PepsiCo Nearly Doubles D2C Digital Sales

Need to Know

• The massive spike in D2C sales comes after Pepsi launched two new online marketplaces, Snacks.com and PantryShop.com, in May.
• Total revenue for the company grew 5.3% over Q3, to $18.09 billion.
• While the company’s soft-drinks division suffered due to the closure of bars and restaurants, consumers working and studying from home led to strong demand for snacks.
• PepsiCo’s switch to D2C sales follows a growing trend that has seen other brands such as Heinz also open branded e-commerce experiences.

Analysis

PepsiCo reported strong Q3 earnings this week, anchored by a significant spike in direct-to-consumer sales.

The company reported that its online sales nearly doubled in Q3, thanks largely to the launch of two DTC digital marketplaces, Snacks.com and PantryShop.com, in May. Those two online stores were launched to cater to an increased demand for online retail, as physical stores closed due to the coronavirus pandemic, and to serve a customer base that would be increasingly working and studying from home. And the launch has paid off: while PepsiCo saw a dip in revenue to its soft drinks division, as sales to bars and restaurants dried up due to the COVID-19 pandemic, DTC sales of snacks increased.

While the company did not disclose exactly how much of its overall revenue was made up by DTC sales, Rui Fransisco, director of e-commerce for PepsiCo in Europe said that, in that market, online sales have been bolstered by the entry of entirely new consumer demographics.

“With COVID, through some of our studies and some of our research, we’ve seen new cohorts, like older people,” he said in an interview with Just Food. “We saw the segment of 65 and older starting to buy food and beverages online. We also started seeing people in rural areas, and also less affluent [people], buying online, and that has driven the acceleration.”

Overall revenue for PepsiCo for Q3 of 2020 increased by 5.3% to $18.09 billion, exceeding expectations of $17.23 billion.

PepsiCo plans to continue to strengthen its e-commerce capacities, with chairman and CEO Ramon Laguarta saying in an earnings call that the company is “making the necessary investments in our manufacturing capacity, go-to-market systems and digital initiatives such as improving our presence and scale in our e-commerce business, which nearly doubled during the third quarter.”

PepsiCo has been improving its digital offerings since before the pandemic, in February outlining investments in analytics and digital marketing to gain a stronger foothold in the consumer marketplace. That commitment came after the company reported $2 billion in DTC sales in 2019, a figure CFO Hugh Johnston said the company would be able to increase by leveraging data to speak to consumers directly. “By virtue of sort of having a relationship with you, either directly or a relationship with you through our e-commerce partners and our customers, we can actually much more effectively understand what your needs are,” he said at the time.