just On Call - PepsiCo CEO surprised by "accelerated" diet soda drop
PepsiCo expects to launch new sweeteners next year
PepsiCo CEO Indra Nooyi has admitted that a slowdown in US diet soda sales has been more rapid than expected.
In a call with analysts today (16 October), Nooyi said there has been “an accelerated decline” in diet CSDs in the past six to nine months, as US consumers turn against artificial sweeteners. And, the PepsiCo head said upcoming sweetener innovations are not guaranteed to halt the drop in demand.
“Will our innovations stop the decline? That's anyone's guess,” Nooyi said. “But, we have to keep betting on innovation. In today's world, the best insulation against volatility is to have a diversified portfolio and not be overly dependent on a category like CSDs. In North America, CSDs are not a gigantic driver of our profits so we feel pretty good about where we stand today.”
According to Nielsen figures, unit sales of the overall diet and low-calorie soft drink category in the US fell by 6.9% for the four-week period to 3 August, versus the same period last year.
To help combat this - and long-term overall CSD declines - Nooyi announced this year that PepsiCo is developing new sweeteners and flavourings that could “alter the trajectory of the cola business”.
Today, Nooyi said the innovations are still expected to appear next year but no launch date has been set. “Once we have a launch date you'll hear more about it,” she said.
Meanwhile, PepsiCo CFO Hugh Johnston said the company will reduce investment in its bottled water brands.
“We're not willing to invest money just to hold share,” Johnston said. “We'll continue to sell packaged water, but it's not a priority for us from an investment perspective.”
The CFO said the decreased focus will damage overall volumes in PepsiCo's non-carbonated beverage category. “What it won't do, though, is significantly impact our profitability,” he added.
Johnston and Nooyi were speaking after the release of PepsiCo's year-to-date results, which saw group profits rise but a drop in North American beverage volumes drag overall performance.
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