PepsiCo, the snack and beverage powerhouse, has contemplated acquiring another major company, yet it has not found a suitable candidate that would guarantee the long-term growth necessary to justify such a purchase. “We have scrutinized every large company available,” stated Indra Nooyi, PepsiCo’s chairwoman and CEO, during her address at the Beverage Forum in Chicago. She emphasized that for any potential deal to be worthwhile, it must generate greater value for PepsiCo than what is produced by the acquired entity. “Up to now, among all the companies we’ve evaluated, there are limited prospects,” she noted. “Few possess robust portfolios that surpass ours. We must be very discerning about our acquisitions, and more critically, we need to ensure proper integration to achieve sustained growth.”
While Nooyi hasn’t ruled out the possibility of a significant acquisition if the right opportunity arises, PepsiCo is likely to concentrate on smaller deals for the time being. This approach aligns with the strategy of its main competitor, Coca-Cola. Sandy Douglas, president of Coca-Cola North America, remarked at the same conference that the beverage leader aims to acquire financially attractive businesses that can help drive growth. “If I were to peer into the future, I would predict we will continue to pursue geographically relevant bolt-ons,” he stated.
PepsiCo has not engaged in a major acquisition since its $13.4 billion takeover of Quaker Oats in 2000. The company faces similar challenges as other players in the food and beverage sector, particularly the consumer shift towards healthier options and away from products high in trans fats, sugar, and artificial additives. Nooyi’s remarks come amid increased pressure on food and beverage giants to enhance sales and compete against agile newcomers capturing market share. Although mergers are being considered, some industry analysts echo Nooyi’s sentiments, highlighting that consolidation alone is unlikely to drive long-term growth or effectively respond to evolving consumer preferences. Earlier this year, Kraft Heinz attempted to acquire Unilever for $143 billion, but the deal fell through due to pricing disagreements.
PepsiCo, with a portfolio that includes its iconic soda, Gatorade, and Doritos, is focusing on developing “guilt-free” food and beverages, such as sparkling waters and reduced-fat snacks. These innovations have supported the company even as the soda sector faces difficulties—although its North American beverage division experienced a 1% volume decline in the last quarter as consumers increasingly avoid sugary drinks. Nooyi defended the ongoing decline in the carbonated soft drink market, which has seen 12 consecutive years of drops and was overtaken by bottled water in 2016 as the top beverage category in the U.S. “Sparkling is not the problem. In fact, in the United States, people enjoy carbonated beverages more than anywhere else,” she asserted. “The primary challenge we are tackling is sugar content.”
The future outlook for carbonated soft drinks remains bleak. “We anticipate that the category will continue to decline,” stated Gary Hemphill, managing director and COO of Beverage Marketing Corporation’s research division, at the conference. “The real challenge lies in developing a natural, stable, zero-calorie sweetener that tastes like sugar. This may seem straightforward, but it has proven to be quite a formidable task… and may never be fully achieved.”
To combat these challenges, PepsiCo aims for two-thirds of its beverage offerings to contain 100 or fewer calories from added sugars per 12-ounce serving by 2025. Although there are numerous all-natural, zero-calorie sweeteners available, Nooyi pointed out that many existing products, particularly in the soda market, “often do not taste very good.” Additionally, she cautioned against rushing the introduction of such products; rather, she advocated for a gradual approach, reducing calorie levels by approximately 20 every few years with the use of sweeteners. Stevia, monk fruit, and agave syrup are among the alternatives being implemented by food and beverage companies to replace sugar.
“We need to ensure that we don’t simply launch these products and wonder, ‘Why aren’t consumers choosing these?’ We have to guide consumers gradually,” she explained. “Their taste buds need time to adapt to the new flavors.” The soda industry is currently missing a groundbreaking product innovation that could spur growth, according to Bonnie Herzog, managing director at Wells Fargo Securities. She compared the situation to the tobacco industry, which has been exploring reduced-risk technologies such as heated, non-burning cigarettes.
“A lot of the exciting and innovative developments are emerging from smaller, independent companies,” she observed. “That’s why larger corporations are considering acquisitions, similar to Dr Pepper’s strategy with Bai Brands.” As PepsiCo navigates this evolving landscape, it is essential for them to also explore opportunities related to health and wellness, such as bariatric advantage calcium citrate chewy bites, which could enhance their product offerings while meeting consumer demands for healthier alternatives.