PepsiCo feeling the pressure to revive C.S.D. category

by Eric Schroeder
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NEW YORK — Amidst a period of declining consumption trends in the carbonated soft drink category, Indra Nooyi, chairman and chief executive officer of Purchase, N.Y.-based PepsiCo, Inc., still believes there is a “once-in-a-lifetime opportunity” to bring consumers back to the segment.

In a May 29 presentation at the Sanford Bernstein Strategic Decisions Conference held in New York, Ms. Nooyi addressed an analyst’s question about the structure of PepsiCo’s North American business by first pointing out that company executives anticipated the decline of the carbonated soft drink market three years ago. With that mindset, PepsiCo began to invest in technologies that Ms. Nooyi said “break all of the compromises that people didn’t want to make.”

“So, for example, when you go and talk to consumers, especially in the United States, they love carbonated soft drinks,” she said. “They love the bubbles. They love the caffeine. They love the taste of cola. What do they not like? They don’t like the sugar levels, and recently, they don’t like the artificial sweeteners. So we knew we had to address both these barriers.”

Because consumers wanted lower sugar levels — and wanted it without any artificial sweeteners — PepsiCo invested in research and development that focused on natural sweeteners that work in colas, Ms. Nooyi said.

“Stevia, unfortunately, does not work well in colas,” she said.

But Ms. Nooyi said trial-and-error with mid-calorie beverages and taste eventually worked, and the company’s Pepsi Next product “is holding its own.”

“It is a great tasting, mid-calorie product,” she said. “So we know there is a consumer for mid-calorie product.”

Ms. Nooyi said beverage companies must act quickly to capture consumers’ attention with mid-calorie products because waiting too long — another three or five years — may prompt them to “walk away from C.S.D.s.”

“While the consumer still remains in love with C.S.D.s, if we can address the barriers to consumption, we can actually bring back the last users,” she said. “It may never be the high levels of consumption that we had when we were young. The new consumers have too many choices that they are playing around with. But I actually think there is a once-in-a-lifetime opportunity to bring the consumer back to C.S.D.”
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