Coca-Cola and PepsiCo invented the cola category decades ago, sparking a global phenomenon as both brands became cultural trademarks. While the battle for market share has long been called “the Cola Wars,” the competition between Coca-Cola and PepsiCo has extended into the snack food space as well.
However, consumer preferences are changing the face of these historically unhealthy food and beverage giants. Whether you look at the War on Big Food, the War on Big Soda, or the War on Sugar, the trend is clear—consumers demand nutritional alternatives to the foods and beverages incumbents such as Coca-Cola and PepsiCo have thrived on for years.
For Coca-Cola and PepsiCo to remain the cultural and global leaders they have historically been, drastic changes to their strategies and product offerings are necessary to meet healthier consumer preferences. The current product portfolio evolution is defining the next generation of food and beverage leaders.
New Product Launches Point to Healthier Trends
Launching a new product is anything but cheap for these massive food and beverage players. In fact, the average cost to launch a New Product Pacesetter (those that reach $7.5 million in sales in their first year, according to IRI) could be an estimated $71 million.
Even companies as large as PepsiCo and Coca-Cola can’t afford to launch new products unless they’re sure they can be successful.
Looking at the landscape of new product launches in the food and beverage industry confirms the shift toward nutritional offerings. Quaker®, in particular, has made significant efforts to meet new consumer demands for nutritional products.
With the launch of Quaker SuperGrains Instant Hot Cereal, Real Medleys SuperGrains Granola and Quaker Breakfast Flats, the company appears committed to the new reality in the food and beverage industry. The company has recognized that the “desire for grain variety is increasingly important as the 2015 U.S. Dietary Guidelines recommend more nutrient-dense and plant-based foods—including whole grains—as part of a healthy lifestyle."
By incorporating new ingredients such as quinoa, sunflower seeds, flaxseed and more, leading nutrition companies such as Quaker have positioned themselves for success as global consumption habits evolve toward healthy choices.
However, Quaker isn’t the only brand launching new products with healthier ingredients to meet the nutritional demands of today’s consumers:
- Kellogg’s introduced its Kellogg’s Origins™ line of breakfast offerings in 2015, including ingredients such as quinoa, berries, and toasted oats.
- General Mills developed Yoplait Plenti to enter the greek yogurt space, including 12 grams of protein, flax seed, pumpkin seeds, and fruit pieces in every cup.
- Coca-Cola’s Minute Maid brand has developed Minute Maid sparkling, a low-calorie, carbonated beverage with real fruit juice and natural flavors.
From a marketing perspective, incumbent food and beverage companies must shift their focus toward nutritional offerings as these organizations have, making an effort to rebrand existing products and develop innovative new products in response to consumer nutritional demands.
However, changing the public perception of companies such as Coca-Cola and PepsiCo from unhealthy to leading nutrition companies is a massive undertaking.
What the Food and Beverage Industry Can Learn from PepsiCo’s Evolution
Although both PepsiCo and Coca-Cola are perceived as cola companies, the reality is that they operate on very different business models. Where Coca-Cola has relied on its trademark beverages for two-thirds of its revenue, PepsiCo has diversified, drawing on snack food revenue for almost three-quarters of its business.
This may not have seemed important in the earlier days of the Cola Wars, but PepsiCo’s diversification is essential for the new trend of healthy eating and drinking.
According to PepsiCo CEO, Indra Nooyi, “globally, just 12% of our revenues come from trademark Pepsi and less than 25% comes from carbonated soft drinks.” Instead, approximately 45% of the PepsiCo portfolio has transitioned to “guilt-free” offerings that include everyday nutrition, beverages with fewer than 70 calories per can, and low-sodium snacks.
This shift toward healthy offerings is centered on product innovation focused on strong nutritional profiles, which has resulted in massive growth for certain leading nutrition companies under the PepsiCo umbrella:
- Smartfood Delight, the healthy version of PepsiCo’s popular popcorn brand, experienced 75% growth in 2015
- Naked Juice grew over 60% outside of North America in 2015
- Sunbites, a whole grain popcorn product, grew about 42% outside of North America in 2015
These are just a few of the successes PepsiCo has created in the healthy food and beverage sector. Many consumers still might see the trademark Pepsi drinks as unhealthy; but rather than rebranding their core product, PepsiCo is succeeding as a nutritional food and beverage provider through mergers and acquisitions with healthier brands.
The Need for Food and Beverage Companies to Adapt Quickly
The food and beverage industry might not move as quickly as technology, but if companies don’t adapt now, they risk losing out to leading nutritional companies with healthier brand images. Coca-Cola seems to be struggling with the changing environment, as their attempt to rebrand items as healthy offerings has struggled (the Coke Life experiment seems to be failing).
A business model focused on nutritional mergers and acquisitions like PepsiCo’s will keep incumbent food and beverage companies at the forefront of the market for years to come and perhaps finally mark the winner of not just a cola battle, but a food and beverage war.
If you want to learn more about how food and beverage companies can keep up with the latest health trends, download our free guide on how to build a next generation beverage.
Written by Erin Stavi
Erin Stavi is a Food & Beverage Senior Customer Success Manager at Signals Analytics, a Decision Science as a Service company, that enables global organizations to continuously experience the “aha moment” through Signals Playbook™, a cloud-based analytical intelligence platform that transforms the world’s unconnected data into actionable insights to enhance customer experience, optimize product portfolio health and propel innovation. Erin is a seasoned partner to Food & Beverage companies, devoting years to working hand-in-hand with leading F&B companies such as Kellogg and MillerCoors. She has a background in market research/analytics with a passion for growth and hunger for winning consumer preference.