Frito-Lay’s healthy image could help PepsiCo’s expansion in Whole Foods

30-Aug-2017 - Last updated on 06-Sep-2017 at 08:34 GMT

Will PepsiCo's launch of Frito-Lay's Simply organic line be accepted in Whole Foods? Pic: PepsiCo

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Frito-Lay has launched a line of organic snacks made without artificial ingredients under its Lays, Doritos, Tostitos, Ruffles and Cheetos brands.

The line, named Simply, is PepsiCo’s latest move of expanding its organic snack offerings. The company said it could also help the company break into organic grocery stores, such as Whole Foods.

Will Whole Foods stock Frito-Lay?

The organic snacks launch is timely as Amazon’s acquisition of Whole Foods came through on Monday this past week.

“PepsiCo has the resources to acquire smaller brands that are or could more easily be stock at Whole Foods." - Sonia Vora

PepsiCo-owned health-conscious brands, such as Stacy’s and Naked Juice, are currently sold in Whole Foods, and industry analysts believe launching organic snacks could help the snack giant further expand its footprint in this channel.

“I think newer offerings like organic chips may help the firm [PepsiCo] increase the number of channels through which it can sell its products,” said Sonia Vora, equity analyst at Morningstar Research Services.

However, “I think the most significant headwind will be the association of Doritos with unhealthy snack food,” she said.

“Still, PepsiCo’s scale gives it an edge over smaller, often local snack competitors, which could prove advantageous with regards to [the] Whole Foods/Amazon [deal]… PepsiCo has the resources to acquire smaller brands that are or could more easily be stocked at Whole Foods,” she added.

Whole Foods did not immediately respond to whether it would stock Frito-Lay’s new organic snacks.

Better-for-you focus

PepsiCo has been focusing on transforming its snacks into healthier options in the last decade, and the company’s “guilt-free” products currently generate 45% of its net revenue, according to PepsiCo’s Q2 earnings call.

“These products include diet beverages that contain 70 calories or less per 12-ounce serving and snacks with low levels of sodium and saturated fat,” said Indra Nooyi, PepsiCo’s CEO and chairman.

“We’re actually making progress in Frito-Lay to move the business more to premium products.”

Vora said PepsiCo’s focus on better-for-you products is aligned to the company’s long-term strategy of product innovation and creating healthier, more natural offerings.

“Management has also hinted at steady e-commerce growth, a relatively underpenetrated channel, though these figures are not reported separately,” she said.

“It seems plausible that Amazon is handling a material portion of these e-commerce volumes.”