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February 24, 2012

CAGNY: PepsiCo keeps eye firmly on snacks growth

PepsiCo will ramp up the money it spends on advertising and marketing snacks worldwide by 20% this year.

PepsiCo will ramp up the money it spends on advertising and marketing snacks worldwide by 20% this year.

Speaking at the Consumer Analyst Group New York conference yesterday (23 February), John Compton, CEO of PepsiCo’s food operations in the Americas, told attendees that the company aims to grow its leadership position within “macro snacks”, with a particular focus on Frito Lay North America.

“The macro snack market is roughly a $400bn market and is consistently growing about 6% a year,” he said, citing data from Euromonitor. “PepsiCo is the undisputed leader in macro snacks, we are larger than Kraft Foods and also double our next closest competitor [Nestle]. In savoury, we have almost a six times advantage over our closest competitor. But what matters most is growth.”

Macrosnacks includes biscuits, confectionery, bars, salty snacks, nuts and other savory snacks. Gum, however, is excluded from the confectionery segment.

Compton told attendees that PepsiCo plans to increase its advertising and marketing spend by 20% in 2012, with a particular focus on Lays, Doritos and Sun Chips.

“We are also stepping up our innovation in 2012, but on Lays we are going to borrow from the success of Walkers in UK and we will be rolling out [the] ‘Do us as flavour’ [marketing campaign] in the US later this year.”

He added: “To be fair, we have had a few markets around the world where in 2011, although globally we gained market share, there were a few we didn’t, notably in the US. We will be addressing the two segments, premium and value, that gave us concern. And in all of our markets around the world will be addressing the value segment.”

Tom Greco, president of PepsiCo’s Frito Lay North America unit, said the company will execute its “most increment programme of innovation”, ramping up advertising and marketing spend by 35% this year. This, he said, is expected to yield low single-digit volume growth and mid single-digit revenue growth for 2012.

Greco said its Doritos Jacked and Ruffles Ultimate brands, in particular, will benefit from investment.

“Our 2012 innovation pipeline is absolutely loaded and very incremental,” he said.

Greco said Frito Lay will launch a value popcorn innovation under the Cracker Jack brand this year, in addition to a tortilla chip under the Tacqueros brand. Lays Stax will also benefit from a pipeline of new flavours, with an emphasis on the Hispanic market, he added.

Speaking on the overall business, CEO Indra Nooyi said PepsiCo’s current portfolio was weighted towards beverages, which accounts for 48% of sales. She said the company sees snacks overtaking beverages to generate 55% of revenues by 2021.

Compton added: “We are constantly looking to raise the bar for productivity levels in snacks, enabling us to afford that A&M investment we are making. The market is growing…we have a proven history in brand building, execution and a relentless focus on productivity.”

Earlier this month, PepsiCo announced plans to cut around 8,700 jobs from its business worldwide in a bid to cut costs and drive growth.

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