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Pepsi doubles down on 'guilt-free' options in effort to boost sales

  • More than 45% of PepsiCo's revenue comes from its 'guilt-free' beverage and snack division, the company said Wednesday.
  • CEO Indra Nooyi said she wants to grow this segment, as consumers' preferences change in the grocery store.
  • Quaker is one brand the company is particular optimistic about.
Containers of Quaker Oats oatmeal
Ramin Talaie | Bloomberg | Getty Images
Containers of Quaker Oats oatmeal

PepsiCo said strong consumer demand for its healthier drinks and snacks helped drive its better-than-expected results in the first quarter.

"To meet the evolving needs of our consumers around the world, we are shifting our portfolio to a wider range of what we call... 'everyday nutrition products,' which are products with positive nutrients like grains, fruits and vegetables or protein," CEO Indra Nooyi said on the company's earnings conference call.

PepsiCo said that its "guilt-free products" — beverages that have fewer than 70 calories per 12 ounces and snacks that have lower amounts of salt and saturated fat — accounted for more than 45 percent of the company's revenue for the latest quarter.

In the first quarter, total sales rose 1.6 percent to $12.05 billion, marking the second consecutive quarter of rising revenue following eight quarters of decline.

"Our everyday nutrition portfolio is growing faster than the balance of [PepsiCo's overall] portfolio," Nooyi explained. Finally, PepsiCo's research and development spending around healthier products is paying off and "paving the way for new flavors," she added.

Highlighting recent "guilt-free" products, PepsiCo cited recent launches of Life Water and a sparkling lemonade that are resonating with shoppers. Baked Lays, Quaker Breakfast Flats, and a new version of 7UP with 30 percent less sugar, are other examples of PepsiCo's innovations aimed at providing healthier alternatives.

This year, the company plans to expand its Smartfood Delight popcorn lineup, and in Brazil, it will launch new Quaker fruit bars made with real fruit and less sugar.

Sales at its Quaker Foods North America segment dropped 3 percent year-over-year in the first quarter, but Nooyi remains confident this division is ripe for growth. Quaker is one brand the company has marketed as offering numerous healthy alternatives for consumers.

"Quaker Foods North America has the opportunity to return to growth by leveraging one of the most beloved nutrition distribution brands to renew excitement in the center of the [grocery] store," she told investors and analysts Wednesday.

Across the industry, packaged food companies have been seeing weaker sales as more shoppers stick to the perimeter of the store, where healthier foods like fresh fruit, vegetables and proteins, like meat and fish are sold.

Watch: PepsiCo CFO on CNBC