PepsiCo to focus on nutrition biz, eyes growth at 3x of fizz-and-snacks

Seeks quick entry into value-added dairy, wants nutrition segment to replace colas as cash cow

PepsiCo India has decided on growing its nutrition portfolio three times faster than its core fizzy drinks and snacks business, for the next few years.

This comes after a visit in March by Indra Nooyi, its global chairperson and chief executive. Nooyi has keen interest in everyday nutritional products and instructed the local arm to grow the business rapidly in the coming years.

"This (nutrition business) is a far more long-term game, as educating the consumers, habit creation and developing a new business model takes time. The message is very clear: We need to grow faster than our core portfolio and remain over-invested in nutrition. This portfolio should grow 2.5 to three times faster. Value-added dairy is one of the fastest growing categories and this is the right time to get into it," said Deepika Warrier, vice-president, nutrition category, PepsiCo India.

The goal is part of a drive to change its portfolio, by promoting nutritious utility products and cutting the sugar content in these. It would also help reduce the dependence on its core business of cola drinks.

During Nooyi's visit, Warrier and her team explained their road map to achieve a healthier portfolio in India. Nooyi gave a clear direction to the management here - to add value to existing products with more of nutrition, instead of only cutting on 'guilt products'. And, adding new products which are low in unhealthy ingredients like sugar, saturated fat and sodium to be accelerated, sources said.

The rationale behind PepsiCo's focus on the nutrition business is its inherently lower sugar, fat and sodium intake, which suits the purpose.

To implement the plan, PepsiCo has developed a go-to-market channel through which it would reach 100,000 outlets with the new products. In recent months, it has launched two new platforms under its nutrition business, Tropicana Essentials and Quaker Nutri-Food. The latter is a fortified breakfast products range, launched last month. It has launched one product under Tropicana Essentials and Warrier says the plan is to add another by the end of this financial year.

In the next few days, PepsiCo will be launching a third platform under Quaker oats and milk. This is described as a ready-to-drink and milk-based product. Described as offering 15 per cent of one's daily calcium need and 10 per cent of fibre. PepsiCo will add two more variants by March with the two flavours it will be launching initially.

PepsiCo India gets about a tenth or Rs 680 crore sales from its nutrition products, 44 per cent from its core beverages portfolio and 46 per cent from the snacks business. In 2015-16, net sales dipped 18 per cent to Rs 6,626 crore and net loss grew to Rs 538 crore from Rs 177 crore a year before.