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June 28, 2012

PepsiCo’s Expanding Snacks Portfolio Targets Emerging Markets

IStock_000003858314XSmallAnalyst Insight by Ildikó Szalai, Senior Company Analyst at Euromonitor International

As part of the extensive repositioning of its food and drinks portfolio, PepsiCo recently announced a significant number of new product launches and new category entries in the snacks arena, largely targeting emerging markets. In Mexico, its joint venture with Strauss Group, Sabra Dipping Co, introduced Obela, a fresh, refrigerated dips and spreads brand that will be launched in June. Meanwhile in India, PepsiCo's Frito-Lay plans to launch more than 50 new products as it invests in scale and innovation to consolidate its leading position in the country's dynamically growing sweet and savoury snacks market.

Snacks expansion

Building and extending its snacks portfolio is a key strategic ambition for PepsiCo. The company aims to grow its core salty snacks brands, at the same time extending into adjacent categories such as crackers, bread bites and baked snacks. This diversification forms part of the company's efforts to develop a more health-oriented offer in line with evolving consumer demand and a stricter regulatory environment.

In Mexico, Obela will be marketed as a variety of fresh dips and spreads based on natural ingredients, tapping into the ever growing health trend in the country. The products are expected to benefit from both Strauss's capability and expertise in fresh food and PepsiCo's go-to-market and brand-building strengths. Although the dips category in Mexico is still relatively small, worth US$13 million in 2011, it is expected to post a 3% CAGR over 2011-2016. The company also announced that it is looking for new growth opportunities for Obela beyond the Mexican market, which, given its moderate size, will be necessary in order to justify the joint venture's investment of US$10 million to help drive the successful launch of the Obela business in Mexico.

PepsiCo invests in scale and innovation in the attractive Indian snacks market

In 2010, PepsiCo held a 42% retail value share of the Indian sweet and savoury snacks market, down from 52% back in 2006. Click to tweet! Although still some way ahead of local player Haldiram Foods International with a 23% value share, PepsiCo's strategy shows increased urgency and aggression in terms of product development and innovation. Between April and June 2012 alone, it introduced 16 new pack sizes and variants of its existing product range and announced that over 50 new products are at various stages of testing for the Indian market. Click to tweet!

In terms of future growth prospects the Indian sweet and savoury snacks market is expected to achieve a 14% CAGR over 2011-2016, and is attracting interest from a number of international players, including Perfetti Van Melle, which entered the category in 2011 with the launch of a brand new product - a range of filled, fried and non-fried ready-to-eat salted snacks under the Stop Not label.

As well as new market entrants, second-tier players behind PepsiCo are also gaining value share. Haldiram Foods International, Balaji Wafers and ITC Group all made gains over the 2006-2011 period, while PepsiCo's share declined. These local companies are aggressively competing with PepsiCo, particularly in the lower price segment to which large consumer groups are trading up from traditional unbranded snacks.

In order to successfully compete with dynamic local companies, PepsiCo will have to continue to push into healthy snacks options in India. As part of this strategy, in June 2012 it introduced six new variants of its baked snack brand Aliva to add to the existing four variants launched in 2009.

Future direction in targeting emerging snack markets

PepsiCo's increasingly integrated approach to branding offers ways to develop synergies across its international operations and tap into the global rise in health-consciousness. However, the company needs to remain sensitive to localised differences in demand. PepsiCo is notably looking to develop healthy products targeting particular demand in emerging markets.


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