PepsiCo thins portfolio and bets on better-for-you products

0:08Hello and welcome to the Modern Retail Podcast. I am senior reporter Gabby Barco. I am here with Melissa Daniels this week. How are you, Melissa? I'm doing well. You know, it's the thick of the holiday season. I'm almost done with my Christmas shopping. I'm in the fun part where I just shop all the local businesses for gifts for my friends, which is super fun for me. And almost daily watching the Charlie Brown Christmas special. So I'm in great spirits. I love that. I have not started. So I need to get whatever, you know, as this episode is airing, I probably should be out. And I'm telling my future self to go out on Saturday.

0:51And yeah, find some fun gifts. It's so much. It's just. I mean, what are your thoughts on like the in person versus online shopping, which we talk about almost every week. But like, do I go to the stores? Do I brave the crowds this weekend? Because then it could be faster and I could just get everything. Or do I do the ordering and returning and ordering and returning thing, which I think for me, when it comes to gifting, there's a formula where it's like, how far away does the person live? And or am I seeing them before the holidays? And or how much am I willing to spend? All of that kind of comes together to decide, am I ordering something online that's getting shipped to their house, which I just for some friends this morning?

1:33Or, you know, am I going to a local store to pick something out that I'm going to gift wrap and make really cute to give to my girlfriends for dinner, which I also did on Monday. So there's really a calculus in how the gift shows up to the person that I think factors into where you shop. As far as the experience, I would always rather shop in person, almost always. I do too. And it looks like it's going to snow on Saturday, but I am heading to the stores. You know, wear a cute hat, get a hot beverage, like make it a treat. Oh, yeah, I could channel my, you know, Hallmark movie character channel.

2:12I love this for you. We'll let you know how it goes. All right. Well, let's get into it. Later on in the episode, we have a roundtable discussion looking at the secondhand boom of 2025. That one features Melissa and modern retail reporters, Alison Smith and Julia Waldo. So please stay tuned for that. I myself am very excited to hear about all of your thoughts on secondhand boob, because you know, with the tariffs of it all, it seemed like it kind of had that, yeah, second wave almost after last year. Oh, yeah. I mean, it was just such a big year for services and individuals in that area, and we get into all of it.

2:55But first, we're going to get into some of the news for the week about PepsiCo's new plans to lower prices and introduce new products and also really rearrange a lot of its portfolio. Gabby, you covered this for us this week for the Modern Retail newsletter and got some great insights. What's the big takeaway here? You know, what is Pepsi doing and why? Yeah. So essentially what's happening is that Pepsi is streamlining its entire portfolio or PepsiCo, I should say, the parent company that owns hundreds of brands, including the snacking Frito-Lay portfolio. So yeah, it's 20 % of their product line is going to be discontinued and cut from shelves, which is a lot.

3:47I mean, that's one fifth of their products. And we'll get into it in a minute. But essentially what happened is that there was pressure from an activist investor, Elliott Investment Manager, that essentially pushed them to really go in this direction and just revamp everything and restart their organic growth because they had been falling behind for a while. Yeah. So talk to me a little bit about the sort of business strategy here, because it sounds like there's a few things going on. They're going to be trimming some of their portfolio, but they're also going to be investing in more new products and lowering prices.

4:28So it sounds like there's a lot sort of on the cost and the sales side that they're going to be looking at? Yeah, we can get into the product side in a minute, but essentially what's happening is that they want to, you know, create efficiencies, optimize the supply chain. And of course, usually what that means is shutting down a lot of production lines, which usually results in layoffs. So a lot of these products that are going to go away are means that they're no longer going to be utilizing those production lines. And then that in turn, a lot of these efficiencies are going to help them lower prices across the line, if that makes sense.

5:11Yeah. So some of that is going to be reinvested back into marketing and advertising, including pushing a lot of the new products that we're going to be talking about and hoping that they become growth lovers because yeah, Pepsi, like a lot of big CPGs is betting that better for you versions of popular snacks and then new products that are more in tune with the changing tastes. I feel like we talk a lot about that on the show, changing habits, dietary preferences. So yeah, they think it's going to help bring people back because what happened the last couple of years is that PepsiCo has been relying on price increases versus repeat purchases for that top line growth and maintaining profitability.

