PepsiCo, the world’s second largest food company behind Nestlé, is launching an assault on archrival Coca-Cola in Germany. It has a long way to go: By value, Coca-Cola controls 79 percent of the soft drink market here compared to Pepsi’s modest 8 percent, according to market research firm IRI.
“We want to double our German revenue in the foreseeable future,” Germany manager Tom Albold told Handelsblatt, adding that PepsiCo achieved double-digit growth in Europe’s largest economy in 2018.
The group’s German business, estimated at around €500 million ($574 million), includes soft drinks such as Punica fruit juices and Schwip Schwap, a mix of cola and orange juice, as well as Lays potato chips.
Globally, PepsiCo has had an appetite for healthier products, adding oatmeal brand Quaker to its plate in 2001, Naked Juice in 2007 and DIY sparkling water maker SodaStream in 2018. However, the 14 brands it sells in Germany mostly fall in the categories of soft drinks and snacks.
PepsiCo’s broader product range means it’s a much bigger company than Coca-Cola globally, with sales of $63.5 billion against $35.4 billion. But Pepsi’s soft drink sales in Germany shrank from 2015 through 2017 despite global growth, and Albold is determined to put a stop to that.
Pepsi has revived its Taste Challenge that asks blindfolded customers to try two colas and determine which is better, Pepsi or Coca-Cola. It’s reorganized its bottling operations and recently put the Radeberger brewery group, a unit of Oetker, solely in charge of filling reusable bottles and distributing Pepsi to restaurants, ending its cooperation with long-standing partners such as Berentzen.
Pepsi hopes Radeberger will help boost its sales in bars and restaurants. It could work, said industry watchers. “It could be an advantage that PepsiCo is using brewery leader Radeberger to access the gastronomy market,” said Günther Guder, managing director of Germany’s association of beverage wholesalers.
PepsiCo also wants the seven bottling companies it engages for one-way containers to expand their capacities, and Albold plans to streamline logistics by renting two or three new distribution hubs.
“There won’t be an upheaval with all of Germany suddenly drinking Pepsi,” Guder said. Coca-Cola will likely remain the market leader, but it has annoyed restaurant owners in recent years by ditching sales of crates of half-liter bottles and so-called premix, kegs of ready-mixed drinks to tap.
Albold wants to win German customers by launching Pepsi Max Lemon here and redesigning the Punica to attract more teenagers. Pepsi is also reducing the sugar in Lipton Ice Tea by a third and introducing a honey-sweetened version. And it’s pitching a reduced-sugar version Rockstar energy drink, third-place in the market behind Red Bull and Monster, as a breakfast beverage.
Albold has also boosted the marketing budget for Lay’s and Doritos to take on German market leaders Intersnack and Lorenz. The company’s legacy may be built on soft drinks, but PepsiCo is trying to woo German men with extra spicy chip flavors that go “perfect with beer.”
Christoph Kapalschinski covers consumer goods, textiles and food for Handelsblatt. David Crossland and Grace Dobush adapted this story into English for Handelsblatt Global. To contact the author: [email protected]