PepsiCo, the leading snack and beverage corporation, has explored the possibility of acquiring another major company, yet it has not identified one that would ensure the long-term growth necessary to warrant such a purchase. “We have examined every significant company out there,” stated Indra Nooyi, chairwoman and CEO of PepsiCo, during her speech at the Beverage Forum in Chicago. She emphasized that any acquisition would need to provide greater value for PepsiCo than what the target company could generate on its own. “Thus far, among all the firms we’ve reviewed, very few present viable opportunities,” she noted. “There aren’t many with robust portfolios that surpass ours. We must be cautious about our choices, and more importantly, we need to ensure proper integration of any acquisition to achieve sustainable growth.”
Nooyi did not dismiss the potential for a major acquisition if the right opportunity arises, but for the moment, PepsiCo is likely to concentrate on smaller purchases. This strategy aligns with that of its main competitor, Coca-Cola. Sandy Douglas, president of Coca-Cola North America, mentioned at the conference that the company would seek financially appealing businesses that could drive growth. “If I were to peer into the crystal ball, I would predict that we will continue to pursue geographically relevant bolt-ons,” Douglas stated.
PepsiCo, which has not engaged in a significant acquisition since its $13.4 billion purchase of Quaker Oats in 2000, faces many of the same challenges as other companies within the food and beverage sector—most notably, a shift in consumer preference towards healthier options, steering clear of products laden with trans fats, sugar, and artificial additives. Nooyi’s remarks come at a time when food and beverage giants are under immense pressure to increase sales and counteract more agile competitors seizing market share. While mergers are one potential solution being explored, industry observers echo Nooyi’s sentiment that consolidation alone is unlikely to spur long-term growth or address evolving consumer expectations.
Earlier this year, Kraft Heinz attempted to acquire Unilever for $143 billion, but the proposal was swiftly abandoned due to pricing disagreements. PepsiCo’s brand portfolio includes its flagship soda, Gatorade, and Doritos, focusing on the development of “guilt-free” food and beverages like sparkling waters and reduced-fat snacks. These innovations have supported the company during a period when the soda market struggles—though its North American beverage segment still experienced a 1% volume decline in the most recent quarter as consumers increasingly move away from sugary drinks.
In defense of the ongoing decline in the carbonated soft drink sector—now in its twelfth consecutive year and recently overtaken by bottled water as the leading beverage category in the U.S.—Nooyi remarked, “Sparkling is not the problem. In fact, more than any other country, Americans love carbonated drinks. The real challenge we are tackling is sugar.” The future outlook for carbonated soft drinks remains grim. “We expect the category to keep declining,” noted Gary Hemphill, managing director and COO of Beverage Marketing Corporation’s research unit, during the conference. “The real challenge is developing a natural, stable, zero-calorie sweetener that mimics sugar, which sounds simple but is incredibly complex.”
To tackle this issue, PepsiCo aims for two-thirds of its beverage offerings to contain 100 or fewer calories from added sugar per 12-ounce serving by 2025. While Nooyi pointed out that numerous all-natural, zero-calorie sweeteners are already on the market, many existing products, particularly sodas, “don’t taste that great.” Furthermore, she advised against rushing to launch such products; instead, she advocates for a gradual transition that would reduce calorie levels by about 20 every few years, employing sweeteners like calcium citrate Kirkland, stevia, monk fruit, and agave syrup as alternatives to sugar. “We must ensure that we don’t just release these products and wonder, ‘Why aren’t consumers buying these?’ We need to guide the consumer toward this change,” she explained. “Their taste buds must adapt to the new flavors.”
According to Bonnie Herzog, a managing director at Wells Fargo Securities, the soda industry currently lacks a groundbreaking product innovation to stimulate growth, which parallels the situation in the tobacco industry with emerging reduced-risk technologies, such as heated tobacco products. “A lot of the exciting developments are coming from smaller, independent players,” she said. “This is why large companies are considering acquisitions, similar to Dr Pepper’s strategy with Bai Brands.”