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Pepsi (PEP) Introduces Organic Gatorade Called G Organic

PepsiCo, Inc. PEP is reportedly introducing an organic version of its best-selling sports drink Gatorade, called G Organic.

The sports drink, certified organic by the U.S. Department of Agriculture, is made with less artificial flavors and colors, and has more natural ingredients instead. The G Organic Range is available in strawberry, lemon, mixed berry flavors at select The Kroger Co. KR supermarkets.

Gatorade was acquired by Pepsi as part of its $13.4 billion purchase of Quaker Oats in 2000.

This is another attempt by Pepsi to capture market share of the fast growing American natural food and beverage market. However, launching more natural versions of their popular products might not always prove successful.

In June, Pepsi said that it is bringing back its aspartame-sweetened Diet Pepsi to the U.S. stores in September, less than a year after launching an aspartame-free version of the soft drink. In Aug 2015, due to consumer safety concerns, Pepsi had launched Diet Pepsi sweetened with sucralose. The increasing demand from fans of the aspartame version – via social media – compelled the company to re-introduce the Diet Pepsi with aspartame.

Pepsi is focusing on the expansion of its nutritious product offering, which contributes around 25% of its revenues. Most of the company’s latest line-up of products are healthier versions like reduced calorie beverages, non-carbonated beverages and healthier snacks. The company is on track to offer more products with less sodium, sugar and saturated fat, to reap benefits from a shifting consumer preference toward good-for-you and health & wellness products. Over time, the company’s product profile has grown from fun-for-you to a more balanced offering of good-for-you, better-for-you and fun-for-you products.

In order to revitalize cola sales, which are suffering due to high calorie content, the company is testing cola product variations using evolutionary natural sweeteners in various markets.

Moreover, Pepsi has expanded its beverage portfolio to include more non-carbonated beverages to decrease the dependence on colas. In fact, the company generates just 12% of its revenues from trademark Pepsi and less than 25% from CSD, globally.

Notably, in snacks, Pepsi’s recent innovation efforts focus mainly on higher-margin healthy and premium salty snacks as there is a definitive market for such products now. Importantly, premium products generate higher margins and should boost profits of the company.

Stocks to Consider

Pepsi carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the consumer staples sector include Ingredion Incorporated INGR and Omega Protein Corporation OME, both sporting a Zacks Rank #1 (Strong Buy).   

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