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PepsiCo's ( PEP ) declining snack volumes trigger product changes

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PepsiCo ( PEP ) uses retailers' data to improve demand forecasting

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AI helps PepsiCo ( PEP ) and retailers process large amounts of

shopper

data

By Richa Naidu and Jessica DiNapoli

AMSTERDAM/NEW YORK, Oct 30 (Reuters) - PepsiCo ( PEP ),

which is overhauling some of its top brands like Lay's potato

chips as shoppers look for cheaper options, is increasingly

sharing data with major retailers and in return getting coveted

information on shoppers' purchases, a PepsiCo ( PEP ) executive said in

an interview this week.

PepsiCo's ( PEP ) declining snack volumes are triggering product

changes. The maker of Lay's chips and Pepsi sodas has seen weak

sales growth in recent quarters, leading to tweaks to its pack

sizes and more advertising for its Tostitos and Doritos brands.

In early October, the Purchase, New York-headquartered

company cut its forecast for annual sales growth.

On Tuesday, a top PepsiCo ( PEP ) strategy executive told Reuters

that PepsiCo ( PEP ) has begun using more of retailers' own data on

their sales of PepsiCo ( PEP ) products to better forecast demand and

make its supply chain more efficient.

"We are increasingly sharing data" with retailers, said

Angelika Kipor, PepsiCo's ( PEP ) global head of strategy and

transformation. She cited "different level of collaboration, but

the retailers are increasingly doing it" because they want to

understand their entire supply chains better, Kipor said. She

added that PepsiCo ( PEP ) is sharing its forecasting data with the

biggest retailers in the world.

For instance, when Carrefour recently placed an

order with PepsiCo ( PEP ), PepsiCo ( PEP ) gave the grocery giant a data-driven

historical analysis of the types of products it was missing from

its order that had sold well in the past, prompting Carrefour to

order those items and driving higher sales for PepsiCo ( PEP ).

VALUABLE DATA

One of the most valuable - and elusive - types of

information is check-out data on what shoppers ultimately buy,

which retailers covet and even sometimes leverage in pricing

negotiations. Walmart ( WMT ), the world's biggest retailer,

sells a subscription to suppliers for first-party Walmart ( WMT ) data

on shopper behavior, as well as inventory data.

"Some of it is the level of maturity of your relationship

(with the retailers) - the level of trust, the level of the

(retailers' digital capability)," Kipor said.

Artificial intelligence allows PepsiCo ( PEP ) to quickly process

large amounts of data, Kipor said on Tuesday.

Other packaged goods companies, from Unilever ( UL ) to

Danone, have been racing to find ways to use AI to

improve supply chains - including deciding what brands to keep

in their portfolios to cutting costs and estimating how much

product to make and ship.

Kipor, who declined to name more retailers, said the

data-sharing arrangements were separate from the often

acrimonious pricing talks between retailers and consumer goods

companies.

PepsiCo ( PEP ) said last year that it would not further raise

prices of its sodas and snacks after multiple rounds of hikes in

prior years that helped offset once-in-a-generation levels of

inflation after the COVID pandemic.

Still, prices on Pepsi products like Lay's potato chips,

Tostitos tortilla chips and Diet Pepsi have continued to rise in

subsequent quarters, though at a slower pace than previously,

according to U.S. securities filings.

"I'm not touching" price negotiations with PepsiCo's ( PEP ) retail

customers, Kipor said. "The retailers don't want to have

out-of-stocks and neither do we ... we have a common goal."