Food & Beverage

PepsiCo pledges to slash beverage calorie counts by 2025

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PepsiCo Chairman and CEO Indra Nooyi pledged Monday as part of a new sustainability initiative to significantly reduce the calorie count of the company's beverages as it looks to counter health concerns about sugar-sweetened beverages, and respond to changing consumer preferences. She also revealed plans to redouble water efficiency companywide.

"Over the last decade, we have made progress in reducing sugar," Nooyi told CNBC. "But there's a lot more we needed to do because countries which loved sugar were growing faster than countries which were consuming lower-sugar products."

"We have to make sure that our products meet the changing consumer needs," she added.

According to PepsiCo, at least two-thirds of the company's beverages will contain 100 calories or less per 12-ounce serving by 2025. As part of the initiative, the company will increase the focus on zero or lower-calorie products.

It's a big commitment — PepsiCo sells beverages in about 180 countries worldwide and still makes well over $1 billion annually from the sale of its flagship sugar-based Pepsi drink. The push back on calories follows efforts in several communities to tax sugary drinks as a way to fight rising obesity rates.

At the same time, PepsiCo has been pushing its low-calorie offerings, including a relaunched Diet Pepsi with aspartame. And this summer it announced new brand Pepsi Zero Sugar, replacing Pepsi Max.

"Technology breakthroughs right now are resulting in better-tasting colas, almost as good as the full-sugar colas, but with lower calories," said Nooyi. "So we're now faced with [an] interesting opportunity to step the consumer down to lower sweetness levels."

PepsiCo also is the maker of unsweetened ready-to-drink coffee and iced tea products, under the Starbucks and Pure Leaf brands, as well as several lines of flavored sparkling water, juices and the Gatorade sports drink brand. Today, soda represents less than 25 percent of the company's global revenue.

Industrywide, carbonated soft drinks still account for the majority of the category's sales, according to Mintel. It estimates the diet carbonated soft drink segment accounts for about 74 percent market share while the diet category is just 26 percent.

Mintel said the diet soda business has been declining as a result of "negative health perceptions surrounding artificial sugar, coupled with the large number of better-for-you and low/no calorie beverages available."

The company's lower-calorie initiative isn't limited to North America.

For example, PepsiCo has 30 percent lower sugar 7-Up products in China and India, and in Mexico and the U.K., it is launching lower-sugar sodas, according to the CEO.

"The consumer can't tell the difference, and that's the greatest thing about all of the R&D work, which is now yielding results," she said.

The CEO also spoke about ongoing efforts to reduce sodium in products, including snacks sold by the Frito-Lay division.

"By applying the seasoning differently, we can actually still make it a salty snack, but with lower sodium levels, and that's what we have managed to do with… our products in countries like the U.K. and China, where we've reduced salt levels significantly," she said.

By 2025, PepsiCo said three-quarters of its global foods portfolio will contain sodium volumes not exceeding 1.3 milligrams per calorie. Also, at least three-quarters of the foods will not exceed 1.1 grams of saturated fat per 100 calories.

According to the CEO, the company also already made significant strides and is now frying snacks in many countries using "heart-healthy oil." Also, she said in China the company has available to it a new frying technique that can reduce saturated fat levels by about 20 percent while at the same time increasing capacity of the machines by 25 percent.

PepsiCo also is taking its healthy push to vending machines as part of a so-called Hello Goodness initiative it's previously disclosed. It includes everything from Frito-Lay's baked chips and Sabra hummus products to healthier beverages.

She said sales in the Hello Goodness machines are running higher than other vending machines "because all of a sudden, people look at this and go, 'Gee, I can eat everything I want out of this machine rather than, you know, having to go to convenience store or going to my pantry to bring stuff.' "

Nooyi said the shift in consumer preferences reflects a change in consumer habits.

"Consumers are changing their habits because they want to focus a lot more on remaining healthy because they're living longer," she said. "So they want to remain very healthy for the duration of their lives. And so as consumers change, we have to change our product portfolio."

Meanwhile, PepsiCo's sustainability goals also include reducing the company's carbon footprint and achieving increased water savings worldwide.

"We cannot keep operating in communities if we don't have prudent water goals or greenhouse gas emissions goals because societies won't allow us in," said Nooyi. "So I think in many ways, what we are doing with our goals right now is much more — you know a way to drive our performance on a sustained basis, so we are financially motivated with a very strong conscious."

The company is aiming for a 20 percent reduction in greenhouse gas emissions across its value chain by 2030. That applies to everything from production activities worldwide and packaging to transportation and its agricultural supply.

The company said it plans to work with business suppliers and customers, too, as part of the effort to reduce emissions.

In water goals, the company is targeting a "15 percent improvement in water efficiency of its direct agricultural supply chain in high water-risk areas by 2025." In short, that means savings equivalent to the total amount of water used in the company's manufacturing operations.

PepsiCo said its water savings efforts also call for replenishing 100 percent of the water it consumes in its manufacturing operations within "high-water-risk areas."

Finally, the company pledged it would "improve water efficiency of its direct manufacturing operations by 25 percent by 2025." PepsiCo said that was in addition to the 25 percent savings it already has achieved since 2006.

(UPDATE: The story was updated to add more comments from the Pepsi CEO regarding changing consumer tastes and habits.)