Grain-based foods a key in PepsiCo wellness group
BakingBusiness.com, October 12, 2010
by Josh Sosland

Grain-based foods should view with considerable interest the announcement last week that PepsiCo, Inc. is creating a Global Nutrition Group. While major moves by a food company as successful as PepsiCo always merit close watch, the step is of added interest because of echoes dating back nearly a decade.

When PepsiCo in late 2000 announced plans to acquire the Quaker Oats Co., several investment analysts speculated that the purchase of Quaker was only to capture its rapidly growing Gatorade beverage brand and that the stodgy Quaker food business would be quickly divested. Roger A. Enrico, chairman and chief executive officer of PepsiCo at the time, put such speculation to rest. He said the acquisition of the Quaker snack portfolio would give PepsiCo an entree into the morning market for snacks, a segment he said was underserved by Frito-Lay.

“The Quaker trademark gives us the legitimacy, the nutrition credentials, if you will, to think about playing in all of this and being a leader in this whole (nutrition) trend,” he said. “So, the net of all this is that I can say, the Quaker snack business may only be about 8% of their present portfolio, but it sure adds a much higher share of excitement to us.”

Mr. Enrico mused that within five years the Quaker snack business could generate up to $34 million in annual operating profits. While it has struggled over the past year or so, the Quaker unit in the first nine months of 2010 generated operating profit of $393 million, a far larger business than envisaged by Mr. Enrico in 2000. It is because growth has slowed that PepsiCo reviewed this business in the past several months. The decision to create the nutrition group and to include Quaker in the unit appears to be a resounding vote of confidence in growth prospects for the health and wellness category generally as well as for the importance of grain-based foods within that category.