Rob Sellers
Aug 22, 2018

What PepsiCo's purchase of SodaStream tells us about the changing world of FMCG brands

Could the acquisition help PepsiCo fend off unbranded competition and add some much-needed fizz to its flat margins?

What PepsiCo's purchase of SodaStream tells us about the changing world of FMCG brands

One of the hottest consumer issues right now is the crisis around plastic packaging and the grim effect it is having on our environment. We’ve all seen iconic photography of gyres swelling endlessly in the middle of the ocean, or animals trapped and poisoned by plastic debris. These compelling images are not just frightening, they’re worrying familiar.

Look among the trash and you find the identifiable hints of the brands we all know and consume.

As consumer knowledge grows, and sentiment moves against the brand owners deemed "responsible" for the crisis, governments have begun to move towards legislation that will penalise producers. In a landscape that has become increasingly difficult for CPG brands, another hit to margins that are already squeezed will see some drastic actions and innovation.

PepsiCo’s purchase of SodaStream is a big commitment to deliver their iconic brands into homes in a way that produces less waste. As SodaStream claims on its global site: "One SodaStream bottle can help the average family reduce more than 3,700 bottles and cans from our planet". So is this purchase all about the plastic trend, or is there more to it than that?

Although emotive, plastic pollution is far from the biggest issue on the desks of CPG CEOs. Long-term margin decline is not the result of heightened environmental consciousness, it’s the result of the consistent and inevitable power switch from the brands people consume to the retailers they shop at.

In the UK, for example, the rise of the Big Four grocers has been followed by more disruption from the European discounters. And all these retailers aren’t just customers, they have become almost every brand’s key competitor. Through aggressive (and impressive) development and pricing, shoppers are defaulting away to private labels.

And as Amazon increases focus on grocery, the only certainty is that the disruption is far from over. CPG brands that rely on the 20th-century business model of physical distribution through third-party retail may soon find their margins disappear altogether.

This re-frames what the real benefits of the SodaStream purchase may be for PepsiCo. Since re-booting a few years ago, SodaStream has built a modern blended retail model. Not just selling through traditional retailers and through ecommerce, but also operating a direct-to-consumer service that allows consumers to order replacement gas and bottles, plus register their machines.

We have seen brands like Nespresso and Harry’s win because of the ability to bypass retailers and go straight to the shopper with category defining results.

Exploiting SodaStream’s initial success in this space may give PepsiCo those two super important ingredients to almost every modern brand: customer data, and owning the total brand experience.

If so, this could ultimately allow PepsiCo to start to fend off non-branded competitors and, perhaps, completely change how families enjoy its iconic portfolio with the end result of finally adding some much needed fizz to those flat margins.

Rob Sellers is the managing director at GreyBase, the brand activation, shopper and experiential hub in Grey.

Campaign UK

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