PepsiCo delivers snacks DTC: COVID-19 fad or long-term ecommerce strategy?

Last week, PepsiCo launched two ecommerce websites (PantryShop.com and Snacks.com) to provide direct-to-consumer (DTC) options for its packaged goods brands. Given the increase in the number and frequency of consumers turning to online grocery shopping to avoid going to stores during the COVID-19 pandemic, it seems like the timing is perfect. Or is it?

Here our retail, food, drink, and consumer experts weigh in and discuss whether or not the new sites meet consumers’ changing needs and behaviors – now and in the future – what’s left to be desired, if there are opportunities for innovation and what we can expect from the competitive landscape in the long term.

Katie Yackey, Analyst, Ecommerce, Mintel Reports US

Companies such as PepsiCo have kept a close eye on the DTC market, waiting to make their play as consumers’ interests in DTC brands continue to grow. According to new research on direct-to-consumer retailing, more than two in five US consumers say they are shopping DTC more now than in 2019 and half of those who have not purchased from a DTC brand would be interested in doing so.

Furthermore, both sites tap into two of the key elements of ecommerce: PantryShop.com primarily leverages the convenience of ecommerce by offering consumers bundle packages, while Snacks.com focuses on personalization by allowing consumers to customize their own snack box.

However, much like is seen in the streaming wars, too many DTC options – with their own site, subscription, and password to manage – overwhelms consumers making the experience less valuable and more complicated. Further complicating things, the new sites do not provide consumers with a one-stop shopping experience for all their grocery needs. While a first-time trial of PepsiCo’s new sites may be interesting, especially under stay-at-home orders, in the long term, it is highly unlikely consumers will seek out a site specifically for their snacking needs if they can bundle it with their normal grocery shopping habits.

Diana Smith, Associate Director, Retail and Apparel, Mintel Reports US

It’s a great time for PepsiCo to experiment with offering new forms of convenience to consumers. While both sites have merit, the proposition of buying individual types of items (eg snacks, breakfast foods) directly from a supplier runs counter to how consumers shop for groceries. While they might be willing to test out these sites initially – especially now, while they are at home and continue to face challenges with out-of-stock items and long delivery timeframes – it’s likely they’ll see this as a novelty that will wear off once pre-COVID-19 shopping resumes and won’t ultimately adjust their shopping behaviors, especially if they have to pay delivery fees.

That said, the bundled approach via PantryShop.com based on various need states has merit as it more closely mirrors a one-stop-shop approach and consumers are stocking up more in light of COVID-19. It’s likely we’ll see more brands offering bundled kits like this which could threaten mass merchants, club stores and traditional grocers. The idea could be strengthened by allowing consumers to customize their own bundles. Snacks.com is fun and easy to use and is a great option for parents looking to keep their kids happy. A subscription option to receive replenishment boxes on an ongoing basis would be a nice extension of the offering.

Beth Bloom, Associate Director, Food and Drink, Mintel Reports US

It’s worth repeating – this is the perfect time for PepsiCo to launch a DTC platform. Online snack purchase has remained lower than expected in recent years, considering the omnipresence of snacking, the tendency for snack loyalty, the relatively high percentage of planned snack purchases, and the non-perishability of snack products. New Mintel research on the US salty snacks industry finds that while close to half of salty snackers keep a stash on-hand, and one in five admit to buying them right before consumption, only one in 10 purchase snacks online. While COVID-19-induced stay-at-home orders have stunted impulse snack purchases, snack demand remains high, with consumers turning to familiar comfort foods to manage stress and anxiety, and to help manage kids, big and small, that are home for the foreseeable future. This will likely force consumers to further see snacks as planned purchases, a behavior that will likely remain, to some degree, once stay-at-home orders are lifted, and consumers are encouraged to be more judicious with their brick-and-mortar patronage.

The performance food category already has a stronger than average online consumer base. Nearly one in five snack, nutrition, and performance bar buyers shop online (either from a general online retailer or an online nutrition-focused site), according to US research on snack, nutrition, and performance bar consumers. One limitation of PepsiCo’s PantryShop.com platform is that it currently limits purchase to pre-fab kits that combine a range of fitness products. This will likely reduce patronage of consumers who want to purchase their one product of choice, or be allowed to customize their own box. Our research shows that half of bar buyers stick to one type of bar, meaning they know what they like, and might not be willing to pony up for unfamiliar products. A better approach may be to allow consumers to customize their own kits, and then expand to include pre-fab versions of some of those more popular combinations. What’s more, introducing a stronger sense of expertise can help to appeal to a fitness/nutrition-focused consumer base, including allowing consumers to search by benefit (eg hydration, muscle recovery, weight loss).

Marcia Mogelonsky, Director of Insight, Mintel Food & Drink

During the pandemic, online shopping for food has increased: almost half of consumers today say they are shopping more online, compared to 8% when the pandemic first started to take hold in the US, according to Mintel’s Global COVID-19 Consumer Tracker. Product shortages seen with some online retailers, as well as challenges using services such as InstaCart and other shop-for-you options have limited choice for consumers. PepsiCo’s launch of the new ecommerce sites looks to capture consumers’ current online shopping behavior, circumventing issues by skipping the “online middleman” with its DTC route.

Some aspects of the program, however, may need rejiggering. PantryShop, which at this point offers only pre-set boxes of products, for example, may get pushback from consumers who want more control over the variety of foods they eat for breakfast. Similarly, Snacks.com may find consumers seeking products that are not currently available (eg Baked Lays). And, it is not clear if Snacks.com will offer limited edition snacks (eg the latest Doritos flavor).

On the other hand, the DTC platforms provide an opportunity for innovation. PepsiCo brands could pitch “special limited edition” products or present the platform as a sort of “focus group” for trialing new products. As more shoppers become fluent in the world of online shopping, these new platforms could reach a wider audience, especially those who no longer feel comfortable shopping in stores, and entice them to try new products.

Jenny Zegler, Associate Director, Mintel Food & Drink

Online sales have divergent benefits for consumers and food and drink companies. Consumers gain the convenience of shopping from the comfort and safety of their homes, which is essential during the COVID-19 pandemic. Meanwhile, companies gain a better understanding of consumers through data collection.

Mintel identified the potential for more consumers to shop for groceries through ecommerce channels in the 2016 Global Food and Drink Trend ‘e-Revolution: From carts to clicks.’ The transition to ecommerce for groceries had been limited in the US until the pandemic hit. As more consumers try to avoid exposure to the virus, the shorter supply chain of PepsiCo’s DTC model is an advantage. One-quarter of US consumers say they are worried about the safety of food and drink purchased at stores, according to Mintel’s Global COVID-19 Consumer Tracker.

For food companies, ecommerce can help answer consumer demands for personalization, as observed by our 2018 Global Food and Drink Trend ‘Preferential Treatment.’ For PepsiCo, the data collected about consumers from PantryShop.com and Snacks.com could illuminate consumer preferences and habits, as well as inspire new product development. If out-of-stocks on Snacks.com as of May 15 are any indication, we could see more Flamin’ Hot flavored snacks in the future.