Sweetener innovation could fundamentally change cola business

Following PepsiCo’s fourth quarter earnings call last week in which CEO Indra Nooyi announced that t…

Following PepsiCo’s fourth quarter earnings call last week in which CEO Indra Nooyi announced that the company will lead the cola category via “disruptive innovation,” its CFO stated that its work with new natural sweeteners could “fundamentally change some of the elements of the core product offering in carbonated soft drinks.”

At yesterday’s Consumer Analyst Group of New York conference, Hugh Johnston, CFO of PepsiCo, said that the company will evaluate its options on how the innovation will be employed, following review of the ingredients by the U.S. Food and Drug Administration (FDA), according to BeverageDaily.com.

Amid concerns by some analysts that PepsiCo might end up negatively affecting its business with a dramatic shift in sweeteners, Johnson noted that the innovation will be “more evolutionary than revolutionary.” Leaning toward patience, he said that the company wanted to let the innovation “play out before we make a decision on exactly what the optimal structure would be for the beverage business going forward.”

Johnson also addressed PepsiCo’s “hybrid everyday value program,” which the company launched following turbulent pricing of CSDs in recent years, and the company’s belief that a low price strategy is not right fit for the CSD category.

“The pricing environment just got way too high/low over the last maybe five or six years,” Johnson said. “And what we started to do last year, and we are doing with a couple of very significant customers this year is to essentially have higher pricing on holidays and lower pricing every day, to start to level out some of those steep peaks and valleys.”