How PepsiCo Is Coping With Growth In E-Commerce

by Trefis Team
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With online grocery shopping rising at a phenomenal pace, PepsiCo (NYSE:PEP) is placing a big bet on the online channel. The company is making an increasing effort to address the growth opportunities across eGrocery, pureplay, urban grocery delivery, direct-to-business, and direct-to-consumer models. Keeping this in mind, the cola giant has developed a team of roughly 200 e-commerce professionals that has been tasked with capturing growth in this rapidly growing space. Until now, PepsiCo’s efforts seem to be working well, as the company has witnessed tremendous growth through its e-commerce channels.

PepsiCo’s Place In This Fast Growing Space

PepsiCo’s team of 200 people is made up of seasoned e-commerce and tech professionals, who work in conjunction with the entrepreneurial talent at the company. Since the needs and wants of this group are different from those traditionally in a consumer packaged goods (CPG) business, the unit is treated as more of a tech company and could be the key for future growth. This online unit does not function out of the company’s headquarters in New York but from about an hour away in midtown Manhattan. This group, which was started about two years ago but whose workings were revealed recently, focuses on the marketing and packaging of the company’s products for online sellers such as Amazon, as well as brick-and-mortar retailers who are trying to build their e-commerce business.

PepsiCo’s move in this space seems warranted as online shopping is growing at a rapid pace. In fact, US online grocery shopping is set to grow five-fold over the next decade, with American consumers projected to spend over $100 billion on food-at-home items by 2025, according to a report by the Food Marketing Institute and Nielsen. The report also notes that the online channel is likely to capture a substantial portion of the market share from traditional stores. At present, about a quarter of the households buy some groceries online, up from 19% in 2014. This is expected to rise to approximately 70% in the next ten years.

In its recently reported third quarter earnings, CEO Indra Nooyi stated that the company’s e-commerce sales are set to hit $1 billion in annualized retail sales, with impressive growth rates reported in its key markets. The online sales in the US are set to increase by 80% this year, with those in China expected to double. The company also stated that in many cases, the online share exceeds its offline share, and the company is gaining in the e-commerce space “pretty much across the board.” The initiatives undertaken by PepsiCo are paying off and will continue to bode well for the company in the foreseeable future.

See Our Complete Analysis For PepsiCo Here

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for PepsiCo

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