Brazilian subsidiary is among fastest growing operations; focus is on savory snacks

12/09/2022

---

Alexandre Carreteiro — Foto: Silvia Zamboni/Valor

PepsiCo will invest R$1.2 billion in its food operations in Brazil in 2023 as part of a project to double in size within five years.

This is the food giant’s largest annual investment in 70 years of operating in Brazil and doubles the average amount invested per year between 2020 and 2022. The company also left the cookie market after reviewing some strategies.

The new investments will be directed to expand the capacity of the nine plants, and will also focus on automation, logistics, digitalization of the sales force, and product research and development. Savory snacks are the main bet. Alexandre Carreteiro, the chief executive of Pepsico Alimentos, said the category grows 18% a year in Brazil, while PepsiCo’s sales increase above this level.

“We are doing something historical in Brazil. It is a vote of confidence in the country’s potential. We have never grown or invested at these rates. And we believe it will continue,” said Mr. Carreteiro, who received global CEO Ramon Laguarta for a one-week visit last month.

In the third fiscal quarter through September 3, PepsiCo’s global revenues saw an organic growth (excluding acquisitions and exchange rate variations) of 16%. Latin America posted the best regional performance, with a 22% growth, to $2.5 billion. The global revenue reached $22 billion. Although the company does not break down revenues for Brazil, it said the country grew above the regional average.

“Many habits developed during the pandemic, such as having people over, barbecuing, and consuming snacks, remained. People indulge in some pleasures thinking about today, and possibly delaying acquisitions of durable goods,” he said. Besides, he argued, the per capita consumption of savory snacks in Brazil is one of the lowest in Latin America, and has the potential to grow. It is around 1.8 kilos per year, lower than in Chile and less than half Mexico’s rate.

PepsiCo has a 55% share of Brazil’s snack food market, according to the company. The food giant owns brands such as Cheetos, Doritos, Ruffles, and Lay’s, plus “Brazilian jewels” like Torcida and Fandangos.

The company expects to expand sales by betting on the expansion of the portfolio, with packaging and prices that meet different social classes and moments of consumption, in addition to regionalization. This year, for example, the company launched Torcida Camarão com Pimenta in the Northeast region, developed from the flavor of a typical regional fried pastry. “It is very important to be close to local consumers,” he said.

According to the executive, the consumption of savory snacks is the one that grows the most within the category of “snacks,” and has been expanding its share over cookies, chocolates, and chewing gum. “The consumer sees savory snacks as healthier than sweet products, and we see a migration between both categories. There are many opportunities to grow,” he said.

The company left cookies in Brazil in August, with the sale of Mabel to Camil, for R$152 million. The multinational did not reveal how much it paid for the company about 10 years ago, but the company reportedly faced losses with the deal – it allegedly disbursed between R$700 million and R$800 million.

Mr. Carreteiro does not comment on values but said that the logic of the sale is to focus on segments of higher growth and where the company is the market leader or vice-leader, which occurs, besides snacks, with the brands Toddynho (chocolate milk), Toddy (chocolate powder), Kero Coco (coconut water) and Quaker (oatmeal). “We were number 6 in cookies,” said Mr. Carreteiro. “We were operating in the doughnuts segment with a more popular alternative, with a lower value added. And there are many players in this category around here,” he said.

“So the decision was: either you become more relevant and make acquisitions and grow, or you leave to focus on where you have more ability to win,” he added. In addition, he recalled that the company needed funds to invest in its core products. The contract with Camil also provides for the licensing of the Toddy brand for the cookies market.

In his view, the bet in industrialized savory snacks does not contradict the consumers’ search trend for healthier products. “You have two fronts in the savory snack segment: indulgence, as people want to give themselves a daily pleasure, so the flavor is key, and healthy eating. We work on both fronts.”

The executive states that the company has, in the last years, been reducing the salt and sugar concentrations in its preparations and using healthier fat options, such as sunflower oil. The products no longer contain trans fat.

With the work to review the formulas, PepsiCo says that more than 90% of its portfolio will not need to use warning labels of high concentrations of sodium, sugar, and saturated fat, part of the new food labeling implemented in October by the National Health Surveillance Agency (Anvisa).

“Our products have an increasingly adequate nutritional profile, and we have also entered the healthy products segment, a market that has been growing, with products like Popcorners,” he said.

Popcorners, produced from a process of high-speed frying without oil, was launched in July, part of a portfolio of 25 new items that reached the shelves this year.

While the perspective in the Brazilian market is of strong expansion, in the United States The Wall Street Journal reported this week that the company plans to cut hundreds of jobs in North America, in response to unfavorable perspectives for the U.S. economy, with higher interest rates and lower demand. The newspaper cited people familiar with the matter and internal documents to which it had access.

At the end of last year, PepsiCo employed 129,000 people in the U.S., according to Dow Jones. Asked by Valor, the company said that, in Brazil, hiring is planned due to the investment plan. Today it employs 11,000 in the country.

*By Ana Luiza de Carvalho, Luciana Marinelli — São Paulo

Source: Valor International

https://valorinternational.globo.com/