Photographer: Caitlin O'Hara/Bloomberg

PepsiCo Makes a Bigger Online Bet After Amazon Rattles Grocery Industry

Updated on
  • Company has 200-person e-commerce unit in midtown Manhattan
  • PepsiCo faces slowdown in U.S. grocery sales of beverages

With Amazon.com Inc. threatening to disrupt the supermarket industry, PepsiCo Inc. is making a bigger wager on e-commerce. 

The food-and-beverage giant has created a 200-person business unit that’s tasked with spurring online growth in a fast-evolving grocery landscape. So far, it’s working. PepsiCo is on pace to hit $1 billion in annualized e-commerce sales this year, Chief Financial Officer Hugh Johnston said in an interview.

That’s about double the rate a year earlier, even if it remains a small piece of the pie. PepsiCo has total revenue of about $63 billion a year.

“That business is just really growing like crazy,” said Johnston, who also serves on Microsoft Corp.’s board. “We run it more like a tech company than we do a consumer-products company, and it’s a real star of the portfolio for us right now.”

To further set the online business apart, it’s located in midtown Manhattan -- about an hour from the company’s suburban headquarters in Purchase, New York.

The group is focused on marketing and packaging PepsiCo’s products for online sellers, including Amazon.com Inc. and Boxed Wholesale, as well as traditional brick-and-mortar grocers that are trying to boost their digital footprint. The division was founded about two years ago, but PepsiCo has been quiet about it until now.

PepsiCo faces more pressure to go big in e-commerce because grocery sales of soft drinks have weakened, especially in North America. And the overall food industry is bracing for a wave of change. Grocery companies have been rocked this year by Amazon’s $13.7 billion purchase of Whole Foods Market, a deal that sent shares of traditional supermarkets tumbling.

Shopping Shift

Combined, Amazon and Whole Foods promise to change the way consumers shop for food. That means grocery suppliers, including PepsiCo, must also adapt.

Beverage rival Coca-Cola Co. has increased its focus on online sales as well. Adjusting to the digital age is now a key priority, Chief Executive Officer James Quincey said in an interview earlier this year.

At PepsiCo, the e-commerce project has required the company to recruit people outside its typical pool of prospective employees, Johnston said. Three-quarters of the team comes from tech backgrounds, he said.

“They are much more digitally native than they are consumer-products native,” he said.

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