6:02And we heard over and over that that's not a sustainable model, right? You can't just keep increasing prices on Doritos to grow your top line. And so they were losing market share to other brands, private labels, et cetera. Yeah. So let's go back to the product angle of this here, because when I think PepsiCo, I just think of these huge iconic brands that we've all literally grown up with, right? And that we've seen iterate over time. We don't necessarily have detail yet on what they're going to be cutting. But, you know, did you reveal anything in your reporting here or what jumped out at you as far as what's going to be shrinking in their portfolio?

6:46Yeah. So they didn't reveal that. It looks like they're keeping that close to the chest, maybe as they figure out what they're going to be doing, what direction they're heading in. But just if we want to speculate, as of this summer, they killed off nine soda flavors and discontinued like 21 other beverages. Of course, they own, let's say, brands like Dr. Pepper, Sprite, bubbly sparkling water gatorade so uh it doesn't necessarily mean they're going to eliminate entire brands i think what i mean the thought is that they'll probably just discontinue like limited editions or underperforming flavors that no one's really buying but they do have their portfolio has about 200 brands so that's a lot of products right yeah there's so many to get rid of it looks like um yeah some of the other cutting they did this year was looking at some of the very niche Mountain Dews out there.

7:43Sorry to all the Mountain Dew major melon fans out there, or the zero sugar major melon fans. But yeah, I mean, I think it points to what you said earlier about consumer appetites, maybe leaning into this better for you direction where, you know, having these super sugary sodas or super niche drinks isn't as important as something that's just like fresh, clean, doesn't have artificial colors and flavors, you know, that's where the wind is heading. So it would make sense from an operations perspective to stop putting your resources into these products that are kind of of a different era. Yeah. So of course, some of that innovation involved acquisitions, which we talk a lot about on the show.

8:24So one of them was that really, really big headline, the acquisition of Poppy, the healthy soda. But Pepsi is also coming out with their own prebiotic soda. I don't know what that's about. My gut says that that was probably in the works already. So maybe they think they're, two different markets. They're also doing something that's very on trend for the coming year, which is removing artificial dyes, additives, and using simpler ingredients like injecting protein and higher fiber and whole grains. Some of these products already rolled out. So we had the recent introduction of the Simply Naked Cheetos and Doritos lines, which are essentially like, you know, I was watching an NBC segment where they had like a blind test where the hosts were tasting them.

9:17And really the only difference on camera was actually the color, right? It's just like not that neon orange Cheeto that we know and love. It's like a little bit of a muted yellow. so that came out in October and then in 2026 they are hopping on the protein bandwagon so there will be protein Doritos coming to you in the next year what else of course are we gonna try them can we do a taste test of those on our show I think we should I think so I think we should and then Propel which is their electrolyte line that also has like a whey protein in it I guess that's that's happening too. So yeah, you can get your electrolytes and hit your macros at the same time.

10:04It's just all about optimizing. Wow. I also want to flag that the simply naked version of the Cheetos also comes in Flamin' Hot. So you can get the Better For You Flamin' Hot Cheetos. What in the world? What a time to be alive. What an interesting sentence. yeah. I want to double down on something that you mentioned though, which was, you know, the acquisition of Poppy. And I think when that happens, many of us were looking at that as like, oh, wow, like Pepsi's really betting on, you know, the better for you category. I think it was, you know, it was a move that made sense in a lot of people's minds.

10:43And I think people were sort of, you know, waiting for Poppy to kind of make a move and go somewhere. But, you know, do you think there is room for more in this category? You know, when we think about this future of the Better For You soda specifically? Yeah, I think so. I do think that there are a lot of brands out there right now. So maybe we'll start to see even more consolidation. But of course, this exit was huge. I believe it was about$2 billion. So yeah, of course, they're betting on it. And I think, you know, with all of the movement in the last few years of removing sugar, you know, just introducing more zero sugar sodas across all brands.

11:24I mean, Coke is, of course, doing it too. I think, you know, there is this pressure that consumers now expect better for you. I mean, of course, I don't know how healthy a soda could be, but if you are a soda person, you should be able to find like a zero sugar or zero zero uh dies version of that and so that seems like this seems like part of that strategy partly when we go back to elliot taking this stake in pepsi co and we look at what they were saying what they see is opportunity you know more focused brands a titan skew portfolio um and really having just more focused growth rather than trying to be all things to all people uh at least as some beverages.

