What $ 50 million looks like to Pepsi

Where’s My Health Choice?

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OK. Today we are going to think about what we really want.

You know what I mean. We say we want car companies to offer a plethora of vehicles that get a zillion miles to the gallon. We say we want food companies to offer really healthy foods. We say that beverage firms should offer the same.

But…

That’s a bunch of crap. Because we buy big, oversized trucks that most of us can’t handle. (Did you ever watch these folks park those behemoths?)  And, don’t try to convince me that you don’t know those SUV’s are considered trucks by the manufacturers and the regulators.  Which is exactly why they can provide such lousy safety provisions and poor gas mileage.

But, it’s not just vehicles where we say one thing and do another.  We buy Cheetos and potato chips, chocolate covered cookies. And, lake-fulls of soda pop.

Yeah. We say we want healthy choices. But, we don’t buy them. And, then we blame the companies for not making the products we don’t want to buy.

(This is the kind of logic that elected our government officials during the last election. What we do has little to do with what we tell others we really want.)

Pepsico is fueled by junk food

So, we have Nestle striving to offer us great food choices. As we double down on those chocolate bars. And, avoid Init (a fiber-filled nut bar) and guzzle down Mac N’ Cheetos, laden with salt, fat, and a slew of unhealthy options. (Both of these are Pepsico offerings.)

Or, avoid buying the Chevy Volt, opting instead for that GMC Acadia or the Chevy Tahoe. And, then complain how much gas we need to buy. (Only because the price of fuel has just risen about 30 cents a gallon. Watch out- it’s bound to get a lot higher pretty soon!)

These are critical issues. After all, GM makes about $ 15K per big car (read “truck”) it sells- versus about $ 1K for the Volt- if it makes anything at all (yet). Or, the fact that more than 50% of Pepsico’s profits derive from sales of Frito-Lay.

We don’t buy those healthy foods and beverages because we want those tasty, salty, bubbly, sweet choices. In a recent survey, 2/3 of folks my age (baby-boomers) and more 1/2 of the kids my son’s age (millennials) all admitted that they would and do buy potato chips and pretzels any day of the week over granola bars. So, we really can’t blame Pepsi for tweaking the packaging and flavor of its chips instead of making that healthy snack- which won’t sell as well, plus it needs at least 5 X the development expense to bring to market.

Here’s another fact to consider- increasing the sales of a Pepsico potato chip offering by 1/10 % means $ 135 million in annual turnover!  This is also why Nestle is not meeting its revenue targets. Because Nestle is spending big bucks on developing those healthy goods- that folks just don’t line up to buy.

What $ 50 million looks like to Pepsi
The arrows are showing exactly how much a “successful” new product sales will actually contribute to the firm’s sales and even less to its profits.

What $ 50 million looks to Nestle

And, any new, low-volume product offering not only slows overall sales growth- but it drags down corporate profit margins. A new product for Pepsi or Nestle can’t be considered successful if it garners $ 50 million in sales- because with overall sales more than 1000X that amount, no shareholder or stock analyst cares much.

So, don’t blame the companies for their choices. Look in the mirror- and remind yourself who is the real problem.

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6 thoughts on “Where’s My Health Choice?”

  1. Can I say, “Amen!” Personal responsibility has all but been forgotten in this age of the nanny government. It’s my opinion that it’s the culture of excess we live in that prods us to consume huge quantities that is more of an issue than the content of the food/drinks. Small amounts of real foods can satisfy us more than piles of lab-created healthified cardboard. That and our sedentary lifestyles. My grandmother’s generation lived to ripe old ages, healthy and strong, and they ate lard, had never heard of ‘low-carb’ but worked physically..right up into those ripe old ages. Real food. Moderation. Movement.
    Susan recently posted..Food for Thought #11

    1. I’m not sure this is a function of nanny governments. It’s more that we claim things different than the way we truly act.
      By the way, my relatives never touched lard (for a variety of reasons) and stayed healthy. But let us not forget how many of our relatives died early- in childbirth, in infancy, or even adolescence, because the advances of civilization ranging from antibiotics to clean water weren’t available to them.
      Thanks for the comment and those great observations, Susan!

  2. Well, if your speaking for everyone then you have it wrong. A lot of us do not pick up that granola bar because so many of them are packed with sugars and chemicals. We prefer to make our own so we control what is in them, If Pepsi had to depend on the amount of chips and sodas I buy they would have closed their doors years ago. I drove a Suburban for years because I needed it for our company. Now that we no longer need it we have down sized to a Subaru Forester. Great mileage by the way. Nestle Chairman Peter Brabeck states that Nestle Group is the largest Food company in the world, with about 65 BILLION DOLLARS and 275,000 employees. They got there because they can see trends before others do and they act on them. They may not be meeting their revenue targets at the moment but they have plans that will get them there. So when I enjoy my Whole Foods Lifestyle I am always glad to hear about companies that are working hard to develop healthier foods for us to enjoy.. Thanks for pointing that out for us..
    william recently posted..Ninja Blender A Gift That Keeps On Giving

    1. I agree with you about Nestle, Chef William. But, at least from what has been published, the new Pepsi product (INIT) is a wholesome offering. But, making your own lets you alter the taste to your personal desires- and nothing will ever beat that!
      Thanks for the visit and the comment.

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