PepsiCo is one of the world’s largest food and beverage companies. It has been actively making investments to expand its business and better serve customers. PepsiCo’s investment strategies focus on both refreshing existing brands and creating new products that meet emerging consumer needs. Some major investment projects include: introducing natural and organic offerings, reformulating products to reduce sugar/sodium/fat, increasing research and development spending, expanding e-commerce and digital capabilities, entering faster-growing markets, and making sustainability-related investments. PepsiCo aims to strike a balance between delivering shareholder returns and responding to changing consumer preferences through prudent investments.
PepsiCo has invested heavily in introducing natural and organic products to meet changing consumer demand
In response to consumers’ desire for natural ingredients, PepsiCo has invested significantly in its portfolio of natural foods and beverages. Some examples include Naked Juice cold pressed smoothies, Stubborn Soda crafted sodas sweetened with stevia, KeVita probiotic drinks, and Sabra hummus made with non-GMO tahini. PepsiCo acquired Naked Juice in 2007 and KeVita in 2016 to accelerate growth in this area. The company has committed to deriving at least two-thirds of its global beverage volume from 0 calorie and low calorie beverages, like Pepsi Zero Sugar.
Reformulating existing brands to reduce sodium, sugar and saturated fat content has been a priority
PepsiCo has also invested heavily in improving the nutritional profiles of existing brands by reducing sodium, sugar and saturated fat. For example, Lay’s potato chips have been reformulated to contain 50% less sodium. Tropicana orange juices have at least 25% less sugar and calories. Quaker Chewy Bars have 33% less sugar than previous recipes. Frito-Lay North America, PepsiCo’s snack division, has removed 17,000 tons of salt from its products. These efforts help PepsiCo adapt its vast portfolio to changing consumer preferences and nutrition guidelines.
Increasing R&D budgets enables PepsiCo to innovate and maintain competitive edge
Investment in R&D and innovation capabilities is critical for PepsiCo to keep pace with rapidly evolving consumer tastes and competition. PepsiCo nearly doubled its R&D spending from 2010 to 2020 to over $750 million annually. The company has innovation centers around the world developing new products tailored to local markets. Recent innovations enabled by these investments include PopCorners popped corn snacks, bubly flavored sparkling water, Lifewtr premium bottled water, and Starbucks ready-to-drink coffee beverages through a partnership.
Strategic investments expand PepsiCo’s e-commerce and digital marketing capabilities
As consumers increasingly shop online, PepsiCo has invested to grow its e-commerce and digital marketing capabilities significantly. It acquired Be & Cheery, one of the largest online snack companies in China, in 2018. PepsiCo also acquired SodaStream in 2018 to participate in the fast growing at-home carbonation market. Investments in digital marketing include partnerships with platforms like Hulu and YouTube TV to advertise brands. PepsiCo aims to derive over $2 billion in annual sales from e-commerce channels, highlighting its commitment to investing in this emerging space.
Entering developing markets like Africa presents new investment opportunities
PepsiCo views developing markets like Africa as presenting strong growth potential due to rising middle classes and rapid urbanization. It has invested $5.5 billion in manufacturing plants across Africa since 2010. For example, PepsiCo opened its first manufacturing plant in Ethiopia in 2018 and invested $66 million in an expansion of its manufacturing capacity in Egypt in 2019. Focusing investment on developing markets allows PepsiCo to tap into shifting global demographics and more favorably positioned growth opportunities.
Sustainability initiatives align PepsiCo’s operations with consumer preferences
In response to growing attention to environmental sustainability, PepsiCo has directed investment towards improving the environmental footprint of its operations. Initiatives funded include efforts to reduce water consumption, transition to renewable electricity sources, and make packaging more recyclable and biodegradable. For example, PepsiCo invested $18.2 million in 2020 on U.S. projects aimed at improving recycling rates. Such moves help insulate PepsiCo against changing societal expectations and potential for increased regulation.
PepsiCo aims to balance delivering robust shareholder returns with meeting changing consumer needs and preferences through ongoing investments in areas like natural products, healthier recipes, R&D, e-commerce, emerging markets, and sustainability. Prudent investment is critical for PepsiCo to retain its competitive edge.