Pepsi Automates Supply Chain to Head Off Shortages

In a bid to ease ingredient shortages, multinational food and beverage giant PepsiCo said it is planning to automate and digitize more of its supply chain data in hopes of boosting efficiency and garnering other time-saving insights.

In joint prepared remarks Wednesday (Oct. 12) accompanying the company’s third-quarter 2022 financial results, PepsiCo CEO Ramon Laguarta and Chief Financial Officer Hugh Johnston said the company is focused on “automating and digitizing our supply chain to support our innovation pipeline with greater agility and speed-to-market.”

The company is leveraging increasingly intelligent data analytics to predict purchasing trends and avoid shortages or overproducing items not in demand.

“We’re becoming much more digital, becoming much more insightful and precise as a company, and that applies … to our supply chain,” Laguarta told analysts on a call. “I think we’re becoming much more integrated in our [demand] forecasting … and we’re able to execute a certain level of higher complexity in our business.”

Driving supply chain efficiency is especially important for F&B brands now, as ever-increasing food prices have more and more grocery shoppers turning away from their favorite products to lower-priced store-brand alternatives. F&B behemoth Nestlé argued over the summer that its strength in supply chain relative to private-label brands, at a time when there are so many disruptions and setbacks, is a key competitive advantage.

“Keep in mind that private label supply chains are feeling the pinch too when it comes to their cost inflation, and also some of them are still experiencing some bounce-back problems from the times of COVID,” Nestlé CEO Ulf Mark Schneider told analysts in July. “Remember, those private label supply chains tended to be more exposed than with large players.”

Related: Food and Beverage Brands Leverage Supply Chain Advantage to Combat Private-Label Shift

Research from PYMNTS’ study “Consumer Inflation Sentiment: Inflation Slowly Ebbs, but Consumer Outlook Remains Gloomy,” which drew from an August survey of 2,169 consumers, found that 37% of grocery shoppers have reduced the quality of the items that they are buying to manage their spending in response to rising prices. Plus, 62% report having cut down on nonessential spending.

Read more: New Survey Shows Consumers Less Optimistic Than Fed on Taming Inflation

As well as predicting demand, PepsiCo is also looking to improve its supply chain by streamlining the portfoliio of products being manufactured. Laguarta explained that, through the company’s “very strict processes of portfolio optimization,” which involve a quarterly look at brand performance across all of PepsiCo’s businesses, the firm is able to boost its supply chain by eliminating underperforming products and focusing on those that sell well.

Additionally, Laguarta noted that Pepsico’s tech investments will help improve its supply chain issues, but that the company is certainly not out of the woods.

“We’re not running a perfect company at this point, given all the challenges there is still in supply chain of ingredients and some of the transportation bottlenecks,” Laguarta said of the Frito-Lay subsidiary, “but I would say we’re able to cope with higher levels of complexity.”