Pepsi Nitro. Mtn Dew Major Melon. Soulboost. Driftwell.

All of these are innovative beverage brands launched by PepsiCo in the past two years—and they share a hidden connection that goes deeper than that. Each traces its lineage to a radical approach to product development at the giant food and beverage company that uses data science technology to comb through a range of information—everything from restaurant menus to Reddit chatter and consumer survey responses—to reveal trending “attributes.” These could be a flavor, a color, a need state, a feeling, some combination of them or something else entirely, around which brand teams then develop products.

The technology, known inside the company as the Attribute Engine, has not been reported on previously. Its purpose, company executives told Ad Age, is to enable faster and more powerfully relevant new products and brands across the portfolio in time to align with the trends that support their success and, when necessary, to identify products with weakening underlying trends so they can be retired, retooled or remarketed. The Attribute Engine has been replacing what they describe as a more “industrial” approach that used categories as a starting point for innovation, and joins with other data-backed labs at the company to identify beverage occasions and packaging development.

Pepsi’s move to identify trending attributes from a platform perspective comes as big beverage brands have been losing the innovation race to faster-moving direct-to-consumer brands and start-ups, experts say. As result, big brands lose a hold on high-spending young consumers.

“Innovation is a key catalyst for increased sales, market share, and profitability for beverage companies because so many legacy categories are in a slow state of decline,” said Burt P. Flickinger III, managing director of the consultant Strategic Resource Group. “It’s more important today because of digital connectivity and the social shopper has concerns about sugar content, and other aspects of 20th-century brands. Generations X, Y, and Z are adopting these products because they are different, exciting, and have a lot more cool appeal in the marketplace.”

PepsiCo’s own strategy acknowledges that rapid innovation is vital. The “PepsiCo Positive” (or Pep+) strategic plan, introduced by CEO Ramon Laguarta in September, aspires in part to be “faster” in broadening product portfolios within a framework that also emphasizes sustainability in business practices and in ingredients, which together are key to the program’s goals.

What’s an Attribute Engine?

The Attribute Engine has origins that predate the Pep+ strategy. It has been quietly feeding Pepsi’s brand teams trending insights around which new products and brands have been developed since 2019. So far, the focus has been on the beverage side of PepsiCo's massive food and beverage portfolio.

Umi Patel, VP, consumer insights and analytics for PepsiCo Beverages North America, said the Attribute Engine presents a unique view into omnichannel trends by interpreting conversations on social channels such as Reddit, TikTok, and Instagram; search and sales data on Pepsi’s own e-commerce sites; restaurant menus; and more. “Most importantly, we take all that data, and then talk to humans—our consumers, and leading experts, and we put that all together, to come up with what are the different need states that consumers are going to need now and in the future,” she said.

Pepsi had been looking at digital trends for years as it approached innovation, “but what’s unique about this is how it brings it together, in order for us then predict what it means for the future,” Patel said.

Moreover, the trends revealed by the Attribute Engine are being approached in a different way by the company, spurred in part by the disruption brought about by digital influence on consumers, and amplified in social media, said Emily Silver, VP of innovation and capabilities for PepsiCo Beverages.

“The big difference is that [in the past] we were looking at insights category by category, so it was a very industrial view: So we’d be doing cola innovation, or water innovation, or sport-drink innovation—it worked, but the world’s just become so much more complex,” Silver said. “Now what we are realizing is the beverage landscape changes so much, and consumers are so dynamic, we can’t think of it in industrial terms.

“So, a flavor, or a texture, or a sustainable package—that’s the common thread we are now picking up, and then figuring out which brand makes the most sense to pick up the trend, based on its portfolio role,” she continued. “That’s the big ‘from-to’ for us.”

‘Popping attributes’

Eight of the top 10 products in IRI’s recently released annual Pacesetters list of 2021’s most significant food and beverage product launches are beverages. It's a phenomenon Joan Driggs, IRI’s VP of content and thought leadership, attributes to COVID-sparked trends of consumers “taking the party home” in the case of alcoholic beverages—and to a growing consumer taste for flavor combinations in non-alcoholic drinks, like this year’s No. 1 Pacesetter in the category, Dr Pepper & Cream Soda from Dr Pepper Keurig.

PepsiCo rival Coca-Cola has also taken a fresh look at innovation, including with its flagship Coke brand. Its new Coca-Cola Creations program involves a series of limited-edition flavor varieties that seeks to tap into trendy topics, such as augmented reality. One flavor, called Coca-Cola Starlight, debuted in February and consists of a red-tinted liquid that the brand pitched as “space flavored.” Coca-Cola Zero Sugar Byte, marketed as "pixel-flavored," followed in April.

Startup brands in the meantime are “lapping the field when it comes to the invention of creative new beverage products,” said Jeff Klineman, editor in chief of Bevnet, an industry trade publication. He's quick to note that the ease and speed-to-market for DTC brands—and the peculiarities of marketing to fickle young consumers in search of something different—has made innovation a goal unto itself for some. The upshot is that smaller brands often flood the market with new products without regard to how profitable, or lasting, they might be.

