The far-reaching impact of the U.S. housing slump is well known, and now it’s trickling down to affect some beverage sales, Reuters reported.
PepsiCo noted that the company’s Gatorade sports drink sales had declined, while its sales of sodas and Tropicana juices featured a better-than-expected quarterly profit. This lead PepsiCo CEO Indra Nooyi to meet with c-store CEOs who revealed that the weak U.S. housing market means fewer construction workers are stopping in for sports drinks and other snacks on their way to work.
“One of the things that used to happen is the construction worker used to pull up with the pickup truck at 6 a.m. or 6:30 a.m., buy six or seven bottles of 32-ounce Gatorade, a few bags of Doritos, throw it in the truck and pull off to the construction site. With housing starts being down as much as they are, that construction worker is not coming through the (convenience store) to pick up that Gatorade and so there’s no question that we have lost that active-thirst occasion related to that construction worker who was toiling in the hot sun,” Nooyi said.
Nooyi said the Gatorade franchise will shrink in the short term, but the company is running the business with the long term in mind.
She said PepsiCo will not go to lower “private-label pricing” and that the core athletic user is extremely loyal. She noted the company is offering other products to retain casual users who might be swayed by lower-cost tap water, bottled water or soft drinks.
Nooyi added that in the recent past Gatorade enjoyed strong growth in light of the rising number of casual drinkers and warmer-than-normal weather. Now, those casual drinkers have more options, the weather is cooler and the recession is causing some buyers to choose less expensive options.
John Compton, CEO of PepsiCo’s Americas Foods business, added that higher unemployment and lower housing starts had indeed hurt convenience stores, particularly in the snack business during the last three to four months. He went on to say that across other channels total business has not changed significantly as the dollar stores have picked up quite a bit.