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Pepsi is making big money on smaller portions

Pepsi is making big money on smaller portions



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PepsiCo is seeing "huge growth [in] small-format" snacks, as well as for mini cans of its full-sugar products, CEO Ramon Laguarta said Tuesday on an earnings call.The reason? "Portion control," Laguarta said. PepsiCo (PEP) has been reducing sugar and trans fats across its portfolio to appeal to health-conscious consumers. It sees the demand for small packages as part of the healthy-eating trend.PepsiCo's CEO said this week that the company has seen growth in small pack sizes. Low-fat and low-cal snacks and drinks are certainly also popular — zero-sugar beverage sales are growing three times as fast as full sugar drinks, and baked or "popped" snacks are also growing more quickly than fried snacks, Laguarta said.Read MoreBut sometimes you just want something sweet, salty or fatty, albeit in moderation. That's where smaller sizes come in. Beyond portion control, offering different package sizes is also a strategic way for companies like PepsiCo to appeal to a large swath of customers across its many snack and beverage brands. With a wide variety of sizes, there's something for just about everyone, from the heads of large households to impulse shoppers at gas stations to parents packing kids' school lunches every morning. "It's becoming increasingly obvious that smaller pack sizes are really important," to companies trying to appeal to more customers, said Duane Stanford, editor of Beverage Digest. "If you do it right, it's definitely a win."Cheap snacks on the goThere's another bonus for the company: When customers buy smaller sizes, they usually spend more per ounce compared to a larger version of the snack or drink — sometimes significantly more. And as people get back to their pre-pandemic routines, some are placing a premium on snacks and sodas that can be eaten on the go, no matter the relatively higher cost. "Post-pandemic, people have returned to busy schedules and are increasingly choosing convenient options that fit into their lifestyles, including grab-and-go products that can easily be transported," said Claire Lancaster, head of food and drink at WGSN, a trend forecasting company. The demand for smaller items could also be due to more snacking in general, she noted, adding that people are shifting "toward all-day snacking rather than having three sit-down meals."And while consumers get more bang for their buck per ounce with larger sizes of an item, they're still spending more dollars. That might not be feasible for every buyer, especially as inflation soars.So people on a tight budget may splurge on a small snack, even if they can't afford to buy a bigger package. And as prices rise, "consumers trade down for options that are in budget," Lancaster said. Laguarta pointed to a variety of pack sizes and prices as a method to keep consumers in the fold and drive sales. Customers who can afford only a small snack today may become tomorrow's repeat customers, agreed Stanford, as companies hope that they will "stick with [their] product or even move up to more expensive versions."


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