PepsiCo zooming ahead on 'good for you'

by L. Joshua Sosland
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PURCHASE, N.Y. — Already accounting for nearly a quarter of the company’s sales, “good-for-you” products at PepsiCo, Inc. will “rapidly expand” in the years ahead, said Indra K. Nooyi, chairman and chief executive officer.

PepsiCo’s line of healthier products, or its “good-for-you” portfolio, as the company describes it, was the subject of discussion by Ms. Nooyi in the 2009 annual report.

As previously reported, PepsiCo net income in the year ended Dec. 26, 2009, was $5,979 million, equal to $3.81 per share on the common stock, up 16% from $5,142 million, or $3.26 per share, the year before. Sales were $43,232 million, essentially unchanged from $43,251 million in 2008.

Ms. Nooyi estimated sales of healthier products at $10 billion, “anchored” by the Tropicana, Naked juice, Aquafina, Quaker Oats, Gatorade (for athletes) and Lebedyansky and Sandora juices. Other promising areas include a dairy joint venture with Almarai in the Middle East and various local “good-for-you” products and brands.

“We will build on this core with an increasing stream of science-based innovation derived from the R.&.D. capabilities that we have been ramping up over the past couple of years, as well as from targeted acquisitions and joint ventures,” Ms. Nooyi said. “We will be investing to accelerate the growth of these platforms, and we will use the knowledge from these initiatives to improve our core snack and beverage offerings and also to develop highly nutritious products for undernourished people across the world.”

Elaborating on research and development at the company, the annual report posed a number of health and wellness challenges the company is facing:

• Getting athletes and exercisers to “perform better for longer and to play harder.”

•Reducing salt by 25% to 50% without compromising taste

•Balancing biological needs with cultural wants.

The company said issues like these have forced it to rethink research and development beyond ways to enhance flavor, color and intensity of taste.

“As we study and understand how the body metabolizes foods and beverages, we’re designing convenience products that make it easier for consumers to lead healthier lifestyles,” the company said. “To address these and other questions, PepsiCo established new research priorities that promote greater nutrition and food safety. A new global team of clinicians, epidemiologists and food scientists — each with a different perspective and area of expertise — is working to develop new products that can improve people’s diets. And, at a new research facility adjacent to Yale University, we’re collaborating with some of the world’s best scientists and using advanced equipment to measure metabolism in more than 300 ways.

“Together, the team is using advanced science to create wholesome products with natural ingredients, lead our industry toward a healthier future and contribute to ongoing dialogue about societal health solutions.”

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