Marketing
13 February 2023
Frito-Lay turned name brand chips into essentials
The PepsiCo business wasn't seeing trade-down to private label in 2022.
Photo by Giorgio Trovato on Unsplash
×
The Current, delivered daily.
Ecommerce news, right to your inbox.
Sign up for our email newsletter.
Subscribe
.sticky-cta-wrapper {
width: 100%;
position: fixed;
bottom: 0;
left: 0;
background-color: var(--black);
}
Subscribe to The Current newsletter
Throughout 2022, a common narrative emerged that consumers were opting for private label products over name brands as they sought to save money amid 40-year-high inflation.
While grocers from Walmart to Kroger reported a general shift toward their store brands throughout the year, the trend was not uniform across all CPGs.
In particular, some of the country’s most popular chips brands proved resilient in their ability to keep consumers reaching for more.
PepsiCo said its Frito-Lay business, which includes Doritos, Cheetos and Lay’s, delivered double-digit growth of 18% year-over-year in the fourth quarter of 2022, and 17% for the year. It also gained share in key categories during the year.
“The business continues to benefit from strong category trends as consumers navigate towards popular, trusted brands that offer value, convenience, and variety,” top executives wrote in prepared remarks ahead of the company’s most recent earnings call.
Even as inflation rose, there were signs throughout the year that consumers were opting for Frito Lay products as they sought savings. Frito Lay’s multipack became a poster child of the consumer desire to stock up on essentials when it became one of the top selling items during July’s Prime Day, per data from Numerator.
Frito Lay’s prime positioning wasn’t accidental. PepsiCo CEO Ramon Laguarta called the snack business the “jewel” of the company.
“We've put a lot of investments in the last couple of years and [Frito-Lay] continues to respond every year better to those investments,” Laguarta said, adding that the company invested in upping marketing spend, product innovation and clearing infrastructure bottlenecks.
The result is a business with 11% operating profit growth in 2023, which Laguarta called historically high.
“We feel like Frito had just an outstanding year,” said CFO Hugh Johnston. “We'd love to have a couple more like this one.”
What’s the lesson?
Make your brand essential. Frito-Lay sells chips and snacks, but the company’s growth indicates that consumers see it further up the pyramid. They're the types of brand that people seek out as a treat as they seek to feel better, similar to beauty products. This is a result not just of innovation, but brand recognition that has turned products into categories. When people see Doritos, they don’t think they’re buying cheesy tortilla chips. They simply think they are buying Doritos, and that makes them a staple. Instead of looking for other brands that are cheaper, people sought savings by stocking up on Prime Day.
There’s opportunity in a downturn. PepsiCo recognized that Frito-Lay had a big opportunity, and invested. It’s a time when many companies are pulling back due to the collision of inflation and a consumer downshift. But the parts of a business that are working can benefit from a boost, no matter what’s happening in the economy.
Subscribe to The Current Newsletter
SubscribeTrending in Retail Channels
Marketing
09 June 2023
'There's a lot of ways to frame value'
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
Photo by Kelly Common on Unsplash
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.
Keep reading...Show less
Loading...
Subscribe to The Current Newsletter
SubscribeLatest from Retail Channels
.sticky-cta-wrapper {
width: 100%;
position: fixed;
bottom: 0;
left: 0;
background-color: var(--black);
}
Copyright © 2026 thecurrent.media.