Dive Brief:

• PepsiCo is taking the online challenge from Amazon seriously with a 200-person business unit dedicated to online growth with a current pace to hit $1 billion in e-commerce sales this year, according to a report in Bloomberg. That rate is about 2x from the year-ago period but still pales against the company's $63 billion yearly total sales.
• The online growth group, established two years ago but only unveiled recently, focuses on marketing and packaging the CPG giant's products for online sellers like Amazon and Boxed Wholesale, along with brick-and-mortar grocers that are trying to grow their digital business.
• The group is run more like a tech company than a CPG company, Chief Financial Officer Hugh Johnston told Bloomberg, and it could be key to PepsiCo's future as the grocery and e-commerce landscapes continue to shift.

Dive Insight:

As Bloomberg noted, PepsiCo ramping up its e-commerce initiative now reflects similar efforts from its main rival Coca-Cola Co., which has this year started to put a greater emphasis on its digital business under new CEO James Quincey. The entire CPG sector is being heavily disrupted by companies like Amazon and has, as a response, started to peel back spending on marketing and advertising. If e-commerce projects like PepsiCo's continue to see success, and if brick and mortars continue to see declines in foot traffic and sales, it's unlikely that this trend will stall out anytime in the immediate future.  

This has hurt almost all of the major agency holding groups. Discussing recent Q2 earnings, WPP CEO Martin Sorrell cited spending cuts from the packaged goods sector as one of the main reasons why his company slashed its growth forecasts for the year from 2% to 1% or less. PepsiCo and Coca-Cola's shifts to a greater online focus might be accelerating now that Amazon has entered the brick-and-mortar grocery space with its purchase of Whole Foods.

Sales for many of their core products including soda are also declining as consumers seek out healthier, more natural alternatives. Though these companies offer far more than sugary drinks, brands like La Croix, with its lineup of sparkling water, are finding stellar success, especially with younger demographics. Coca-Cola's latest corporate branding campaign, in turn, doesn't emphasize soda and instead reflects its platform as a "total beverage company" that includes lines like Odwalla juice and Smartwater.