PepsiCo's Shift in Strategy

By Richa Naidu and Jessica DiNapoli
AMSTERDAM/NEW YORK (Reuters)
PepsiCo (NASDAQ:PEP) is revamping its major brands like Lay's potato chips as consumers seek cheaper options. The company is increasingly sharing data with major retailers to gain insights on shopper purchases, according to a PepsiCo executive.

Declining snack volumes are prompting PepsiCo to alter its product line-up. The maker of Lay's chips and Pepsi sodas has experienced sluggish sales growth, leading to adjustments in pack sizes and ramped-up advertising for its Tostitos and Doritos brands.

In early October, the Purchase, New York-based company reduced its annual sales growth forecast.

A senior strategy executive from PepsiCo stated that the company is using retailer sales data to enhance demand forecasting and streamline its supply chain. Angelika Kipor, PepsiCo's senior vice president of strategy and transformation, emphasized a deeper collaboration with retailers, who are increasingly willing to share their data to understand their supply chains better. PepsiCo is also providing major retailers with forecasting data.

For instance, when Carrefour (EPA:CARR) ordered from PepsiCo, the company furnished a historical analysis that identified products Carrefour frequently missed, leading to increased orders.

Valuable Data

Checkout data, indicating what shoppers ultimately buy, is highly sought after by retailers. Walmart (NYSE:WMT), for example, offers suppliers subscriptions for first-party data regarding shopper behavior. Kipor added that the effectiveness of partnerships with retailers relies on maturity and trust in their relationships.

PepsiCo utilizes artificial intelligence to process extensive data efficiently. Competitors like Unilever (LON:ULVR) and Danone are also utilizing AI to refine supply chains.

Kipor clarified that these data-sharing relationships are separate from pricing negotiations, which can often be contentious. PepsiCo announced last year that it would halt further price increases on its products after multiple hikes driven by high inflation following the COVID pandemic.

Prices for Pepsi's products, including Lay's chips and Diet Pepsi, have continued to rise but at a slower rate, as indicated in U.S. securities filings. Kipor stated, "I'm not touching price negotiations with PepsiCo's retail customers; retailers and PepsiCo share a common goal to minimize out-of-stocks."

(This story has been corrected to fix the title to senior vice president, strategy and transformation, in paragraph 5)