Frito-Lay, owned by PepsiCo Inc. PEP, aims to get into organic grocery stores, with organic Doritos, Tostitos, Cheetos and other snacks, per a Blomberg report. This is quite a smart move by Frito-Lay amid continuously shifting consumer preference toward healthier options.
Frito-Lay has 11 brands without artificial ingredients. The product line, marketed under the name, Simply, meets all the qualifying norms required to be in Amazon.com's AMZN Whole Foods Market WFM, according to PepsiCo executive Jonathan McIntyre.
The new Simply brand is part of Frito-Lay's initiative to cash in on the current industry’s trend toward healthy options.
PepsiCo has been doing well on the back of significant innovation, continued momentum in Frito-Lay business, revenue management strategies, improved productivity and cost-saving initiatives, along with better market execution.
Notably, Pepsi’s recent efforts toward innovation in snacks focus on higher-margin healthy and premium salty snacks, as there is a definitive market for such products now. Currently, 45% of Pepsi’s total net revenue comes from Guilt-Free products. This percentage is likely to increase given the company’s stepped-up innovation and focus on adapting to changing consumer preferences.
Changing demographics and purchasing behaviors make it important for PepsiCo and other food and beverage giants to understand and capitalize on main consumer insights that identify growing trends. Health awareness has been prime concern for consumers in recent times and capitalizing on this trend can prove to be beneficial for any food and beverage company in 2017.
Share Price Performance
PepsiCo’s shares have increased around 10.8% year to date compared with 10% growth of the S&P 500. PepsiCo beat earnings estimates in each of the trailing four quarters. Estimates have moved upward by 0.4% for both 2017 and 2018, respectively, over the last 60 days. The company’s new product lineup, aggressive marketing, productivity improvement and cost-saving initiatives should boost profits and thereby the stock’s performance in the upcoming quarters as well.
Zacks Rank & Key Pick
PepsiCo carries a Zacks Rank #2 (Buy). Another top-ranked stock in the same space is Coca-Cola European Partners plc CCE, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Full-year 2017 earnings for Coca-Cola European Partners are expected to increase 17.9%.
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