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PepsiCo will hit a mind-blowing $2 billion in online sales this year

Brian Sozzi
Editor-at-Large

It makes sense that struggling grocery store chain Kroger (KR) is reportedly kicking middle managers to the curb to cut costs.

Because clearly, more people are shopping for food online — and probably at increasingly tech savvy supermarket giants Walmart (WMT) and Target (TGT). And of course, Amazon (AMZN) lingers as a major force in packaged food delivery.

PepsiCo (PEP) will hit an impressive $2 billion in sales done online this year, CEO Ramon Laguarta told Wall Street analysts on an earnings conference call Thursday. Many of the company’s big brands such as Gatorade and Frito Lay appear to be benefiting from the consumer shift online, according to PepsiCo Vice Chairman and CFO Hugh Johnston.

“If you look at all the snack food brands are doing quite well [online], Quaker Foods as a portfolio tends to appeal to online shoppers and the Pepsi beverage business is doing terrifically well,” Johnston said on Yahoo Finance’s The First Trade. “Part of the reason for that is that we really started investing in e-commerce three years ago. We built a team of a couple hundred people located in Midtown Manhattan where you get digitally savvy younger types of employees and that team has done a great job building a new set of muscles for us that we didn’t have before.”

While credit goes to PepsiCo for investing aggressively in online capabilities, its largest retail partners have also done their part. Whereas shopping for food online was always a hassle — when you want to eat or drink, you often want the product now — advances in delivery methods have pretty much reduced a long-time friction point for shoppers.

A convenience store customer make a purchase next to a shelf of Frito-Lay snacks. (AP Photo/Lisa Poole)

Walmart (PepsiCo’s largest customer at 13% of annual sales) said recently it will roll out a grocery delivery subscription this fall. For $98 a year, subscribers gain access to unlimited same-day delivery. It will be available at 1,600 stores — or 50% of the U.S. — by year end.

Meanwhile, back in June Target unveiled a same-day delivery option in 47 states for only $9.99 per order. The company is using its Shipt delivery business to make it happen, a business it bought for $550 million in 2017.

And for a flat $119 annual fee, Amazon Prime offers shoppers access to 3 million items shipped same-day.

Indeed, a lot of those orders look to be Pepsi soda and Frito Lay chips.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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