Thank you for this very thoughtful article, Erin! The article provided a clear and comprehensive overview of the beverage industry and provided a helpful picture of PepsiCo.’s value chain.
To be perfectly honest though, I don’t believe that PepsiCo should focus so much of its resources on coconut water specifically. While coconut water has become ubiquitous in the past few years, many health-food trends are quick to come and go and coconut water may fall victim to the same type of trend decline. Mangosteen drinks had their moment, but when was the last time you sought out mangosteen?
Even so, I do agree that there is an opportunity to invest in these geographies overall, but in a way that complements the company’s portfolio existing portfolio. In a way, it is somewhat analogous to the fragrance industry in that fragrance companies are continuously seeking out new, exotic ingredients to incorporate into its products to bring “new news” and innovation to consumers. PepsiCo can continue to explore these diverse regions to find alternative beverage options or ingredients when items such as coconut water experience a disruption in supply. Furthermore, efforts to invest in areas of Southeast Asia and to develop local communities could be used to build brand equity in both a sustainable and social way that consumers can appreciate.
Thanks for your article, Oded! I appreciate your view on the future of Amazon in Mexico and the impact of Trump and potential changes In the NAFTA regime on it – particularly the view that Amazon would serve the US from Mexico.
I agree with your conclusion that Amazon not open a new warehouse in Mexico, and the analysis that is behind it.
To answer your questions – I think it is a very real geopolitical risk that should absolutely be reflected in Amazon’s financial statements. However, given that Amazon’s profit and a big portion of value generally comes from AWS, it is unlikely that a change in profit from the Mexican warehouse will change the outlook of Amazon too much. Will Mexico boycott American brands? I sincerely doubt this – American brands are at the core of the consumer world and it would be difficult to change brands such as Coca Cola, Nike, and others.
Thank you for this article, HJ! I, too, am impressed by the steps that Jackson Family has already taken to combat the effects of climate change. To build on Angielist’s last point, it will be essential for the industry to come together on the sustainability front for the long term health of the industry as a whole. Your article made it clear that the severity of the threat remains ambiguous, however, vineyards can come together in coalitions to share best practices to position themselves to be more sustainable. Vineyards can share elements of their operating models without putting their strategic competitive advantages such as quality, price, taste, etc at risk. Leveraging data-driven farming technology could be especially useful because although vineyards such as Jackson Family may not share the data with competitions (especially since measurements around soil and other elements are critical to wine quality), the investment in the technology itself can be done through partnerships with research universities and other industry groups.
The efforts of Jackson Family wine alone will not be enough to move the needle against climate change. The wine industry, along with other agricultural-business, must work together to hold larger initiatives, with or without incentives from regulation.
Great article, KTR! I really liked your analysis of Diageo. I thought you gave a very comprehensive overview of the company and the impact of Brexit on it. The fact that Diageo would be impacted by trade tariffs as a result of delays, despite continuing to trade under WTO rules is especially interesting. I am particularly interested by the role of business and whether it is correct for business to lobby government, which is at the heart of your argument.
In terms of passing on costs to the UK consumer – it is very difficult for Diageo to do so, as it relies on large part on retailers in its off-trade business. These retailers (e.g., Tesco) have enormous scale and enormous bargaining power, that allows them to pressure Diageo to bear the brunt of cost inflation.
To answer your questions – reputation is critical to Diageo in the UK. It operates in a highly branded industry (alcoholic beverages) and must protect its brands. It must therefore protect its reputation. On the other hand, while Diageo should protect itself by speaking to the British government – from a social perspective, I don’t believe that lobbying the government is the best way to achieve the best social outcomes for UK citizens. Therefore, Diageo’s best interest may not align with the British public.
As traditional retailers continue to struggle and the clothing industry becomes saturated with smaller pure e-commerce players, it will become even more critical for brands to provide unique offerings to consumers to differentiate themselves from the competitive set. Nike is no exception to this. Furthermore, as retailers move away from the traditional fashion cycle to meet consumer demand for instant gratification (“see now, buy now” mentality), I predict that consumers will play a larger role in the actual design of the products. This is where mobile e-commerce and 3D printing come into play.
Platforms such as NikeID allow consumers to have a completely different retail experience and provides the differentiation they are seeking a. However, currently NikeID custom orders take several weeks longer to deliver than standardized products. As 3D printing matures and becomes more cost effective and accessible, consumers will be able to have their custom orders delivered instantaneously. Both large established retailers as well as start-ups are already exploring this and as the technology improves, more power will be in the hands of the consumer.
Thank you for this article, Ivan!
In this particular case, I can see how transparency and traceability into the supply chain may not be helpful to Cambell’s and could possibly be detrimental to its brands equity.
Campbell’s products contain many of the ingredients that research and the media reveal to be unhealthy. I checked out whatsinmyfood.com and what immediately stood out to me was that the classic chicken noodle soup contains GMO-ingredients along with Monosodium Glutamate – ingredients that our generation has been educated to avoid due to their relative unhealthiness. Campbell’s competitors such as General Mills and Unilever have made efforts to remove these ingredients in areas of their portfolios as a response to the shifting consumer tastes. They have even gone so far as to clearly declare their transparency and health improvements to consumers that their products are GMO-free through marketing efforts, including bold labels on the front of packaging (for example, General Mills Cheerios). Competitors are taking these types of actions because demand for transparency is being driven not only by millennial consumers, but also by government regulation at state and national levels . However, when the transparency of Campbell’s supply chain and sources reinforces consumers fears of unhealthy ingredients, it is likely to work against them.
Along Campbell’s supply chain, its customers, grocery retailers, are also responding by allocating less shelf space to similar large, traditional CPG manufacturers. This is not aided by Amazon’s recent purchase of Whole Foods. Campbell’s pending acquisition of organic food company Pacific Foods comes as no surprise, as the incumbent CPGs are fighting to recapture share . Unilever is in the midst of selling off its margarine business, its original business, to pave the way for faster growing food segments as “artificial foods” suffer . Incumbents that have the resources to pick of the smaller trendy healthy brands are doing exactly that.
Lastly, as a digital learning from my experience in CPG, microsites such as “What’s in my food?” have historically been ineffective in reaching consumers, especially when it is obvious to the consumer that the site is backed by the manufacturer. While the URL title is clever, consumers still have to make the extra effort of going to the site and may not like what they find. But perhaps Campbell’s is in fact trying the keep its transparency low-key for now while its products continue to contain less popular ingredients.
 Annie Gasparro and Jacob Bunge. “GMO Labeling Law Roils Food Companies” Wall Street Journal. (20 March, 2016). Retrieved from https://www.wsj.com/articles/gmo-labeling-law-roils-food-companies-1458510332
 Watrose, Monica. “Campbell Soup hits snag in Pacific Foods acquisition.” (27 September, 2017). Retrieved from http://www.foodbusinessnews.net/articles/news_home/Business_News/2017/09/Campbell_Soup_hits_snag_in_Pac.aspx?ID=%7B46A61B6E-D0D6-49E1-90D6-45591B5E9A8B%7D&cck=1
 Sarah Syed and Ruth David. “Unilever’s Margarine Unit Gets Bids From Bain, CD&R” Bloomberg.com. (19 October, 2017). Retrieved from https://www.bloomberg.com/news/articles/2017-10-19/unilever-is-said-to-get-bids-for-spreads-unit-from-bain-cd-r