PepsiCo's Move to DTC Is About More Than Distribution

PepsiCo’s snacks were once exclusive to grocery stores and rec soccer games—but no more.

On Monday, Pepsi debuted two DTC funnels for its extensive food and bev repertoire. The URLs alone must’ve cost a fortune…

• Snacks.com will stock 100+ Frito Lay chip and dip varieties.
• PantryShop.com will sell bundles of bestselling drinks and snacks, organized into pandemic lifestyle categories like “Snacking” and “Workout & Recovery.”

DTC isn’t meant to replace Pepsi’s sprawling wholesale presence, but rather offer an alternative that’s friendly to blanket fort life. And as shoppers raced to fill their pantries, Pepsi hustled to craft its online presence: Its new channels were created and launched in less than a month.

Zoom out: For the week ending May 2, online food sales increased 66%, per Nielsen. The Flamin’ Hot Cheetos hive will try to further the cause. When I browsed Snacks.com last night, some products were already out of stock.

The back-of-the-bag story

The same infrastructure that helped Pepsi tally $2 billion in e-comm revenue last year (without DTC) will give it advantages over its newfound DTC competitors.

• Shipping: Pepsi’s manufacturing centers are close to end customers, the company’s head of e-comm told Progressive Grocer. So at launch, Pepsi’s DTC arm can guarantee two-day shipping for most orders.
• Selection: DTC incumbents typically launch with one product in a few flavors. Pepsi’s Frito-Lay brands run into triple digits.

All that wrapper crinkling might distract you from Pepsi’s ulterior DTC motives. Whether you call it sourcing community feedback or mining user data, Pepsi’s DTC channels allow it to own its relationship with consumers. Later on, Pepsi can apply what it learns about e-comm habits to its omnichannel strategy.

My takeaway: If shoppers will buy mattresses and diamonds online, they’ll buy chips. So I expect other surging snack companies—like Goldfish maker Campbell’s or Oreo baker Mondelēz—to follow Pepsi into DTC sales eventually.