PepsiCo price and product cuts put operators on alert
PepsiCo has reached an agreement with an activist investor that will see the company cut prices on some products and eliminate nearly 20% of its portfolio by early next year, the Associated Press reports.
The company says it will use the savings from slimming down its lineup to fund more marketing and deliver better value to consumers, while also accelerating innovation around “simpler” and functional offerings such as Doritos Protein, Simply NKD Cheetos and Doritos, and its prebiotic cola.
Elliott Investment Management, which took a roughly $4 billion stake in PepsiCo in September, criticized slowing growth and weakening profitability in the company’s North American food and beverage businesses, the Associated Press reports.
For convenience services operators, this move signals a few things to watch closely with Pepsi bottler and foodservice representatives:
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SKU rationalization: With about one-fifth of products on the chopping block, some slower-moving or niche flavors and package sizes used in vending and micro markets may disappear. Stay ahead by confirming which SKUs are being cut and planning alternate placements.
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Price and value resets: Manufacturer price cuts and a push for “improved value” could support more competitive pricing in vending, micro markets and OCS, but the exact impact on costs and margins remains unclear because PepsiCo has not detailed which items or how much pricing will change.
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New product mix: The emphasis on functional ingredients and cleaner labels may create opportunities to refresh sets with protein-forward or “no artificial” salty snacks and beverages that resonate with health-conscious workplace and campus accounts.