Pepsi Launches DTC Sites for Pandemic Shoppers

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Pepsi Launches DTC Sites for Pandemic Shoppers

By Thad Rueter - 05/11/2020
Challenges abound as more brands embrace direct-to-consumer sales
Pepsi is offering DTC sales of snack packs and other items

A new PepsiCo direct-to-consumer (DTC) push aims to win over more consumers during the COVID-19 pandemic and help build the company’s e-commerce prowess over the longer term, after the outbreak subsides and more economies reopen. But big challenges remain for any brand looking to get into the DTC game.

On Monday, PepsiCo debuted two DTC websites, PantryShop.com and Snacks.com, “where shoppers can order an assortment of PepsiCo's trusted and loved food and beverage brands,” the company said. PepsiCo positioned the launch of those sites mainly as a response to pandemic buying habits. Even so, direct-to-consumer sales stood as one of the hottest retail trends before the pandemic, and signs point to it gaining even more heat as the outbreak drags on.

PantryShop.com offers “specialized bundles containing PepsiCo's top-selling, pantry favorites from brands like Quaker, Gatorade, SunChips and Tropicana, within categories such as ‘Rise & Shine,’ ‘Snacking,’ and ‘Workout & Recovery.’” PepsiCo is tapping into another retail trend – so-called curation – as those items have been “thoughtfully curated based on affinity research and are designed to meet consumers' 'new normal' such as working and exercising from home and homeschooling.” The kits cost $29.95 and $49.95, and consumers get free standard shipping.

Consumers using Snacks.com “can choose from more than 100 of their favorite Frito-Lay products from a variety of iconic brands like Lay's, Tostitos, Cheetos and Ruffles, as well as dips, crackers, nuts and more.” For now, shoppers spending $15 or more get free shipping, PepsiCo said.

Short-Term DTC Play

The short-term DTC play for PepsiCo is relatively simple, at least according to Gibu Thomas, PepsiCo’s head of e-commerce, who talked to Progressive Grocer on Monday.

“What we’ve heard from consumers is that during times of crisis, they like to turn to things that give them comfort, and our brands play an incredibly important role in bringing smiles and joy and comfort to shoppers,” Thomas said. “We’ve seen that increase in demand for our products, and these DTC sites make it easy to get them.” Driving home that point, PepsiCo said it conceived and developed the sites in less than 30 days in response to “consumers' evolving needs” during the pandemic.

Even so, this new DTC push is part of a broader PepsiCo effort that kicked into gear about three years ago, as the company focused more on e-commerce.

“Over the last few years, we have built an incredibly talented e-commerce team within PepsiCo of native digital experts combined with entrepreneurial CPG experts,” said Thomas. “(They) bring a relentless focus on consumer centricity and are enhancing our digital capabilities to enable PepsiCo’s continued growth.”

Such efforts appear to be paying off, as PepsiCo said that its e-commerce sales last year amounted to $2 billion – a meaningful amount for a company that sells most of its products via physical commerce.

Broader DTC Trends

Broader direct-to-consumer trends are also in play.

Other major U.S. brands – Nike, for instance, stands as a leader in this area – have over the past few years poured more fuel into their own DTC efforts, taking advantage of improved e-commerce and mobile technology, more efficient fulfillment networks and more sophisticated digital outreach to consumers, who, after all, have a growing tendency to shop from the comfort of their homes.

By one estimate, direct-to-consumer online sales in the U.S. reached $14.28 billion last year, though there is good reason to think that the actual total is at least somewhat higher than that, depending on how one measures the DTC space. Those DTC sales could grow more than 24% this year, thanks in large part to the pandemic, but also because of pre-outbreak trends.

DTC Challenges and Lessons

That doesn’t mean growth will go smoothly, especially given the impacts of the pandemic.

“Even though consumers are buying more products online due to the coronavirus, digitally native (direct-to-consumer) brands should anticipate hardships in the coming months,” said Oscar Orozco, eMarketer senior forecasting analyst. “Sales will continue to shift from nice-to-have products to must-have products, with (DTC) brands falling under the nonessential category. Disruptions in the supply chain are also likely. That will mean slower shipping times, normally a distinguishing factor for (DTC) products.”

Indeed, fulfillment can make or break any DTC effort, and too much distance between the factory and a consumer’s home can prove fatal, especially given the distribution power of Amazon, Walmart and other big players in the general food retail space. But PepsiCo would seem to have a fulfillment advantage, at least according to Thomas.

“One of the benefits we have as a result of our scale is, we have a very distributed supply chain footprint, and therefore our products are manufactured pretty close to the end consumers,” Thomas said Monday. “This allows us to deliver a majority of consumer orders in two days or less, which meets our shopper’s expectations.”

That’s not the only potential DTC lesson offered by this new PepsiCo push. Other brands and companies seeking to make their mark in direct-to-consumer sales must figure out how much of their own expertise and funding they can rely on, and how much they might have to outsource.

Not all DTC real and would-be players have the data and deep analytical resources that PepsiCo has, but according to Thomas, employing those tools can pay off with DTC. “The end-to-end capabilities that we’re using for PantryShop.com were developed completely in-house, which allows us to move with increased speed and iterate based on consumer feedback,” Thomas said.

Pricing, too, is another area of concern, especially for a food, snack and beverage brand. And pricing can require a fresh DTC balance, at least depending on the products being sold via DTC channels. “We’ve priced the products to be competitive to retail prices, but because retail is still the primary channel where consumers find our products, the multi-product bundles are intended to be complementary to other channels, not competitive,” Thomas said.

PepsiCo, like so many other brands, still has much to learn about direct-to-consumer sales. As well, many of those brands are behind retailers such as Amazon and Walmart when it comes to experience dealing directly with shoppers, along with e-commerce strategies and tactics. For now, the main focus on the new PepsiCo DTC push is to meet the needs of pandemic shoppers. But what happens with them will help shape the brand’s direct-to-consumer future – and not doubt provide general insights to other brands seeking more DTC presence.

“As we iterate on these platforms with the direct feedback we get from consumers, we’ll learn a lot about what really matters to them, which will help inform both our retail strategy and what the future of our DTC efforts look like,” Thomas said. “We want to make consumers happy at the end of the day, so we will continue to iterate until we find the right proposition that works for consumers.”