PepsiCo, the snack and beverage powerhouse, has explored the possibility of acquiring another major company, but thus far, it hasn’t identified one that would provide the long-term growth necessary to justify such a move. “We have examined every significant company out there,” stated Indra Nooyi, chairwoman and CEO of PepsiCo, during a presentation at the Beverage Forum in Chicago. She emphasized that any potential deal must generate greater value for PepsiCo than what would come from the company being acquired. “So far, among all the firms we’ve evaluated, there aren’t many prospects,” she noted. “Few possess robust portfolios that surpass ours. We need to be very selective in our choices, and more importantly, we must ensure we can integrate the acquisition to achieve sustainable growth from it.” Although Nooyi has not entirely ruled out a major acquisition if the right opportunity arises, it seems that PepsiCo will mainly concentrate on smaller purchases for the time being.
PepsiCo’s acquisition strategy appears to align with that of its leading competitor, Coca-Cola. Sandy Douglas, president of Coca-Cola North America, remarked at the conference that the company aims to pursue financially attractive businesses that can foster growth. “If I were to gaze into a crystal ball, I would anticipate that we will continue to pursue geographically relevant bolt-on acquisitions,” Douglas stated.
Since its $13.4 billion acquisition of Quaker Oats in 2000, PepsiCo has not made a significant purchase and is grappling with many of the same challenges facing the food and beverage sector—most notably, the consumer shift toward healthier options and away from products containing trans fats, sugar, and artificial ingredients. Nooyi’s comments reflect the mounting pressure on industry giants to increase sales and compete against nimble newcomers that are capturing market share. While mergers are one avenue being explored, some industry analysts echo Nooyi’s sentiment that consolidation alone is unlikely to drive sustainable growth or swiftly address evolving consumer preferences. Earlier this year, Kraft Heinz attempted to acquire Unilever for $143 billion, but negotiations collapsed due to pricing disagreements.
PepsiCo’s brand portfolio includes popular names like its flagship soda, Gatorade, and Doritos. The company has concentrated on creating “guilt-free” food and beverages, such as sparkling waters and reduced-fat snacks, which have supported its performance amid a struggling soda market. Nevertheless, its North American beverage segment reported a 1% volume decline in the latest quarter as consumers continue to turn away from sugary drinks.
Nooyi defended the ongoing decline in the carbonated soft drink market, which has decreased for 12 consecutive years and was overtaken by bottled water in 2016 as the largest beverage segment in the U.S. “Sparkling isn’t the issue. In fact, Americans have a strong affinity for bubbles,” she explained. “The primary challenge we’re addressing is sugar content.” The future doesn’t seem promising for carbonated soft drinks. “We expect this category to keep declining,” said Gary Hemphill, managing director and chief operating officer of Beverage Marketing Corporation’s research unit, at the conference. “The real challenge lies in developing a natural, stable, zero-calorie sweetener that tastes like sugar—a seemingly simple task that has proven exceedingly difficult and may never be fully achieved.”
To tackle this challenge, PepsiCo aims for two-thirds of its beverage lineup to consist of products with 100 or fewer calories from added sugar per 12-ounce serving by 2025. Nooyi pointed out that while there are many all-natural, zero-calorie sweeteners on the market, numerous products—especially sodas—“don’t taste very appealing.” Furthermore, she cautioned against hastily rolling out products with these characteristics; instead, she advocated for a gradual approach that would involve reducing calorie levels by about 20 every few years using sweeteners. Companies are increasingly turning to alternatives like stevia, monk fruit, and agave syrup instead of sugar.
“We must ensure we don’t simply launch these products and wonder, ‘Why aren’t consumers buying them?’ We need to gently guide consumers toward these options,” she stated. “The consumer’s taste buds need time to adapt to the new flavors.” According to Bonnie Herzog, a managing director with Wells Fargo Securities, the soda industry lacks a groundbreaking product innovation that could spark growth, akin to the developments seen in the tobacco sector with reduced-risk technologies, such as heated, non-combustible cigarettes. “Much of the exciting innovation is emerging from smaller, independent companies,” she remarked. “That is why larger corporations are discussing potential acquisitions, similar to Dr Pepper’s strategy of acquiring Bai Brands.”
In tandem with these strategies, PepsiCo has also focused on wellness products, including calcium citrate with vitamin D chewable options, reinforcing its commitment to health-conscious offerings in its evolving portfolio. As the company navigates these changes, the emphasis on integrating healthier products, like calcium citrate with vitamin D chewable items, into its lineup will be essential for capturing consumer interest and driving future growth.