How PepsiCo plans to lead the £14bn breakfast club

When PepsiCo CEO Indra Nooyi announced in February that the company planned to axe 8,700 jobs globally and focus on the company’s 12 megabrands going forward, some industry commentators saw it as a volte-face.

Just two years earlier ,she had pledged to “snackify drinks and drinkify snacks” as part of a greater push into nutritional products and the news was interpreted as a sign that Pepsi was putting its health agenda on the back burner.

Nothing could be further from the truth, says David Murray, general manager of two of the megabrands, Tropicana and Quaker, echoing comments made by Richard Evans, president of PepsiCo UK, Ireland and South Africa in a letter to The Grocer (25 February).

Why would it take its foot off the gas, he says, when both brands have enjoyed strong growth over the past few years - Quaker grew 10.5% to last year and 2.5% to (Nielsen) - and when they are ideally positioned to “unlock” the £14bn breakfast occasion? If anything, the time is right to put the pedal to the metal and, having kicked off the year with h,the company is planning to do just. “We like breakfast,” he declares. “There’s something about breakfast for us that’s got great appeal.”

And not just on a nutritional front. “Why breakfast is so important for us is our estimates put it at a value of about £14bn, so it’s a pretty sizeable consumption occasion and what’s fantastic about it is it’s in growth both in home and out of home. Out is growing seven times faster than in home. We’ve got a fantastic portfolio but we wanted to look at what is it we need to do to truly unlock the strategy of creating value?”

To that end, PepsiCo commissioned one of the biggest pieces of research the company had ever conducted in the UK last year, tracking what 33,000 people ate from dawn to dusk. The research identified two major trends: how crucial a healthy start to the day had become to consumers and how important convenience was in their choice of breakfast. So , PepsiCo decided to focus its subsquent 12 to 18 months worth of NPD on these two areas.

First out of the blocks was Oat So Simple Toppers this January. Available in two variants - Chocolate Chunks and Strawberry Pieces - the instant porridge pots have a separate compartment in the lid containing the topping, which can be stirred into the porridge. Instant pots are already worth £7m to PepsiCo having only launched last year and Murray sees them as key to attracting new consumers to the Quaker brand.

“The people buying this are young males who are coming into the category in their droves,” he says. “As a result of this pot alone we’ve had 750,000 new consumers who were not eating hot cereals before.”

A further extension to the Quaker product portfolio was unveiled in February when PepsiCo launched Oat So Simple Morning Bars, replacing its Oats cereal bars. But it’s not all about oats. PepsiCo’s juice brands are also in line for some heavyweight NPD. This month, the company plans to launch an Apple Lemonade and Pink Lemonade under its Copella brand. Murray is confident it will gain the same sort of traction as its last piece of seasonal innovation.

“Last winter, we brought out Copella Winter Warmer - a spiced apple juice that was sold in the chiller that you warmed up. It was a phenomenal success and the summer lemonade is the flip of that,” he says.

The main focus juice-wise, however, will remain the daddy of the juice portfolio - Tropicana. Having relaunched Tropicana Kids in January and introduced juice bottles for consumption on the go last month, PepsiCo is launching Tropicana Single Source this May. It intends to add Valencia orange and Mandarin flavoured juices to the existing Sanguinella juice range.

These innovations will be backed by a huge marketing spend, including new TV advertising campaigns for Tropicana and Quaker, promises Murray. “We’ve doubled our marketing investment on Tropicana in the last two years and on Quaker Oat So Simple our investment is the highest it’s ever been,” he says. “We’ve put our money where our mouth is and really started to push the business.”

PepsiCo will have just enough time to bed these new products in before the next round of NPD in September - NPD that will extend beyond new varieties of Oat So Simple, hints Murray. “We’ve got some very exciting change-the-game products in convenience that are going to come out and we are going to do a little bit more work on our traditionals, which is the steady-state volume of our business.”

In both cases, speed will be of the essence and if a product needs a tweak post-launch, so be it.

“That’s our role,” says Murray. “If we waited until everything was buttoned up and perfect we wouldn’t really be in that cycle. Last year in Tesco, we launched 14 pieces of NPD in four months. That’s how fast we can run. Granted, that emptied the wardrobe out a bit, but that’s why the research we’re doing with our global group is so important - so we can fill up the pipeline, so we’ve got great new news every season on both portfolios.”

What healthier strategy for growth could there be than that?