PepsiCo, the snack and beverage powerhouse, has explored the possibility of acquiring another major company, but has yet to find one that could provide the long-term growth necessary to justify such an investment. “We have considered every significant company on the market,” stated Indra Nooyi, chairwoman and CEO of PepsiCo, during her speech at the Beverage Forum in Chicago. For any acquisition to be worthwhile, it must generate more value for PepsiCo than what the target company would bring on its own. “Currently, among all the companies we’ve evaluated, we haven’t identified many viable options,” she remarked. “Few possess portfolios that surpass ours. We must proceed cautiously, ensuring that we can effectively integrate any acquisition for sustainable growth.”
Nooyi remains open to the possibility of a major acquisition if the right opportunity presents itself, but for now, PepsiCo is likely to concentrate on smaller purchases. This approach aligns with that of its primary competitor, Coca-Cola. Sandy Douglas, president of Coca-Cola North America, noted at the same conference that the company is on the lookout for financially attractive businesses that can spur growth. “Looking ahead, I anticipate we’ll continue making geographically relevant acquisitions,” Douglas predicted.
PepsiCo has not engaged in a significant acquisition since its $13.4 billion purchase of Quaker Oats in 2000 and faces many of the same challenges as other players in the food and beverage sector. These include a shifting consumer preference towards healthier options, moving away from products laden with trans fats, sugar, and artificial additives. Nooyi’s remarks reflect the pressures facing food and beverage giants to enhance sales and compete with agile startups that are capturing market share. While mergers are being considered, some industry analysts echo Nooyi’s sentiments, cautioning that consolidation may not necessarily lead to long-term growth or address the evolving demands of consumers. Earlier this year, Kraft Heinz made headlines with a $143 billion bid for Unilever, which ultimately fell apart over pricing concerns.
PepsiCo, with its well-known brands including its flagship soda, Gatorade, and Doritos, has shifted its focus towards creating “guilt-free” food and beverages, such as sparkling waters and reduced-fat snacks. These innovations have supported the company as the soda market struggles; however, its North American beverage division saw a 1% volume decline in the last quarter as customers continue to move away from sugary drinks. Nooyi defended the decline in the carbonated soft drink sector, which has seen a 12-year slump and was overtaken by bottled water in 2016 as the leading beverage category in the U.S. “The issue isn’t sparkling drinks; people in the U.S. love carbonated beverages more than anywhere else,” she explained. “The real challenge is sugar.”
Looking ahead, the carbonated soft drink category does not seem poised for recovery. “We expect this segment will keep declining,” stated Gary Hemphill, managing director and COO of Beverage Marketing Corporation’s research division, during the conference. “The key challenge is creating a natural, stable, zero-calorie sweetener that tastes like sugar, a seemingly simple goal that has proven extremely difficult to achieve.”
In response to these challenges, PepsiCo aims for two-thirds of its beverage portfolio to consist of products with 100 calories or fewer from added sugar per 12-ounce serving by 2025. Nooyi highlighted that while numerous all-natural, zero-calorie sweeteners exist, many current products, particularly sodas, “just don’t taste that great.” She also advised against rushing to launch such products, advocating for a gradual approach that reduces calories by about 20 over several years. Sweeteners like stevia, monk fruit, and agave syrup are being utilized by food and beverage companies as alternatives to sugar. “We must ensure that we don’t hastily introduce these products and then wonder why consumers aren’t buying them,” she cautioned. “We need to help consumers adapt their taste preferences.”
The soda industry is currently lacking a breakthrough innovation that could catalyze growth, according to Bonnie Herzog, a managing director at Wells Fargo Securities. This situation mirrors trends seen in the tobacco industry, where reduced-risk technologies are emerging. “Much of the exciting innovation is coming from smaller, independent players,” Herzog noted. “This is why larger companies are considering partnerships or acquisitions, similar to Dr. Pepper’s strategy with Bai Brands.”
In this changing landscape, products like solaray cal mag citrate plus d 3 & k 2 could play a role, as consumers increasingly seek healthier options. As PepsiCo navigates these challenges, its strategic decisions will be crucial in ensuring it remains relevant and competitive in the evolving market.