PepsiCo Americas Beverages will reduce the calorie content of its soft drinks as US cities mull taxes on high-sugar drinks, the company's divisional head has said.
PepsiCo Americas Beverages CEO Al Carey said the tax threat is “one of the things that keeps me up at night”. But he added that steps will be made over the next five years to reduce any impact.
“We don't believe that carbonated soft drinks is the primary reason for obesity, but we've got a very good plan to take calories out of our total portfolio over the next five years,” said Carey, in a presentation to the Deutsche Bank Global Consumer Conference 2012 in Paris on Wednesday (20 June).
He added: “We will price to offset those (places) where it happens and I am concerned about it.”
Carey said the taxes, such as one proposed in Richmond, California, are more about reducing government deficits than obesity.
“It seems like an easy way to pick up some money,” he said. “Some of the taxes that have been imposed are not dramatic, but then some of the ones that they thought about proposing in a few of the states and cities are dramatic. They are actually not sensible.”
Richmond has put a penny-per-ounce soda-tax proposal on a city ballot scheduled for November. If implemented, it would be the first municipal soda tax in the US.
On Wednesday, a report put in front of the board of the American Association Beverage said a penny-per-ounce tax of high-sugar drinks could reduce the numbers of overweight and obese in the US by 5%.
Carey said PepsiCo is working with Coca-Cola through the American Beverages Association to fight the taxes.
A spokesperson for PepsiCo told just-drinks the company was working to offer more low-calorie and zero-calorie options, but this was not in direct response to tax proposals. "In fact, we've been going down this road for several years," the spokesperson said.
Meanwhile, New York City mayor Michael Bloomberg proposed a ban on large, high-sugar soft drinks in New York City. And this week, Cambridge in Massachusetts said it was considering a similar ban.
In 2009, Bloomberg backed a tax of US$0.12 per 12oz can of high-sugar drinks. The proposal was defeated.
Carey, who became CEO in September, also said a major rethink of PepsiCo Americas Beverages production lines is underway after he found they offered little packaging flexibility.
“It's hard for me to believe that a line in Pepsi bottling systems was unable to make a half-litre 12-pack PET in a shrink wrap,” he said.
“Our bottling system did not invest in flexibility in their plants and in their lines, their production lines, so we couldn't make any of these products.”
Carey said the company has been working with bottlers and will start producing 7.5oz and 1.5L packaging and a 20-can multipack this quarter.
“They are good for the holidays because they offer value at the time that you might be taking your price up at the holiday,” he said.
Carey said he has overhauled the company's marketing stratgy to focus on PepsiCo's top three brands – Pepsi, Gatorade and Mountain Dew – instead of spreading spend evenly over all lines.
“We are probably somewhere in the neighbourhood of a 40% increase in our working media against those three brands,” he said.
