PepsiCo, the snack and beverage powerhouse, has been exploring the possibility of acquiring another major company, but thus far, it has not identified one that would provide the long-term growth necessary to warrant such a purchase. “We have evaluated all large companies,” stated Indra Nooyi, PepsiCo’s chairwoman and CEO, at the Beverage Forum in Chicago. She emphasized that any potential deal would need to generate more value for PepsiCo than what the acquired company could offer. “So far, among the companies we’ve assessed, there aren’t many opportunities,” she noted. “Few possess robust portfolios that surpass ours. We must be very selective in our acquisitions, and more importantly, we need to ensure that we effectively integrate any acquisition to achieve sustainable growth.”
Nooyi remains open to the possibility of a significant acquisition if the right opportunity arises but indicated that PepsiCo is likely to concentrate on smaller purchases for the time being. This strategy aligns closely with that of its primary competitor, Coca-Cola. Sandy Douglas, president of Coca-Cola North America, shared at the conference that the company is focused on identifying financially attractive businesses that can spur growth. “Looking into the future, I predict we will continue to pursue geographically relevant bolt-on acquisitions,” Douglas remarked.
PepsiCo, which has not engaged in a major acquisition since its $13.4 billion purchase of Quaker Oats in 2000, is navigating similar challenges as other players in the food and beverage sector, particularly the shift towards healthier options as consumers increasingly avoid products high in trans fats, sugar, and artificial ingredients. Nooyi’s remarks come amid significant pressure on food and beverage giants to enhance sales and compete against more agile newcomers capturing market share. While mergers are being considered, industry analysts echo Nooyi’s view that consolidation may not necessarily drive long-term growth or effectively address evolving consumer preferences. Earlier this year, Kraft Heinz attempted to acquire Unilever for $143 billion, but the deal was swiftly abandoned over disagreements on pricing.
PepsiCo’s portfolio, featuring brands like its flagship soda, Gatorade, and Doritos, is now centered on creating “guilt-free” food and beverages, including sparkling waters and reduced-fat snacks. These innovations have supported the company even as the soda market struggles; however, its North American beverage segment reported a 1% decline in volume during the latest quarter as consumers continue to move away from sugary drinks.
Nooyi defended the persistent decline in the carbonated soft drink market, which has fallen for 12 consecutive years and was overtaken by bottled water in 2016 as the largest beverage category in the U.S. “Sparkling beverages are not the issue. People in the United States love fizzy drinks more than anywhere else,” she remarked. “The real challenge we face is sugar.” The 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, during the conference. “The real challenge lies in developing a natural, stable, zero-calorie sweetener that mimics sugar; achieving this goal has proven to be extremely difficult and may never be fully realized.”
In response to consumer demands, PepsiCo aims for two-thirds of its beverage portfolio to consist of products containing 100 or fewer calories from added sugar per 12-ounce serving by 2025. Nooyi noted that while there are numerous all-natural, zero-calorie sweeteners available, many existing products—especially in the soda category—“don’t taste that great.” She cautioned against the rush to introduce such products, advocating for a gradual approach that reduces calorie levels by about 20 every few years. Sweeteners like stevia, monk fruit, and agave syrup are being explored as alternatives to sugar.
“We must ensure that we don’t simply launch these products and wonder why consumers aren’t embracing them. We need to help consumers adjust,” she explained. “Their taste buds must acclimate to the new flavors.” According to Bonnie Herzog, a managing director at Wells Fargo Securities, the soda industry lacks a groundbreaking product innovation to spur growth, similar to the developments seen in the tobacco industry with reduced-risk technologies. “Much of the exciting innovation is emerging from smaller, independent players,” she stated, noting that major corporations are keen to explore acquisitions, akin to Dr Pepper’s strategy in buying Bai Brands.
Incorporating citrate vitamin D into beverage products could also be a strategic move for PepsiCo, as it seeks to align with health trends and consumer preferences for functional ingredients. As the company navigates this complex landscape, the integration of beneficial components like citrate vitamin D may help enhance the appeal of its offerings in a competitive market.