“Maybe I'm biased because of the number of miracle-ingredient or wild flavor profiles we see at Bevnet, but I think there are different areas of business where [innovation] might be more important than the actual product itself,” Klineman said. “I think it’s getting harder to knock the consumer or retail customer on their fanny with something new, due to the lowering of market barriers.”

By contrast, big companies such as PepsiCo can't simply “try things,” but rather must meet the demand for brands and extensions that can become profitable growth engines. This supports the need for Pepsi to look deeper into what Patel called “popping attributes” on an ongoing basis—abilities the Attribute Engine provides.

“We don’t look at these trends on a yearly basis or twice a year, we are looking at them every day,” she said. “This is a unique difference that has allowed us to become faster, because we can look at the trends and see when they go up, and when they go down.

“It's also taking us to a place that allows our data scientists and our R&D partners who are developing these products to be ahead of these trends and to deliver our products faster to market than our competitors, allowing us to be more competitive,” she added. “A lot of our competitors are probably seeing similar trends in the market—what differentiates us is being able to take these attributes quickly and put them in a way that our R&D teams can make sense of them and develop an innovation pipeline from them, so that we can go to market quicker than our competitor.”

Related: Canned Jack & Coke is coming to stores

Three hits—and a miss

Nitro Pepsi—the smooth and creamy, nitrogen-infused Pepsi released nationally this year following a brief test in 2019, perhaps best illustrates how the Attribute Engine isolates, and then combines, trending consumer conversations into promising products, in this case, presenting a cola for people who don’t drink cola.

“Nitro was a case where we matched brand strategy and strategic needs with what we’re learning from the Attribute Engine in a portfolio sense,” Silver said. “There was an opportunity from Pepsi’s perspective to engage people that are not traditional cola drinkers. That’s the ‘what’ for the ‘why.’ Umi and I partnered on the ‘how.’”

What they saw, Silver said, was a broad consumer trend toward sophisticated indulgence and experience—and separate conversations around food trends like “whipped,” and “foam.”

“The more we dug into it, the more we saw Nitro popping broadly,” Silver said. “That was the impetus for putting that together and going to the Pepsi team and the R&D team and saying ‘this is what we are seeing.’”

Nitro, which Pepsi introduced using the talents of TikTok’s Khaby Lame, is off to a very strong start, according to Todd Kaplan, Pepsi’s chief marketing officer, speaking in an interview last month. “The product has been doing phenomenally well. It’s even exceeded our trial-and-repeat benchmarks and our sales benchmarks. We can't keep [it] in stock, it’s been doing so well.” 

In the case of Mtn Dew Major Melon—that brand’s biggest new permanent variety—the Attribute Engine pointed out a “popping” flavor, and trends toward vibrant colors and nostalgia—all of which trended especially well with African American and Hispanic consumers, Silver said. PepsiCo was so enthusiastic about the line extension that it backed it with a pricey 2021 Super Bowl ad starring Jon Cena.

And a year ago, PepsiCo debuted Soulboost, a functional sparkling water brand developed around trends in functional ingredients—L-theanine in its Ease variety, and Panax ginseng in its Lift variety—at levels that allowed the company to make claims for their respective relaxation and energy benefits. The ambition with Soulboost, Silver said, was to use the new brand as a “platform to bring cutting-edge ingredients to the marketplace,” but also, get learnings that could eventually port those ingredients to its larger brands.

The Attribute Engine’s ability to track popping trends is just as effective at revealing those in decline, which may explain why consumers might have trouble finding Driftwell, the canned sleep-aid beverage using “natural sleep solutions.”

Introduced in late 2020, PepsiCo then lauded Driftwell as the company’s “fastest launch ever.” Thanks to the Attribute Engine, Driftwell may also be among the fastest brands pulled back into PepsiCo’s garage.

“We used the Attribute Engine to understand the conversation around ‘sleep’ and we thought there was a lane to use natural sleep solutions,” Silver explained. “But what we found very quickly was that one, the conversation shifted—we saw that in the Attribute Engine—and two, not surprising, consumers really needed to feel the effect, so that’s something we’ve pulled from the market and we’re retrenching … but it will be back in some form.”

Black pepper and orange

Like Driftwell, the Attribute Engine itself is still evolving, Patel and Silver said. One potential addition would be an artificial intelligence component allowing the Attribute Engine to provide brands a view of “all the different attributes laddering up to our platforms,” exposing “dig sites” that brands could explore further, Patel said. More data sources—including a component that would integrate data from venture capital companies investing in packaging innovation—are also being considered.

The company doesn’t follow every trend to a new product. For example, “black pepper” and “orange” are among trending flavors currently, according to the Attribute Engine, but they won’t necessarily push their way into PepsiCo products immediately (whether they will is something executives are keeping close to the vest). The executives are confident, however, the data doesn’t lie.

“Orange will be the flavor of the summer,” Silver predicted.

Products in development have traditionally been the kind of trade secrets guarded with extreme caution in the consumer goods industry. Opening up about PepsiCo’s approach to them reveals only discrete building blocks while providing the company some brand benefits of its own—burnishing the company's reputation as a thought leader, for example, and emphasizing a core value of consumer-centric product development.

“These are not trends that Emily and I think are great,” Patel said. “They are areas consumers are really talking about—some are broad, some are tied to the beverage category, and some may not be. It’s up to us to find a unique way to bring them together.”