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Green Supply Chain Expert Insight
By Dan Gilmore
Jan. 16 , 2012

Green Supply Chain Comment: PepsiCo's Struggles Might Give Pause to Aggressive Healthy Food Strategies as Part of Sustainability Programs


CEO on Hot Seat as Healthy Food Strategies Lead to Losing Share in Core Soda Business

Just something for companies pushing "healthy" as part of their Sustainability programs.

An example, among many companies doing so, would be the UK's Sainsbury's grocery chain, which in the Fall announced its new "20 x 20 Sustainability Plan," which involves 20 goals the company says it will reach by 2020. The commitments includes one in which Sainsbury's says it will have the sector's "healthiest baskets," and that "Between now and 2020, we'll continue to reduce salt, saturated fat, fat and sugar in our own brand products and we will lead on providing clear nutritional information, enabling our customers to make informed choices."

Other food manufacturers and grocery retailers have announced similar aims, if often a little less formally.

I am a pretty darn healthy eater, but I am at times a little bothered by others trying to proscribe what foods I should be eating. But forgetting that for the moment, recent news out of PepsiCo should give other companies a bit of a pause when it comes to pushing the healthy eating theme too far.

PepsiCo CEO Indra Nooyi is on the hot seat for the food and beverage giant's lack of sales growth and flat stock price over the past 5 years - while rival Coca-Cola's stock has soared 51% over the same period. Worse, the company's flag ship Pepsi brand is losing share and is now in number 3 in the US, behind not only regular Coke but Diet Coke as well.

And guess what business strategy is taking much of the blame?

"Critics accused management—and Mrs. Nooyi in particular—of focusing too much in recent years on developing nutritious products at the expense of its large soda business," the Wall Street Journal reported this week, noting that "Mrs. Nooyi, who became chief executive officer in October 2006, has pushed to more than double PepsiCo's revenue from "good for you'' products, such as yogurts and Sabra hummus, to $30 billion by 2020."

PepsiCo's board initiated a "strategic review" of Pepsi's business, and while various pundits said they believe Nooyi will keep her job, it isn't assured. One possibility is to break up the company into beverage and snack businesses, though most again don't expect that to happen.

Regardless, it seems clear the message will be to start selling soda - and back off the healthy food parade a bit for now.

"No margin, no mission," as Stephen Covey wrote two decades ago.

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Dan Gilmore is Editor of Supply Chain Digest and The Green Supply
Gilmore Says:

Critics accused management—and Mrs. Nooyi in particular—of focusing too much in recent years on developing nutritious products at the expense of its large soda business.