On May 20, PepsiCo (PEP) announced the launch of Pepsi Limon, a new cola with real lime juice. According to a PepsiCo press release, Pepsi Limon is currently available in 20-ounce and 2-liter bottles. The product will be available in select markets with a considerable Hispanic population, including California, Arizona, New Mexico, Texas, and Chicago. PepsiCo launched this product specifically to attract Hispanic people, who are known to be major consumers of carbonated soft drinks (or CSD).
PepsiCo identified the need for Pepsi Limon in association with Adelante, the company’s Hispanic and Latino employee resource group.
According to Nielsen, a global information and measurement company, Hispanic spend a higher proportion of their income on groceries than non-Hispanics. Nielsen estimates that Hispanics have $1.5 trillion in buying power in 2015, a significant 50.0% increase from 2010. We’ll look further into the importance of the Hispanic demographic group for beverage giants in part 2 of this series.
Will the new flavor boost soda sales?
PepsiCo and its peers like Coca-Cola (KO) and Dr Pepper Snapple (DPS) have felt the impact of the shift in consumer preference for noncarbonated beverages. The ill-effects of carbonated soft drinks and the growing demand for other categories like sports drinks and enhanced water have affected soda volumes. According to Beverage Digest, US soda volumes declined in 2014 for the 10th straight year.
In 1Q15, PepsiCo’s North America beverage volume declined by 1.0% due to a 2.0% decline in CSD volumes. This was partially offset by a 1.0% increase in the noncarbonated beverage volume. PepsiCo’s noncarbonated beverage volume was driven by its water portfolio, Lipton ready-to-drink teas, and Gatorade sports drinks. In fiscal 2014, PepsiCo’s North America CSD volumes declined by 2.0%, while noncarbonated beverage volumes increased by 2.0%.
PepsiCo is developing new products and packaging to revive its declining soda volumes. The launch of Pepsi Limon is part of the company’s strategy to attract the Hispanic consumer. We’ll look at this in more detail in the next article.
Update: This article originally used the phrase “Hispanic people” instead of “Hispanics.” We have since revised to use the latter term. We apologize for the error.