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PepsiCo's Smart50 Popcorn Launch Boosts Snacks Portfolio

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PepsiCo, Inc. (PEP - Free Report) introduced Smart50 — a savory and low-calorie popcorn — within the Smartfood brand, further enhancing its snacks portfolio. This whole grain snack is made of top-quality ingredients, excluding any artificial flavors and preservatives, to bring a better-for-you choice for popcorn lovers. This innovative Smart50 rollout clearly highlights the company’s brand mission to offer simple and transparent ingredients in the snacking category.

Smart50 is available in two flavors, White Cheddar and Sea Salt, at retail stores across the United States, in 5oz and 6oz bags. This ready-to-eat popcorn is a light snack, containing 50 calories per cup or less. Smart50’s latest packaging features the identical pop art-inspired illustrations on the bag, emphasizing on the Smartfood’s brand fun and playful identity.

We note that PepsiCo has a solid foothold in the global snacks market, with popular brands like Doritos, Cheetos and Lay’s. Gaining significant share in the snacking category, PepsiCo’s Frito-Lay North America business reported core constant-currency operating profit growth of 4% and organic revenue growth of 5.5% in third-quarter 2019. Moreover, organic snacks/food volume increased 1% in the reported quarter. This segment is likely to continue delivering strong sales and profits, thanks to rising demand for savory snacks.

PepsiCo has the competitive advantage of selling both snacks and beverages, which are complementary food categories. The complementary portfolio results in cost leverage, capability sharing, cross-category promotions and other commercial benefits. Just over half of PepsiCo's sales come from snacks and the remainder is contributed by beverages.

Over the past few quarters, the company’s robust snacks business has largely offset its sluggish beverage business. The Frito-Lay North American snacks business has been performing steadily over the last four years. At present, Frito-Lay is growing value share in salty, savory and macro snack categories.

Encouragingly, investments in innovation, marketing, consumer insights and manufacturing capabilities in the snacking unit have led to strong revenue growth for its mainstream brands like Doritos, Cheetos, Ruffles and Fritos. The company’s smaller premium brands such as Bare and Off the Eaten Path also remained impressive.

We believe that the latest Smart50 launch will continue to drive the momentum for PepsiCo’s snacking business in the coming days.

Price Performance & Zacks Rank

In a year’s time, shares of this food and beverage bellwether have surged 35.2% against the industry’s 19.2% decline. PepsiCo currently carries a Zacks Rank #3 (Hold).

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