How Pepsi can use Sodastream acquisition to grow its e-commerce business
PepsiCo’s acquisition of Sodastream adds heft to its role as a direct-to-consumer retailer.
Hugh Johnston, the company’s chief financial officer, said the $3.2 billion acquisition Monday lets it play in a new business area. But it also gives it an opportunity to extend direct relationships with customers online.
Sodastream, which sells on its e-commerce site, Amazon, and physical and online stores of major retailers like Walmart and Target, is a new revenue area for PepsiCo, which has historically sold its products through third-party retailers (grocery stores, mostly.) The acquisition lets PepsiCo grows its e-commerce footprint, an opportunity for it to gain more data from direct-to-consumer relationships.
“Large holding companies like Pepsi are going to have more direct relationships with consumers,” said Jonathan Smalley, CEO of Yaguara, a data analytics company that serves e-commerce brands. “The big thing is owning the end-to-end data — even with a company as seemingly small as Sodastream, it’s an opportunity to own that interaction.”
PepsiCo did not respond to requests for comment, but Smalley said that by studying customer behavior patterns, PepsiCo can figure out how best to market to consumers and what kinds of future acquisitions will make sense as it adds products. It also offers a group of customers already committed to Sodastream through an in-home device, a cohort through which it can test new products.
The company’s Sodastream acquisition plays into a couple of broader trends, including the growing demand for healthier products and a shift to online shopping from physical stores, said eMarketer retail and e-commerce analyst Andrew Lipsman. Through its Amazon and e-commerce store, Sodastream has experience as a direct-to-consumer brand, insights that will help PepsiCo learn how to grow revenue through what he calls a “razor blade” sales model — an affordable base product and margin that comes from the complementary items like razor blades and printer cartridges.
“Sodastream has done well on Amazon; a lot of CPG brands are trying to figure out how to do that effectively, and the acquisition is effectively a way of buying into that expertise,” Lipsman said. “If you look at Amazon’s top-selling products within the food and beverage category, a high percentage of that are Keurig and related products.”
As food and beverage products grow their reach on Amazon and other e-commerce marketplaces, brands are increasingly getting into direct-to-consumer relationships. According to eMarketer, food and beverage is the fastest-growing category on Amazon’s U.S. store; sales increased 40 percent year over year. PepsiCo’s e-commerce business in 2017 generated approximately $1 billion in annualized retail sales.
While moving into direct relationships with consumers via e-commerce stores may have worked for brands like Keurig or Nespresso, success often hinges on levels of customer service. Despite the do-it-yourself fizzy-beverage trend, PepsiCo may endure challenges because the product category lies outside of its core offerings, said Sucharita Kodali, principal analyst at Forrester.
“Nespresso has a huge e-commerce business, but it’s also got excellent high-quality service,” said Sucharita Kodali, principal analyst at Forrester. “I think the best thing that Sodastream has going for it is the anti-plastic trend … if you can make your own drinks at home and that makes you fell like you’re doing your part for the environment, I think it will resonate.”
In recent years, PepsiCo has also been trying to diversify product lines. The company rolled out an initiative called Performance with Purpose, which seeks to evolve its offerings toward healthier, more environmentally conscious product categories.
“Our customers, employees and partners feel good knowing that there is a shared journey of sustainable transformation making our products more nutritious and more resource efficient, dialing up the taste while reducing our environmental footprint,” said CEO Indira Nooyi in an earnings call last month.
Member Exclusive‘It is all DTC now’: VCs are eager to strike deals again
In March, the fundraising environment for direct-to-consumer startups was “downright frozen,” as Michael Duda, managing partner at hybrid accelerator agency and venture capital fund Bullish, put it. Now, March seems like a lifetime ago. Over the past six months, many direct-to-consumer startups in categories ranging from home improvement, health and wellness and food have struck […]
Member ExclusiveDTC brands are rethinking their ‘never-go-on-sale’ rule
DTC startups who have prided themselves on either never offering sales, or only offering them on Black Friday, are throwing their playbooks out the window.
Member ExclusiveAfter record sales, DTC startups are focusing on retention
Retention is an important focus for DTC startups year-round. But, with many customers buying some types products online for the first time during the pandemic, DTC startups have a unique opportunity to convince those first-time customers to stick with e-commerce.
SponsoredB2B events were broken before the pandemic, their online reinvention is creating positive change
Kim Darling, executive producer, Inbound Farewell lanyards, business cards and branded pens — it’ll be some time before people get their hands on these souvenirs of in-person events again. As the COVID-19 pandemic continues to transform the way people work, buy, sell, socialize and entertain themselves, the global events industry is facing its biggest-ever challenge. […]
Member ExclusiveBy being too customer-obsessed, DTC startups are failing their retail employees
Despite their affinity for shirking traditional retail practices, there's one thing that direct-to-consumer brands can't shake off entirely: the belief that the customer is always right.
Member ExclusiveA domino effect: How USPS delays may hurt e-commerce startups
Every e-commerce business, from mom-and-pop shops all the way up to Amazon rely on the USPS in some way, Now, service delays threaten to destroy one of the backbones of e-commerce