‘Snack and beverage co-purchases beat peanut butter and jelly!’ Frito-Lay CEO Tom Greco champions PepsiCo's 'Better Together' policy
Presenting at CAGNY 2015 in New York yesterday, Greco (pictured) said: “The incidence of co-purchase between salty snacks and liquid refreshment beverage is higher than peanut butter and jelly.
“That’s because snacks and beverages occupy common demand spaces…The goal is really to understand the drivers of choice inside each demand space as it applies to food and beverage.
“For example, both Pepsi and Tostitos focus on the Fun Times Together demand space. The occasion is a social occasion. It involves friends, and fun is really the priority for this occasion. So we go very deep to understand it and capture the growth potential inside Fun Times Together,” Greco said.
Fun Times Together includes what Greco called a ‘forest ranking’ of the attributes that PepsiCo knows drive performance within the demand space.
“This knowledge informs our entire growth agenda, our brand building, our innovation, our in-store and marketing execution and is all fuelled by the productivity agenda that we construct to drive it.”
For example, at this year’s Super Bowl Greco said Pepsi’s brands were center stage in Phoenix, with a Pepsi image “blanketing the Phoenix skyline”, next to the ‘Tostitos Party Boulevard’, while the game finished with a Gatorade bath for Bill Belichick, coach of the football team New England Patriots.
“Our customers understand PepsiCo’s investment in the NLFL and provide tremendous support as a result. In summary, we continue to make big investments in our brands, and secondly the Super Bowl is the first of several Better Together events that we’ll run throughout the year,” Greco said.
On the innovation front, Greco said Frito-Lay rolled-out Tostitos Rolls and Tostitos Dip-Etizers, which he said were selling well.
“We’re also launching a product called Doritos Roulette where we have an extra spicy chip in the bag, several extra spicy chips in the bag, but you just don’t know which is extra spicy, and they all look the same.”
Turning to Quaker, Greco cited three new SKUs for Quaker Steel Cut oatmeal. “The Steel Cut segment is growing rapidly and the Quick Cook line up has fortified our share position,” he said.
Greco took to the stage yesterday in New York after his colleague Al Carey, CEO of PepsiCo North Americas Beverages (PAB) had introduced proceedings.
Discussing Better Together (previously called 'Power of One' within PepsiCo) Carey said: “I’ve always felt it’s an untapped opportunity, but it’s tricky.”
PepsiCo had to take care to harness the scale advantage that came from combining PAB (54% of PepsiCo’s North America revenues) and FL (46%) without losing their individual focus, he warned.
Nonetheless, customers wanted one point of contact, the product portfolios were complementary and PepsiCo was able to harness synergies in IT, global procurement and R&D functions, he said.
“The total dollars that we grew in [the US in] 2014 were three times higher than the next best supplier for our customers. So we feel like we’re making some progress…I see a formula for success embedded together that’s likely to deliver some good result in the future,” he said.
56% of PepsiCo’s $37bn group net revenue comes from North America; 54% of net revenue in the region comes from beverages and 46% from snacks.
As the largest F&B supplier to most of its retailer customers – and at about twice the size of its nearest rival supplier in food and beverage – PepsiCo held the No.1 market position in Macro Snacks and the No.2 position in liquid refreshment beverages (LRBs), he said.
“Being big alone isn’t necessarily a good thing, but I’ll tell you, it does get you a seat at the table when it comes time to speak to your big retail customers about strategies that are important to the overall business,” Carey said.
PepsiCo was the biggest contributor to cash flow for “almost any customer” it did business with, Carey said – a fact borne out by a later slide showing that, in beverages, the company had four out of the top six dollar growth contributors in 2014 (IRI MULOC), and five of the top 9 in Macro Snacks.
“And I can tell you this – more than one of our customers have said ‘I’ve got to grow my business with my biggest supplier’, so they have a vested interest in seeing that our business grows,” he said.
Posted by Robert Gimpel,