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PepsiCo Introduces MTN DEW ICE, Diversifies CSD Portfolio


PepsiCo, Inc. PEP has been trying out product variations to drive carbonated soft drink sales as the product has been seeing declining demand owing to high calorie content. Recently, Mountain Dew, a product of PepsiCo, introduced MTN DEW ICE — a carbonated soft drink or CSD with a splash of real juice.

The latest lemon-lime flavored carbonated soda with caffeine, with 100 calories per 12 ounces, is a marquee addition to the PepsiCo portfolio.

PepsiCo’s Endeavor to Diversify Portfolio

Sales of PepsiCo’s carbonated beverages continue to be weak due to increasing health consciousness among consumers. Among CSDs, the cola segment has been particularly facing challenges, as consumers are opting for alternatives. The challenges in the CSD category have been felt by all major soft drink makers — Coca-Cola KO, PepsiCo, Monster Beverage Corporation MNST and Dr Pepper Snapple Group Inc. DPS — leading to lower volumes and weak sales.

PepsiCo’s carbonated beverage drink volumes declined 4% in the first nine months of 2017 in North America. Nonetheless, the company is leaving no stone unturned to reinvigorate investors’ confidence and regain its footing through innovation and diversification.

The company regularly creates new flavors of existing products alongside maintaining a robust pipeline of products. The company has generated $5 billion in annual sales from new products since 2013. PepsiCo is gradually reshuffling its portfolio toward healthier products which contain nutrients such as grains, fruits, vegetables, or protein. The company now generates a significant portion of its revenues from such products and also from beverages with less sugar and sodium content.

In 2016, PepsiCo acquired a sparkling probiotic U.S. drinks company KeVita, diversify its soft drinks portfolio amid slowing soda sales. The addition of KeVita will expand PepsiCo’s health and wellness offerings in the premium chilled beverage space. The latest juice-based soft drink is expected to boost PepsiCo’s portfolio, enabling it to increase the number of nutritious and delicious products it offers.

Stock Price Movement

PepsiCo’s shares have gained 5.9% in the last three months, as compared with a 3.1% gain of its industry. Also, earnings estimates for this Zacks Rank #3 (Hold) company rose 0.5% for 2018 over the last 30 days. This signifies analyst optimism on the stock’s near-term performance. We expect the company's efforts toward offering more products with less sodium, sugar and saturated fat along with productivity and cost-cutting initiatives to help fight revenue woes.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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