By Paul Ziobro
The U.S. soda industry is in the midst of a "once in a lifetime
opportunity" to win back consumers turned off by high sugar content
and artificial sweeteners, PepsiCo Inc. (PEP) Chairman and Chief
Executive Indra Nooyi said Wednesday.
"If we can address the barriers to consumption, we can actually
bring back lapsed consumers," Ms. Nooyi said Wednesday at a Sanford
C. Bernstein investor conference. While per-capita consumption
levels may never reach those of the prior generation, "I actually
think this is a once in a lifetime opportunity to bring consumers
back" to carbonated soft drinks, Ms. Nooyi added.
A key part of the fix will be the development of a natural,
no-calorie sweetener that tastes good in sodas, a discovery that
thus far has proven elusive.
In the meantime, Ms. Nooyi said she sees mid-calorie sodas like
Pepsi Next, which uses a mix of high fructose corn syrup and
artificial sweeteners, as a short-term fix until a breakthrough can
be found on sweeteners. But she cautioned that taking too long to
find a solution would cause consumers to slip away for good.
"If we let this go on too long, the consumer will walk away,"
she said.
PepsiCo and its chief soda competitors, Coca-Cola Co. (KO) and
Dr Pepper Snapple Group (DPS), are all seeking ways to squeeze
growth out of a category that has sold less fizzy drinks each year
since 2005, according to the trade publication Beverage Digest. Dr
Pepper Snapple has a number of low-calorie sodas under its "Ten"
platform, while Coca-Cola is experimenting with mid-calorie
versions of Fanta and Sprite in some markets.
Considering the backdrop, PepsiCo has advocated for fewer sharp
discounts, which Ms. Nooyi says does nothing more than provide a
short-term boost to sales volumes. Ms. Nooyi says that prices are
more rational now than they were earlier this year, when soda sales
slumped badly due to cold weather and higher payroll taxes in the
U.S.
Investors have been closely following the progress of PepsiCo's
beverage business in the Americas, as performance in recent years
has trailed that of main rival Coca-Cola. The divergent performance
of drinks compared to the results from PepsiCo's Frito-Lay snack
business has sparked some calls to separate the two business, or
possibly consider a merger with a company like Mondelez
International Inc. (MDLZ), which makes Oreo cookies and other
snacks.
Ms. Nooyi on Wednesday reiterated the company's stance that it
is pleased with the makeup of its portfolio right now. "Our belief
is that we do not need any transformational M&A to accomplish
our goals," she said.
Shares of PepsiCo, which backed its outlook for the year, fell
1.5% in recent trading to $81.19 amid a broad slump in the markets.
Shares are still up 18.7% year to date.
Write to Paul Ziobro at paul.ziobro@dowjones.com
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