12:10It also sounds like we might see, you know, kind of right sizing in the food and snack space and that there's some some changes to be had there. You know, we talked more about soda and a little bit about the Simply Naked. But I do wonder if there's going to be, you know, more innovation, more diversification on the snack side. Yeah, essentially, part of what Elliot was pushing for is sort of the modernizing of the portfolio, which we talk a lot about here that other big CPGs have been doing for years, offloading sugary juices. We've seen some big conglomerates do that and then maybe bringing in some of these healthier, younger products.

12:53And so I think PepsiCo is just essentially being pushed in that direction right now, both on the operation side. So it's like, okay, how can we streamline by getting rid of products that are not performing? And then how do we bring in an innovation? And, you know, that could range from an acquisition like Poppy, but it could also mean, like I was saying earlier, is closing down some of these production lines that are not serving them well. And just going back to growing organically by focusing on brands that are actually performing and that customers actually want. So yeah, I do think we'll see whether this strategy is going to work in the next year, but obviously they're very bullish on the better for you snacking.

13:43Like a lot of different brands have been lately with, you know, the rise of GLP one and like the high protein craze and all of that. But yeah, I think we probably won't really get a sense of what that improvement is going to look like until late 2026 maybe even. But yeah, it'll be interesting to see. And then hopefully soon enough, we'll see what products they'll discontinue. Yes, those will be interesting stories to write, especially always interested in the fan reaction and then watching, you know, people clamor for their favorites and you get the last cases of whatever it is that they can get their hands on.

14:23But great reporting, Gabby. Thanks so much for sharing. Thank you. Okay, so next we have the roundtable discussion. Melissa, do you want to give us a preview of what you, Julia, and Allison talked about when it comes to secondhand or the resale boom of 2025? Yeah, this was a fascinating conversation to have. All three of us have reported on this area throughout the year from different vantage points And so we kind of honed in on the confluence of factors that just made resale and secondhand so, so popular and such a big piece of the retail market this year, you know, in person, but also mostly online.

15:03Right. You know, we've just seen tech companies in the resale world really just explode. And that has a ton of effect on brands doing their own resale, peer to peer resale, buy, sell, trade groups, what have you. So it was a really fun conversation. And we also learned a lot about our own shopping habits and the way that we all secondhand shop, which is always fascinating to me. Great. Well, I am excited. So please listen to that after the break.

15:41few corners of retail have had as good of a year as the secondhand market and that shows no signs of slowing a bcg and vestiaire collective survey from october says that the overall global resale market is set to hit$360 billion by 2030, up from around$210 billion today. But 2025 has been particularly big for the resale industry as people look to save money and just generally see value and a lot of fun in used and secondhand items. Apparel market ThreadUp reported record quarterly revenue of$82.2 million for the third quarter this year. That's an increase of 34 % year over year. I am personally responsible for around 0.006 % of that.

16:29But today, I am joined by two of my stellar modern retail colleagues, Allison Smith and Julia Waldo, to unpack why secondhand sales have popped off so much this year. Julia, Allison, welcome to the Modern Retail Podcast. Thank you. Thanks for having us. All right, let's get into it. So let's just kind of lay the groundwork here on our perspectives. What is your relationship with secondhand shopping? You know, not just from a reporter perspective, but as a consumer. Allison, let's start with you. That's a funny question because I feel like lately I've been writing more about how customers are using secondhand to save money.

17:06I feel like that's not my relationship to secondhand. I feel like I do the opposite of saving money whenever I buy something secondhand because I'm usually looking for like a very unique vintage piece for maybe to decorate my home. For example, I don't really buy that much secondhand fashion. It's mostly like furniture and decor. So to give you a stupid example, I just bought a vintage like brass umbrella stand for our entryway hallway, which was not cheap, but it wasn't like great. It wasn't like stupidly expensive either. but it was like I probably theoretically could have gotten like a cheap umbrella stand from Amazon for like 20 bucks.

