZCash. The issue may have been fixed, but then again, hackers never really sit still, do they?


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.