Category: General Blogs | Tags: soft drink

A Tale of Two Pepsis

So we are supposed to believe that suddenly the entire world is shunning a refreshing Pepsi or Coke because they have a lot of calories, but can’t wait to get their hands on a Subway sandwich filled with Fritos, or an indulgent new nachos you can gobble up on the go from Taco Bell?

Which is it, because, at least in my mind, the two trends seem to be telling me two things at once—and this is driving me slowly crazy!

Are we really seeing consumers the world over suddenly turn against carbonated soft drinks, or is there something else going on here?

Activist investor Nelson Peltz believes it’s the latter. He would like to see PepsiCo split into two parts: one for its food business, the other for its beverages. And he wants this not because he thinks the beverage part of the business would then slither away into a corner and die like some zombie from “The Walking Dead,” but because he believes it would then be able to thrive under a more “focused leadership.”

I’m inclined to agree with him. And this is despite the synergies “The Power of One” — where PepsiCo’s food and beverages have been used together in some powerful promotions—have brought to PepsiCo. The reason is that in this day and age—“The Age of Creative Disruption”—it’s not hard to see why more intense focus can only benefit a beverage business.

I’m writing this, after all, in the days following the announcement that Comcast plans to buy out Time Warner. And the news just broke that Netlfix is paying Comcast to ensure its pipeline into homes remains free of disruption by the increasingly powerful Comcast. And NBC just noticed how a vast number of its audience turned to their iPads, mobile phone and computers, instead of their TV’s, to watch the Olympics live. And I can go on and on...

Talk about creative disruption!  

Our industry’s “creative disruption” can be seen in the interest in the handcrafted and the local over the distant and impersonal. It’s in the craft beer renaissance, where small brewers are giving entrenched global brands a run for their money. Case in point: I recently dined out at a newly opened gastropub in my Queens, N.Y. neighborhood and was able to savor the pub’s new house beer, brewed by the nearby, and newly opened, Queens Brewery. You can’t get much more local than that.

And that’s just beer. We haven’t even touched on the increasing number of new functional beverages—everything from beautifying drinks, to drinks that help you think better, sleep better, or stay alert longer. Or how about the premiumization of just about everything? Think Starbucks’ experimentation with handcrafted sodas.

So it may be that the pickle CSD finds itself in today isn’t so much about consumers running away from high-calorie sodas (as the mainstream media loves to so dramatically describe it) as it is about them just enjoying all the new choices they have.

Beverage companies that can focus 100 percent on navigating their way through all the new opportunities created by this creative disruption probably have a big advantage going forward.

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