You're About To See Fewer PepsiCo Products On Store Shelves

Sometimes the how and why behind big decisions from companies can feel like a mystery, but as PepsiCo gears up to cut products from its lineup we have some clear reasons provided by some activist investors. While you might think Pepsi has all the say over its product lineup, as a publicly traded company it's vulnerable to the whims of changing ownership. That means someone, or some group, that wants to shake things up can swoop in, buy a large stake in the company, and start throwing their weight around. And that is exactly what just happened with PepsiCo and activist investors Elliott Investment Management, as the latter has successfully worked out a plan for PepsiCo to cut around 20% of its products from its portfolio starting next year.

Elliot Investment Management took a $4 billion stake in PepsiCo just a few months ago and has been pressing the food and beverage giant over its slowing growth and what it perceives as a lack of large scale strategy. In September, it sent a letter to the PepsiCo board of directors, along with a presentation that outlines what Elliot sees as PepsiCo's problems and opportunities. While presenting a lot of information, the core argument is that Elliot feels PepsiCo has overexpanded its brand portfolio with too many underperforming products as Pepsi loses market share to Coke in its core beverage market, and costs have gotten out of control. Those two problems both led to the impending cuts.

It's important to remember that PepsiCo is a huge company that owns dozens of food and beverage brands, so this doesn't mean there will be 20% fewer varieties of Pepsi drinks on the shelf. A huge share of PepsiCo's business is in food, as it owns big names like Frito-Lay and Quaker. It also controls various beverages beyond its soda offerings, including Tropicana, Celsius, Gatorade, and Aquafina. Pepsi even expanded recently by acquiring the rapidly growing probiotic soda brand Poppi.

But what is seen as success by many is seen as a liability by the activist investors, as the presentation Elliot put together claims PepsiCo's portfolio "lacks focus" and the complexity of managing so many brands has distracted the company from executing on its core business. The agreement with inventors does not yet include what specific brands or products will be part of the 20% cut, but some notes in Elliot's presentation may provide hints, as it points to Starry and Bubly sparkling water as "brands to review," and suggested proliferation of "flavor extensions," is part of the problem as well. That might mean fewer Doritos flavors on grocery store shelves come next year. However, while no specific prices cuts have been announced, one the areas PepsiCo is reportedly targeting with the cuts is improving customer value, so if your favorite products do survive, they might get a little cheaper.