17:48But you got something that's brass and beautiful and has lived a thousand lives and will hopefully last in all of the homes you need it in. And that's also a very practical home purchase. I applaud you for thinking about umbrella storage. You know, it was practical because I've our umbrellas. We have like five of them have just been like spilling out through our hallway and I was like, I need to correct this. Yeah. Great, great, great, great example. Julia, what about you? How do you define yourself as a secondhand shopper? Yeah. Well, now maybe I need to go get an umbrella holder because my current situation is the umbrellas are in the hallway.

18:22And that's not great. But as a secondhand shopper, yeah, I feel like I usually go with friends, you know, if we're just like out and about and there's a thrift store or like a flea market or something, that's something that I like to do. I do like to go to Goodwill. I'm a Goodwill fan. I haven't been too much recently to secondhand stores, but I feel like there's always something fun, especially, yeah, in the accessories department, like just weird vases or like a coin bank that looks like a puppy wearing a weird outfit or something. I feel like there's always some unusual finds. And that's actually one of my favorite corners of TikTok too, is people like showing off their interesting secondhand finds.

19:08So yeah, lots to see anytime I go. Yes. Well, both of those examples kind of lead me to the thesis of this conversation, which is, you know, this is a big moment for secondhand retailers, whether they are the independently owned stores you're buying furniture from, whether it's a Facebook marketplace group that you're going to buy and sell and swap from, whether it's, you know, a Goodwill store in your neighborhood or a ThredUp or a Poshmark where you're kind of either peer-to-peer or consignment style selling. You know, what are some of the indicators that you all have seen from the companies in this space that show you this is a really big time for secondhand?

19:50Well, you pointed out one already, Melissa, which is just earnings numbers. We're seeing a lot of the growth for or demand from customers for secondhand in just earnings reports. Like you already mentioned, ThredUp having their best quarterly revenue ever. The Real World also just had, I think, their best quarterly GMV reporting in this latest quarter. And then I think the ThredUp also, October, represented their best month for new customer acquisition. So that's some of the data that we're seeing. Yeah, it's interesting, too, because I've talked to some brands who have branded resale programs where they oversee the collection and sale of secondhand items from their brand.

20:35And a lot of these brands have told me that, you know, these efforts are really paying off. Like Hannah Anderson is a brand that I talked to when it was starting its secondhand program over a year ago. They sell children's clothes. And I talked with the brand again recently around, you know, secondhand September. And they told me that actually sales on their pre-loved marketplace have grown 30 % year over year. And then more than half of buyers and sellers have either bought or listed another Hannah Anderson product. So they said people are coming back. They are seeing a lot of really good sales from it.

21:10And Lululemon also is really treating their resale channel as kind of a priority in terms of their marketing budget. When I talked to the brand, you know, Recently, they told me about how they were throwing events like fitness classes and even sauna sessions to promote their secondhand apparel line where you can get leggings and sweatpants and things like that for a pretty good percent off. So, yeah, brands seem really excited about this as well. Yeah. And I think this is something that they see continuing. And if you're a brand that doesn't have a resale marketplace yet, I would bet that it's something you and your team are thinking about or talking through the pros and cons of for 2026 and beyond.

21:54Because, you know, if it's not something the brand's capturing any value on, people are just going to sell it on an informal marketplace or Poshmark, right? There's a lot of value for brands in bringing those secondhand customers to their own first party sites, right? Right. And to that end around growth, I just want to point out that eBay recently had put out its re-commerce report. This is a survey of more than 16 ,000 consumers globally and 11 ,000 eBay sellers. And 42 % of consumers surveyed said they plan to increase their spending on pre-loved items next year. So again, this is just an area that that isn't slowing down.

22:35I want to see where you might have different perspectives than I on this because, you know, we all live in different places, have different lifestyles. And I'm curious what your perceptions are on where people are flocking to for their secondhand. You know, my personal experience, big on ThredUp. I do like Poshmark. I do a lot of Facebook too. You know, that's especially great for certain kids' brands. And of course, my local thrift and vintage stores. But curious what you see as where people are doing secondhand these days. Yeah, I'm seeing a mix as well. I would say ThredUp is still proving really popular, Poshmark too.

