In Latest Shakeup, PepsiCo Bets on Power of One

Compton to Lead Initiative, Global Snacks Group

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In yet another round of restructuring, food and beverage giant PepsiCo is forming a global snacks group to coordinate international marketing and innovation, as well as a new council aimed at boosting the company's strategy of jointly promoting snacks and beverages in stores.

The "Power of One Americas Council" will coordinate sales, marketing and distribution for brands such as Pepsi and Lays in North America, South America and Central America, and will comprise eight current executives led by John Compton, CEO of PepsiCo Americas Foods. The group's creation comes as analysts have questioned PepsiCo's ability to market food and beverage together. Some analysts have gone so far as to suggest the company split in two, separating its fast-rising snacks business from its underperforming beverage unit.

But the council is a clear attempt by the marketer to double down on the joint-promotion strategy. "The combination of our snack and beverage portfolios creates significant value for our shareholders through synergies driven by a common customer base and distribution platform, supplier leverage and shared infrastructure," PepsiCo CEO Indra Nooyi said in a statement announcing the moves. "The value of this combined portfolio has been greatest in our international markets, which share many activities; and we are now well positioned to realize further benefits in North America following the successful integration of our bottling business."

The Global Snacks Group, also to be led by Mr. Compton, "will focus on developing a coordinated approach to the company's global brand portfolio, creating and delivering breakthrough snacks innovation and promoting best practice-sharing around the world," PepsiCo said. The group follows the model of the recently created Global Nutrition Group and Global Beverages Group, moves meant to embrace more global ad executions following the lead of competitor Coca-Cola, which uses similar campaigns across many countries.

When Pepsi created the Global Beverages Group in June, it also added three new marketing roles, including hiring two outsiders: Lorraine Hansen, a Kraft Foods alum, was named senior VP-global hydration, and Brad Jakeman, former exec VP-chief marketing officer at gaming giant Activision Blizzard, assumed the role of president-global enjoyment and chief creative officer.

The Global Snacks Group announcement, by contrast, did not include new appointments.

Global snacks for PepsiCo has emerged as a powerhouse with potential for continued strong growth, especially in developing markets where the emerging middle class is gravitating to a category largely driven by impulse purchases. PepsiCo is already the dominant snacks player globally, commanding 15.9% share, more than twice that of No. 2 Kraft Foods (6.6%), according to a recent report by Sanford C. Bernstein & Co.

This week's moves come in the wake of last week's management changes that included naming Al Carey, who had been running Frito-Lay North America, as CEO of Pepsi Beverages Co., replacing Eric Foss, who resigned. In a report this week, Goldman Sachs suggested that under Mr. Carey's leadership, PepsiCo would put even more focus on Power of One because he was a proponent of the strategy when he served as president of PepsiCo sales.

Yet the marketer has been dogged by questions on its ability to promote both snacks and beverages together. PepsiCo's "track record so far has not been encouraging and we question whether the 'Power of One' strategy is in many ways diluting the focus and resources that [PepsiCo's] soda products need to receive," Goldman Sachs stated in its report, noting that "retailers are not incentivized" by the joint promotions because "their primary interest is in enhancing the topline, not in promoting a particular brand or product." Indeed, Goldman Sachs said it found a number of retail circulars in which PepsiCo-owned Frito Lay snacks were promoted alongside Coca-Cola soda, or PepsiCo snacks beside products from other snack makers.

But PepsiCo executives have called the promotions strategy a competitive advantage, citing recent moves as success stories, including jointly plugging Frito-Lay's natural lineup along with Sierra Mist Natural, as well as bundling Doritos with Pepsi Max promotions.

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