PepsiCo invests in growing healthy snacks segment in Mexico

MEXICO CITY -- PepsiCo has chosen Mexico, one of the world's most overweight nations, as home base for the development of its global healthy snacks initiative.
Written by Lauren Villagran, Correspondent (Mexico City)

MEXICO CITY -- PepsiCo has chosen one of the world's fattest nations –- Mexico –- as a home base for the development of its global healthy snacks initiative.

The food and beverages company is pumping $30 million annually into its Mexican subsidiary in an effort to bolster the health profile of its products and fund a new center for product research on healthier snacks destined for markets worldwide.

"Mexico's expanding middle-class and its relatively high obesity rate make the country an ideal market for snack food manufacturers aiming to expand sales opportunities for more health-minded products," according to a report by Santiago, Chile-based Euromonitor International titled "Mexico: The New El Dorado for Healthy Snacks?"

Seventy percent of Mexican adults are overweight or obese, according to statistics from the national health secretariat. The Mexican government has undertaken a major effort to promote healthy diet and lifestyle, and marketers of healthier snacks are hoping to piggyback on the promotion from the public sector.

PepsiCo's new $20 million Global Center for Innovation in Baking and Nutrition—based in Monterrey, Nuevo Leon—will focus on "research and development in baking processes and the creation of innovative options" that meet changing consumer preferences both in Mexico and globally, said PepsiCo Mexico spokeswoman Monica Bauer in an emailed response to questions. The center is part of PepsiCo's commitment, announced in 2009, to invest $3 billion in Mexico over five years.

That boils down to pumping more grains, nuts, seeds, fruits and vegetables into its product portfolio, which includes the Quaker line of oatmeal, snack bars and cookies. It also means using healthier oils and fewer fats and sugars.

"We’re conscious of the lifestyle change of our consumers," Bauer said. "The transformation of our portfolio is part of the actions we're taking to bring attention to the problems of obesity and excess weight" in Mexico.

PepsiCo Mexico, which operates as Sabritas SRL de CV, produces the top five selling brands in the Mexican sweet and savory snacks category; Sabritas and Ruffles potato chips, Cheetos and Doritos led their respective categories in 2010, according to Euromonitor International.

None of those qualifies as a "healthy snack." But PepsiCo says its Doritos and Ruffles snack brands have 30 percent to 35 percent less fat than traditional varieties. The company also produces a reduced-calorie baked version of Sabritas at a Mexico City facility, where it plans to augment its line of healthier salted snacks.

PepsiCo's leadership has come under fire recently for training its focus on nutritious products at what critics say has been at the expense of its core soda business. Chief Executive Indra Nooyi, who took the helm of PepsiCo in 2006, has set a goal of more than doubling revenue from healthier snacks to $30 billion by 2020.

PepsiCo has reduced spending on the marketing of its soda brands, and soda sales have flagged.

The company is undergoing a strategic review of its businesses; a verdict is due out in early February. The Wall Street Journal reports that the review is likely to result in beefed-up spending on marketing in the core soft drinks business and cost reductions to assuage investor concerns over the company’s direction.

PepsiCo's investment in Mexico, however, points to the potential growth market that Latin America represents in the nutritious snacks category. The country could prove to be "an ideal training ground for the expansion of international manufacturers aiming to extend their healthier snack offerings into emerging economies in the region," according to Euromonitor.

Photo: Flikr/ Matthew Rutledge

This post was originally published on Smartplanet.com

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