23:10I'm hearing more and more about Facebook Marketplace. And my roommate earlier this year got us these really nice end tables from Facebook Marketplace. They're pink. They're really beautiful. And it was super easy to coordinate pickup and get those. And so I've been hearing about that. And then, I mean, this is free, but Buy Nothing is a group that's become very popular in my neighborhood in which you, you know, get products secondhand, but for free from your neighbors. So it seems like there's kind of a mix, whatever you're looking for, it seems like there's a fun channel for you. Well, me personally, like I mentioned before, so a lot of my secondhand purchases tend to be for home, like furnishings and decor.

23:52So Etsy tends to be my really big one. But from just a general consumer's perspective, I agree. It seems like ThredUp is having a lot of growth. The RealReal is having a lot of growth. And then I'll also mention Depop, which is owned by Etsy. I feel like that's a real up and coming secondhand shopping platform. For example, when I reported out a story in August about how all these various resale companies were seeing a lot of growth because of inflation and tariffs. And one thing that I learned reporting out that story was that Depop's gross merchandise sales around that time were the highest for Depop since Etsy had acquired it in 2021.

24:37one. So I feel like that was a really strong indicator of just one, Depop's popularity among a certain type of consumer, but also just, again, that consumer demand for secondhand in general. I want to stick with the platforms for a little bit. Do we think they're getting better? I think they might be getting better. It seems like they're always trying to iterate on their platforms and how they work, how to operate. You know, Poshmark in particular, a big challenge for them has been people just not wanting to list their items. And if people don't list the items, they don't sell, right? But people don't want to take the photos and spend all that time typing through it.

25:14So earlier this year, they released a product called SmartList AI. So there's AI embedded in the system to help you generate listings. On the shopper side, I noticed that ThredUp recently this year has just done way more with personalization on recommending you what items are up for sale. They do a daily edit now of 100 items, which is like every day you could log on and there would be 100 handpicked items for you to look at. I mean, it's quite a service if you think about it. I'm curious what your perspectives are on why you think these platforms seem to be a little bit more ubiquitous. I definitely agree that these platforms are getting better.

25:56And I actually think that's feeding into the growth story for a lot of these companies because they're seizing on this demand that they're seeing from customers and they're trying to figure out, okay, how can we not only attract these customers during a time when customers are trying to save money, but also retain them? So like, for example, you mentioned a couple of really good examples already, Melissa, but just to throw another one in there, OfferUp, a secondhand shopping platform. They recently rolled out a new feature that lets users ask questions about used items and crowdsource advice from buyers and sellers.

26:26They were testing it when I spoke to them in August, but they said it was seeing strong adoption. And I think that kind of tool can be really helpful for these types of platforms because when you're buying something used, you might have a lot of questions about, okay, like, does it work? Like, what are some maybe common, like, issues or pitfalls that consumers run into with this particular type of product? And so, and on these resell platforms, you don't always have access to, like, a ton of, like, customer reviews the way you do on Amazon. So those types of tools can be really helpful. And I think that's one example of how these platforms are trying to make their platforms more user-friendly.

27:03Yeah. And I find the use of AI with these platforms really interesting. Like I know, Melissa, you brought up some of the tools that have rolled out. I know Etsy recently rolled out some additional AI tools, you know, both for sellers and buyers. Like for sellers, they have a writing assistant, you know, that basically helps you draft personalized responses to buyer messages. On the buyer side, you know, you can now see these AI powered summaries of products to give you a better idea of like, oh, is this product actually what you're looking for? And things like that. And then I've also heard a lot more about these like cross-listing tools, like List Perfectly is one that I've heard come up a lot, where if you are a seller, you're able to use these new technology platforms to, you know, cross-list items on, you know, So Depop and Poshmark and Mercari and all these other things.

27:55And so I think that maybe like speeds up the process for some sellers. So it seems like on the back end, things are maybe getting a little bit easier. And to your point about AI, actually, Julia, I think one intriguing or really interesting part about how these companies are using AI in particular is to not only make the platforms easier for customers, but I think using AI is helping save these companies money. I mean, obviously, it seems like an example of you have to spend money to make money because I'm sure these AI tools and features aren't necessarily cheap. But a lot of these retail companies like ThredUp and The RealReal have struggled with profitability in the past.