USA: PepsiCo: tapping into consumer trends (COMMENT)
PepsiCo's Q3 profits rose 13% amid improvements in both volume sales and revenue. Propelled by the strong performance of its cornerstone domestic snacks and beverage divisions, PepsiCo has successfully tapped into prominent consumer trends to ensure it stays ahead of the field.
PepsiCo's 13% Q3 profits increase and 5% jump in worldwide volume is being heralded as its best growth in years. Frito Lay and PepsiCo Beverages, the two biggest domestic divisions, both racked up good volume growth. Additionally, revenues grew well ahead of volume - snack revenues at Frito Lay grew by 7% and beverage sales grew 6%.
So how has PepsiCo managed to maintain its performance in the face of an economy that remains fragile, and forever changing consumer tastes? Increased snacking has led to the blurring of mealtimes with consumers replacing structured mealtimes with 'grazing' throughout the day. Time-strapped consumers are also demanding more convenient on-the-go solutions and obesity concerns are pushing consumers toward healthier alternatives.
PepsiCo appears to be willing to cater to the constantly changing demands of its consumers, whether by a health conscious move toward low-fat products or a foray into bold flavouring. Frito-Lay has launched a line of snacks with no trans-fatty acids. It also introduced an on-package icon identifying some products, such as baked Lay's Ruffles, as smart or healthy snacks. The 'Great Taste, Smart Snack' label contains information on fats and cholesterols guiding consumers toward 'better-for-you' products. Another recent introduction is Lay's Stax potato crisps stacked in a portable, resealable, crush-resistant container.
PepsiCo has backed its innovation with marketing that has transformed it into the king of cool. In addition, PepsiCo has managed to align itself with youth culture by sponsoring teams at extreme sports events such as this month's Gravity Games.
By combining sensitivity to consumer trends with a versatile product mix and highly effective promotional campaigns, PepsiCo certainly seems to have found a formula for success in today's competitive environment. Maintaining its 'cool' is now a large challenge for PepsiCo.
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