Pepsi makes big money on smaller portions

CNN

By Danielle Wiener-Bronner, CNN Business

The biggest trend in snacking is something small: Chip bags and soda go min.

PepsiCo is experiencing “tremendous growth [in] small-format snacks, as well as mini-boxes of its whole-sugar products, CEO Ramon Laguarta said on an earnings call on Tuesday.

The reason? “Portion control,” Laguarta said.

PepsiCo has reduced sugar and trans fats in its portfolio to appeal to health-conscious consumers. He sees the demand for smaller packages as part of the healthy eating trend.

Low-fat, low-calorie snacks and beverages are certainly popular as well — sugar free drink sales are growing three times faster than fully-sweetened beverages, and baked or “stir-fried” snacks are also growing faster than fried snacks, Laguarta said.

But sometimes you just want something sweet, salty, or fatty, but in moderation. This is where the small sizes come in.

Beyond portion control, offering different package sizes is also a strategic way for companies like PepsiCo to appeal to a wide range of customers across its many snack and drink brands. With a wide variety of sizes, there’s something for everyone, from heads of large families to impulse shoppers at service stations parents who prepare school meals for children every morning.

“It’s becoming increasingly clear that smaller packaging really matters,” for companies trying to attract more customers, said Duane Stanford, editor-in-chief of Beverage Digest. “If you do it right, it’s definitely a win.”

Cheap snacks on the go

There’s another benefit to the company: When customers buy smaller sizes, they typically spend more per ounce compared to a larger version of the snack or drink, sometimes significantly more. And as people return to their pre-pandemic habits, some are prioritizing snacks and sodas that can be consumed on the go, regardless of their relatively higher cost.

“Post-pandemic, people have returned to busy schedules and are increasingly choosing convenient options that fit their lifestyles, including on-the-go products that can easily be transported,” said Claire Lancaster, head of food and beverage 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 turning to “all-day snacking rather than having three sit-down meals.”

And while consumers get more for their money per ounce with larger sizes of an item, they always spend more money. This might not be feasible for all buyers, especially since inflation is soaring.

So people on a tight budget can splurge on a small snack, even if they can’t afford a bigger package. And as a price ascend“Consumers are trading options that are within budget,” Lancaster said.

Laguarta highlighted a variety of package sizes and prices as a method to keep consumers in the loop and drive sales.

Customers who can only afford a small snack today could become the loyal customers of tomorrow, Stanford agreed, as companies hope they “stick [their] product or even upgrade to more expensive versions.

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