Pepsi's Sowing Its Wild Oats

Pepsi's Sowing Its Wild Oats

Stuck with consumers who think Quaker Oats is just a boring breakfast brand, PepsiCo is looking to give it a boost by making it into something that could give a jolt to juice drinks and to and investment in Pepsi itself.

Through a partnership with Jamba , Pepsi's oats division developed an easy-to-blend version that can be added as a boost to the smoothie maker's concoctions. Go into a Jamba store now, and you can add antioxidants, protein, yogurt, and more for a flavorful addition to your drink. Now you can also add a full serving of whole grain, too, presumably without the chunky, gritty result if you tried to do it on your own.

On Pepsi's earnings call last month, the beverage and snack giant said the Quaker brand was one of two areas that needed "more attention" -- the other was its North American beverages line -- but being stuck in the middle of a store creates a dusty, moldy image, one that's hard to create excitement around. Pepsi purchased Quaker Oats more than a decade ago for almost $14 billion, and bringing it out of the cereal aisle and into the convenience-food area is one way it thinks it can spark an investment in the brand.

The effort began last year with the introduction of Quaker's Real Medleys cups that paired the oatmeal with fruit or nuts in smaller on-the-go containers. Pepsi says it's already grown from a new brand introduction to a new brand platform and is moving into breakfast cereal bars, an area the market analysts at Mintel say continues to grow at a crisp pace because of its convenience and perceived health benefits.

Kellogg seems to have embraced that concept most completely by developing a whole line of breakfast bars based on its cereal brands -- and one apparent not-so-healthy choice for a Cinnabon-flavored bar. Mintel says almost half of all U.S. consumers snack every day and 19% of those snacks are actually eaten in the car.

Yet this once again seems to underscore the rationale behind Nelson Peltz's plan to split Pepsi in two between its smaller, lagging drinks division and its much larger growing snacks business. Buying global snack-foods giant Mondelez would cement Pepsi's Frito-Lay as a global powerhouse brand.

Quaker Oats is an instantly recognizable brand, but I'm not sure that's enough of a selling feature when it comes to competing against generic or private-label brands. I think most people believe oats are oats even though Quaker commands a better than 50% share of the market. As private labels continue to make inroads, however, look for management to continue shaking up the brand and sowing its oats with new product introductions. Perhaps one day they'll even see the sense in what Peltz proposes to help deliver value to an investor's bet on Pepsi.

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Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends and owns shares of PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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