The Echo-nomist

Hold my juice – PepsiCo is selling Tropicana and other juice brands owned by them like Naked. Their reason? They want to move away from high-sugar drink… Whoa!

This announcement comes during a time when people around the world are become conscious about what they’re eating and their health. They’ve starting working out, focusing on their nutrition intake and changing their diet. While this is positively impacting their life and lifestyle, it’s also changing businesses.

As of 2019, the market size of the global health club industry was $96.7 billion (source: Statista). 39% of America’s population has a gym membership and 174 million people worldwide were part of a health/fitness club in 2019. The pandemic only increased the reach of health clubs. You no longer have to wake up an hour earlier, get ready, drive to the gym or fitness institute. You can exercise from the comfort of your house, at a time that’s suitable to you and in clothes you are comfortable in. This enabled more people to jump in on a fitness journey.

But how has this impacted businesses?

It has led to the emergence of restaurants that serve healthy food, companies changing their selling strategy and operations and booming business for complementary industries (like- sports equipment, health tracking apps, dietician etc.).

Back to Pepsi, they said that selling juice companies will help them focus on their existing products and grow their portfolio of healthier snacks and low/zero-calorie beverages. They want to sell what the consumers are willing to buy. Because of the shift in consumer preference to healthier foods, they’re doing what they can.

Introducing Pepsi True! It has no corn syrup (high in fructose) or artificial sweeteners. Plus point, it comes in a green-can. Even Coca Cola’s diet Coke, zero sugar Coke and Coke zero have become popular.

Other than this, their healthier food change also includes baked Lays, oats, zero-calorie Gatorade, cold brew coffee, probiotic drinks, breakfast bars, Sabra hummus cups, probiotic drinks, enhanced waters (with electrolytes, flavours etc.), Bare snacks (fruit and vegetable snacks) and much more. Whether these are actually healthy or not is a different debate.

They are now a part of the functional beverage industry. Functional beverages are non-alcoholic drinks that contain non-traditional ingredients like mineral, vitamins, probiotics etc. The global market for such drinks is expected to hit $130.5 billion this year, an 8% increase year-on-year (source: Robinhood). Apart from higher demand, they also offer companies like Coca-Cola and PepsiCo the benefit of higher profits. Such drinks command higher prices than average fizzy drinks (full of sugar). Gatorade zero was an innovation worth more than $1 billion!

I think obviously consumers are moving, I think, and it’s going to be a long-term trend into healthier choices in beverages and in snacks, right.

We’re getting very good at providing the consumers with very good taste experiences and functional experiences with zero sugar.

Pepsico earnings call Q&A

But beverage/snacks isn’t the only industry affected by health trends.

Home-workout coupled with fitness craze has really given a push to exercise equipment companies like Peloton.

In the third quarter of FY21, their paid digital subscriptions grew approximately 404%! Their total revenue grew to $1.26 billion. This increased growth and demand helped them expand their customer base and operations. Their total platform workouts are up to 171 million now and their live workouts grew to 2.8 million, up 30% from Q2. They are especially known for their bikes and treadmills. The success could be owing to the their ability to successfully develop and timely introduce new products and services. They have had to significantly increase production for Bike and Bike+. (source: Peloton quarterly reports)

In India itself, Cure.fit has gained popularity over the past few years. They have offline centres but had to shift to an online platform due to the virus. After the pandemic, they introduced various services- online workout, dietician, doctors, yoga and therapy, clothes and equipment and more. This helped them add 1.5 million subscribers and a large share in the online fitness market (source: Business Insider).

I guess you can say the world is becoming healthier, or at least trying to. According to google trends, how to start a vegetable garden was searched twice as much in 2020 as compared to 2019.

Watch out as food and beverage companies shift to healthier snacks (hopefully without comprising on the taste), exercise equipment companies enjoy some $$ and health-related apps become popular on app store/play store.