Pepsi is investing in a $1 billion part of its business to avoid the retail apocalypse that wrecked Sears and Macy's

  • PepsiCo announced Tuesday it is reinvesting some of the millions of dollars it is saving under the new GOP tax plan in e-commerce.
  • E-commerce already accounts for roughly $1 billion in Pepsi's annual retail sales.
  • Analysts have said that Coca-Cola and Pepsi haven't braced for e-commerce's impact, with one calling out beverage giants for their "antiquated" approach. 

PepsiCo is investing in e-commerce to avoid the downward spiral that is dooming retailers like Sears and Macy's. 

On Tuesday, the beverage and snack industry giant announced it is investing some of its savings from the new GOP tax plan in its e-commerce business, as well as in digital skills and brand marketing. 

"We have seen the benefit of investing in capabilities such as e-commerce, a business that is now approximately $1 billion in annualized retail sales for us, with a long runway for continued growth," PepsiCo said in a statement. 

The company didn't say exactly how much money it will invest in e-commerce. PepsiCo is also investing savings under the new tax plan in training for workers, cash returns for shareholders, and $100 million in employee bonuses.

Analysts have warned that the rise of online shopping could be dark news for beverage giants like Coca-Cola and PepsiCo.

Impulse buys make up roughly 30% of overall beverage sales, Ali Dibadj, an analyst at Bernstein, said at Beverage Digest's Future Smarts conference in New York in December. As people increasingly shop online, those sales are in danger.

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UNITED STATES - SEPTEMBER 29: Bottle of Gatorade are displayed on a shelf in an Associated Supermarket in New York Thursday, September 29, 2005. PepsiCo Inc., the world's No. 2 soft-drink maker, reported the biggest quarterly sales gain in 3 1/2 years as hot weather spurred demand for Gatorade sports drinks and Aquafina waters in the U.S. (Photo by Ramin Talaie/Bloomberg via Getty Images)
UNITED STATES - FEBRUARY 08: A bag of Fritos is displayed along with Fritos corn chips in New York Thursday, Feb. 8, 2007. PepsiCo Inc., the world's second-largest soft-drink maker, said fourth-quarter profit rose on a tax gain and overseas sales of Frito-Lay snacks. North American beverage volume had the smallest increase in six quarters. (Photo by Alicia Hansen/Bloomberg via Getty Images)
NILES, IL - DECEMBER 1: Cartons of Tropicana orange juice lie in a grocery store display December 1, 2004 in Niles, Illinois. Tropicana orange juice prices are expected to rise due to the hurricane-damaged citrus crop in Florida. (Photo by Tim Boyle/Getty Images)
NEW YORK, NY - APRIL 09: Cases of Sabra Classic Hummus are viewed on the shelf of a grocery store on April 9, 2015 in New York City. Sabra Dipping Co. is recalling 30,000 cases of hummus due to possible contamination with Listeria, the U.S. Food and Drug Administration said Wednesday. (Photo by Spencer Platt/Getty Images)
Bottles of PepsiCo Inc. Naked brand juice smoothies are arranged for a photograph in Tiskilwa, Illinois, U.S., on Thursday, July 2, 2015. PepsiCo Inc. is expected to report quarterly earnings on July 9, 2015. Photographer: Daniel Acker/Bloomberg via Getty Images
Quaker instant oatmeal
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UNITED STATES - JULY 09: Bags of Lays potato chips sit on display in an Associated Supermarket in New York on July 9, 2007. (Photo by Andrew Burton/Bloomberg via Getty Images)
NEW YORK, NY - FEBRUARY 16: Aquafina water seen on Day 6 of New York Fashion Week: The Shows on February 16, 2016 in New York City. (Photo by Mike Coppola/Getty Images for NYFW: The Shows)


"That's something that's not being addressed right now," Dibadj said.

Without customers grabbing a Diet Coke while checking out at Walmart or a two-liter bottle of Pepsi at the grocery store, the beverage industry could be in trouble. As sales of soft drinks by volume have dropped for 12 consecutive years in the US, companies like Coca-Cola and PepsiCo do not want to risk losing an opportunity to get their products in customers' hands.

"I don't think most beverage companies are particularly well-prepared" for the rise of e-commerce, Caroline Levy, a senior analyst at Macquarie Capital, said at the conference.

Dibadj added: "I think the discourse around e-commerce remains an antiquated discourse ... On average, they don't know what they're doing to capture impulse, but they will out-buy smaller brands."

Coca-Cola and PepsiCo have contested the idea that they're ignorant of the rise of e-commerce. And, both companies are making major investments in the category. In addition to PepsiCo's announcement on Tuesday, Coca-Cola is investigating click-and-collect grocery sales, bundled deals (such as meal kits), and new impulse "triggers" online.

On Tuesday, PepsiCo reported net revenue of $19.5 billion in the fourth quarter, beating Wall Street forecasts

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