I will spare you my thoughts, for now, about the ongoing Pepsico packaging redesign initiative. Lets forget aesthetics for a moment, and note that apparently the redesign has begun to get the attention of the financial community. Last Friday, the 13th, Pepsico announced earnings, and it was hard to avoid the suspicion that things are going south. They announced the first category decline in North American beverage sales in half a century. Now whether the consumer is really beginning to be negatively influenced by the new design work, or as noted by Indra Nooyi this is simply “some disruption in the system”, or just reflects the consumer tightening their belt in this economy, is clearly too early to tell. But stay tuned, the consumer will make a decision about this work, and it will not be ambiguous.
Here are some excerpts from the quarterly conference call with analysts and reactions from the business press.
Indra Nooyi said in her conference call, “The piece of the portfolio that didn’t perform up to expectations was our North American beverage business which continued to be buffeted by the category dynamics. As you know this was an unprecedented year for the LRB category in North America with the first decline in category volume in at least the last half century. Clearly this remains our key area of focus.”
She went on to note, “when you are refreshing 1200 SKUs you are going to have some disruption in the system because people hold off ordering waiting for the new products to come in.”
Massimo D’Amore, CEO of Pepsico Americas continued, “As you know by middle of 2008 we put in place a plan to completely refresh and rejuvenate our entire North America beverage lines, from our brand identities to consumer campaigns to innovation. And most of these initiatives are now appearing in the marketplace. We expect that during the course of the new beverage lineup will gain traction and our supporting campaigns will yield increasing results. The first half of the year will still be a work in process but we believe our investment will yield the results later in 2009.”
Vinnee Tong, AP Business Writer notes “PepsiCo Americas Beverages posted a 10 percent sales decline as the North American soft drink industry saw its first year-over year sales decline. PepsiCo has launched a new marketing campaign to bring consumers back to soft drinks such as signature Pepsi, Sierra Mist and Mountain Dew. The promotional push includes a new Pepsi logo”
William Spain of MarketWatch reported “In beverages, volume was off 6%, as business showed a 10% decline in revenue and a 16% drop in core operating profit.”
Say what you will about the new design effort, and many have, the consumer will be the ultimate judge. It will be interesting to watch this play out in the next year.