Adapting to change
Ms. Nooyi said the changes occurring in consumer purchasing preferences, such as demand for health and convenience, have been present for decades, but are becoming more pronounced.
“Consumer shopping habits are rapidly adapting to evolving new retail formats, and their lifestyles are increasingly influenced by pervasive social and digital media and mobile technology,” she said. “And this, in turn, requires new marketing models that harness the power of digital media and big data in a way that enables us to communicate with consumers on a much more personal and individualized level.
“Consumers are also seeking more value and benefits from what they purchase and consume. They’re also seeking more premium experiences at the same time seeking value.”
But even more pronounced to a company like PepsiCo are the changes taking place at retail, where brick and mortar retailers are expanding into e-commerce and e-commerce players are moving to brick and mortar.
“ … Virtually every channel is melding aspects of grocery, convenience, food service, meal kits, prepared meals and home delivery,” Ms. Nooyi said. “So, with all this change occurring and at an accelerated pace, we can look upon this period in our industry with hesitation and pessimism or with a sense of excitement and optimism.
“We choose to take the optimistic approach because this period offers a once-in-a-lifetime opportunity to strengthen our business and capture new avenues of growth.”
She added that past definitions of category performance may be inaccurate.
“I think you’re beginning to see the limitations of syndicated data …,” she said. “…When you have blurring channels, you now have a shopping occasion being replaced by a home delivery or replaced by a meal delivery of kits. So, what we have to do is rethink what is the real growth of the marketplace…
“…There’s no question that the syndicated data showed a slowdown in the overall market… But I think if you include a much broader definition of the market, I think you’re going to see what the traditional growth is, which is population plus some, more in the range of somewhere between 2% and 2.5%. I think that’s what you’ll see as an overall growth rate. I think we all as manufacturers have to start to rethink how we serve this multiplicity of channels and how we should retool our business models to serve every one of these fragmenting channels.”
One analyst on the call noted that the company’s information regarding its North America Beverages business diverged from syndicated scanner data by approximately 450 basis points. When asked about the difference, Ms. Nooyi said the company does not reconcile its data with the syndicated scanner data.
“ …We have good data on what’s happening in the marketplace,” she said. “I have no idea why the scanner data diverges so much. It's been happening in many markets, and I think it reflects some of the limitation of syndicated data and they need to go back and retool it. But we are very comfortable with where we are, and we’re just going to keep running the business this way. “