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Diving overview:
- PepsiCo has begun testing in Texas a consolidation of its two largest North American divisions, snacks and beverages, into a more unified distribution model to cut costs and increase productivity, executives told investors last month.
- The food manufacturer’s warehouse consolidation plans for both businesses are part of its plan to improve its cost structure over the next three to four years. Investments in technology have provided the data and systems needed to support integration, executives told investors in July.
- “Texas is probably the state where we have the greatest opportunity. Beverages have a low share and snacks have a high share, so when we can put these businesses in the same warehouse and serve our customers from a single point of distribution, it gives us a lot of advantages,” President and CEO Ramon Laguarta said in an Oct. 9 earnings call. “So we’ll see. We’re testing and learning in Texas.”
Dive Insights:
PepsiCo’s Texas project is part of the company’s One North America strategy to reduce costs, improve margins and drive growth, Laguarta said. The company plans to test this and then decide on a nationwide expansion plan.
“The final solution will not be a one-size-fits-all solution that applies to the entire country,” Laguarta said. “So it’s going to be a nuanced solution depending on where your market is and how big your market is and where your population is in different parts of the country.”
Slowing consumer spending and changing eating habits have forced food manufacturers to adjust production and costs to a changing market. Following the Texas announcement, PepsiCo issued a notice in November that it would close two Frito-Lay facilities in Orlando, Florida, including a manufacturing plant and on-site warehouse on November 4 and an off-site warehouse on May 9, 2026.
Laguarta told investors the company was preparing “to address the needs of the future, not the needs of the past.” This means greater concentration among a small number of retailers or customers.
“We have to assume that consumers will want pickup or delivery or digital much more than they do now,” Laguarta said.
Editor’s note: This story first appeared in the Operations Weekly newsletter. Sign up here.
