PepsiCo's desire to morph into a healthy food and drink company hits a speed bump
It is a lot easier to say you want to be a healthy snack company than to actually become one. Global snack giant PepsiCo's recent experience is a reality check for companies banking on healthy products to drive future growth.
One basic lesson in food marketing is recognizing the potential disconnect between what consumers say they want and what they actually buy. In 2010, PepsiCo announced a goal of tripling revenue from "nutritious" products to $30bn over the next decade. PepsiCo recently dialed back its expectations. The firm's new goal for 2025 is to achieve sales growth for these products that will merely "outpace" that of its portfolio as a whole.
So what happened? Taste trumped health and PepsiCo discovered that demand for healthier offerings like True North nuts and Muller Quaker yogurt was much less than projected. Health and wellness are important, but taste, quality, and price matter more. In a Q3 2016 survey from GlobalData Consumer, just 12% of global consumers said that "health/wellness impact" had the most influence on product choice for food. Price and promotions were seen as nearly three times as important and quality almost four times as important.
Consider PepsiCo's experience with Flat Earth baked vegetable crisps, a 2007 offering with a half-serving of fruit or vegetables in each ounce. Flat Earth's health credentials were strong; the brand's sales credentials, much less so. PepsiCo's Frito-Lay unit expected to sell about $100m-worth of chips in the brand's first year; Flat Earth fell flat with just $50m in sales over that period. The brand was deemed a failure and was pulled from store shelves to make room for more profitable snacks.
The lesson for marketers is that health is important, but taste is king. Achieving both is a delicate balancing act. To its credit, PepsiCo will keep on trying. Off the Eaten Path Mosaic veggie crisps will debut in 2017, a snack made with rice, black beans, and green and yellow peas – "better for you" ingredients trending as healthy alternatives to corn or wheat.