The launch of a direct to consumer website is not usually big news, especially during this pandemic, but PepsiCo’s launch of Snacks.com and Pantryshop.com has gained attention with headlines such as “PepsiCo cuts out grocery stores.”
These simple websites don’t look like a particularly big strategic play at first glance. In fact PepsiCo suggest they are tactical having been “developed from concept to execution in less than 30 days.” In only offering big bundles of PepsiCo branded products for delivery in 2-4 days it is unlikely they are a big threat to the likes of Walmart or Amazon.
In precedent terms, however, they are bigger deal. As investment site Motley Fool comments it is the “first major consumer foods name to take a big dive into D2C.” The likes of Nestle, P&G and Coca-Cola will certainly be curious about the proposition and the reaction of retailers. Some will probably follow PepsiCo’s lead.
These D2C sites may take some time before they deliver newsworthy incremental revenue, but they also give PepsiCo more tools to successfully transform the business for the continued on-line and delivery sales growth that Covid-19 has accelerated. Consider these benefits:
These dedicated e-commerce sites (that are not horribly buried under corporate communication) give PepsiCo a commercial ‘playground’ to test and assess behavioural responses including sales conversion. Hard data from experimentation that identifies / optimises PepsiCo product bundles can inform roll-out to other retailers, reveal portfolio gaps and, perhaps most, importantly remove likely failures. For increasingly agile marketing folk it can give them quick data without a need to engage third parties.
Business Model Mobility
Whilst I am sure the removal of retailer margins features prominently in the business cases for each site we should not assume their development is limited to one business model. Established snack ordering sites will provide a foundation for other models. Walmart and Amazon’s activity in India, for example, shows the potential for small independent retailers to support last mile delivery. Successful PepsiCo snack sites could offer such retailers scope to sell / deliver larger snack or food bundles without a need to permanently stock products. There may also be synergy with PepisiCo’s growing D2C Sodastream business.
The PepsiCo name directs you to think beverage brand. The Pantry Store site, however, can push perceptions of PepsiCo as a diverse food and beverage brand with “Rise & Shine” kits featuring Tropicana juice, Quaker oatmeal and Life cereal or “Workout & Recovery” including Gatorade protein bars, Muscle Milk and enhanced electrolyte water Propel. (In fact the one obvious product not visible is Pepsi-Cola). For future brand stretch there is merit in getting consumers comfortable with PepsiCo as a home for a wide range of food and nutrition products. It should also be noted that company has just acquired Be & Cheery a major e-commerce snack brand in China which has already stretched across a wide portfolio.
In summary the move to D2C selling is a belated but correct answer with benefits that extend beyond future incremental margin and revenue.
What has been created in less than 30 days is probably not a good indication of future PepsiCo propositions or business models. However, it certainly offers a commercial ‘playground’ to learn and successfully create them.