Can Caleb's Kola Help Pepsi Restore the 'Cool' to Cola?

PepsiCo CEO Says Craft Soda Potential Is 'Huge'

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PepsiCo CEO Indra Nooyi conceded on Monday that cola has lost some of its "cool factor," but plugged the company's new "craft" cola brand as one way to restore luster to the sagging category.

Pepsi launched the new brand, called Caleb's Kola, in late 2014 using a formula that includes cane sugar, kola nuts from Africa, spices and a hint of citrus. Ms. Nooyi, who spoke at Beverage Digest's "Future Smarts" conference in New York, did not share early sales results. But she said "I think there is actually a huge potential for craft cola." She added that "people still love the cola taste -- it's just lost some of its cool factor and I think products like Caleb's are bringing back some of the cool factor."

Ms. Nooyi made the comments during a question-and-answer session with Beverage Digest editor and publisher John Sicher, who pressed her on a range of issues. She said PepsiCo was "rolling the dice on a lot of new ideas right now," but is not "taking foolish risks."

Soda makers have been forced to rethink their portfolios in the wake of sales declines for their biggest brands that are partly driven by health concerns. Mr. Sicher noted that 2014 will likely mark the tenth-straight year of volume declines for the U.S. carbonated soft drink category.

Caleb's Kola, which is named for Pepsi inventor Caleb Bradham, is meant to capitalize on the growing consumer appetite for smaller, more-premium brands. It launched in September in a handful of East Coast markets and has yet to get any substantial ad support. Mr. Sicher drew parallels to the alcohol industry, where craft beers and premium liquor brands are driving growth. He asked if non-alcoholic drinks could replicate that success. Ms. Nooyi suggested that Caleb's success might not be measured by large case-volume sales, but by its profit potential via premium prices.

Another one of PepsiCo's innovation bets is in the dairy category, including its U.S. yogurt venture called Muller that it launched in 2012 in partnership with a European dairy company. Ms. Nooyi suggested that "dairy is the battleground" for a new trend she often describes as the "drinkification of snacks and snackification of drinks." That could mean drinkable yogurt, for instance.

She said PepsiCo has had "decent success" with the Muller venture, but "we'd like more," hinting that more innovation will be coming next year. Still, she said the company will be careful not to "ride a single fad" in dairy, such as Greek yogurt. Rather the goal will be to play "across a wide range of dairy platforms."

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