PepsiCo, the snack and beverage powerhouse, has been exploring the possibility of acquiring another major company but has yet to identify one that would provide the necessary long-term growth to warrant such a purchase. “We have evaluated every large company out there,” stated Indra Nooyi, PepsiCo’s chairwoman and CEO, during her speech at the Beverage Forum in Chicago. She emphasized that any prospective deal must create greater value for PepsiCo than the value generated by the target company itself. “To date, we have not found many opportunities among the companies we’ve reviewed,” she remarked, noting that few possess portfolios that outperform PepsiCo’s. Nooyi highlighted the importance of being selective about potential acquisitions and ensuring successful integration to achieve sustainable growth. While she didn’t entirely dismiss the idea of a major acquisition if the right opportunity arises, PepsiCo is likely to concentrate on smaller deals for the time being.
PepsiCo’s acquisition strategy appears to align with that of its top competitor, Coca-Cola. Sandy Douglas, president of Coca-Cola North America, mentioned at the same conference that the company seeks financially attractive businesses that can drive growth. “Looking into the future, I predict we will continue to pursue geographically relevant bolt-on acquisitions,” Douglas stated.
Since its $13.4 billion acquisition of Quaker Oats in 2000, PepsiCo has refrained from pursuing large deals. Like many firms in the food and beverage sector, it faces significant challenges, particularly the consumer shift toward healthier options and away from products laden with trans fats, sugar, and artificial ingredients. Nooyi’s remarks come as food and beverage giants are under pressure to increase sales and compete with agile newcomers capturing market share. While mergers are being considered, experts echo Nooyi’s sentiment that mere consolidation may not lead to long-term growth or effectively address evolving consumer preferences. Earlier this year, Kraft Heinz attempted to acquire Unilever for $143 billion, but the deal fell through due to pricing disagreements.
PepsiCo’s portfolio includes well-known brands such as its flagship soda, Gatorade, and Doritos. The company is committed to developing “guilt-free” food and beverages, including sparkling waters and reduced-fat snacks, which have helped it navigate the struggling soda market. However, its North American beverage segment recently reported a 1% decline in volume as consumers increasingly turn away from sugary drinks. In defense of the declining carbonated soft drink market, which has seen a drop for 12 consecutive years and was overtaken by bottled water in 2016, Nooyi remarked, “Sparkling isn’t the problem; Americans love bubbly drinks. The real challenge we face is sugar.”
The future outlook for carbonated soft drinks seems bleak. Gary Hemphill, managing director and COO of Beverage Marketing Corporation’s research unit, noted at the conference, “We expect the category to continue its decline. The real challenge is developing a natural, stable, zero-calorie sweetener that mimics sugar—a seemingly simple task that has proven to be extremely challenging and may never be fully achieved.”
To tackle this issue, PepsiCo aims for two-thirds of its beverage portfolio to consist of products with 100 or fewer calories from added sugars per 12-ounce serving by 2025. Nooyi acknowledged that while various all-natural, zero-calorie sweeteners are available, many existing products, especially sodas, “don’t taste that great.” She cautioned against rushing to launch products with these characteristics, advocating instead for a gradual reduction in calorie content by approximately 20 calories every few years. Sweeteners like stevia, monk fruit, and agave syrup are being adopted by food and beverage companies to replace sugar. “We need to ensure we don’t just release these products and wonder why consumers aren’t buying them. We must guide consumers gradually,” she stated. “Their taste buds need time to adapt to the new flavors.”
According to Bonnie Herzog, managing director at Wells Fargo Securities, the soda industry is in search of a breakthrough product innovation that could stimulate growth, akin to the emergence of reduced-risk technologies in the tobacco sector, such as heat-not-burn cigarettes. “A lot of exciting innovations are coming from small, independent players,” Herzog observed, noting that this is why large companies discuss acquiring brands like Bai Brands, similar to Dr Pepper’s strategy.
In light of the ongoing evolution in consumer preferences and industry dynamics, PepsiCo’s focus on “guilt-free” options, including products enriched with best calcium citrate 500 mg, reflects its commitment to adapting to healthier trends and meeting consumer demands in the competitive beverage landscape.