Quaker to overhaul oatmeal formula

Owner Pepsico vows to take the mushy feel out of its breakfast staple and roll out healthful new products.

By InvestorPlace Aug 24, 2010 12:03PM

Pepsi may not be the first company that comes to mind when you think of a healthful breakfast, but the soft drink giant hopes to change that with a makeover of its Quaker division.

 

Parent company PepsiCo (PEP) will revamp the morning meal offerings from Quaker with revised breakfast options. Reformulated instant oatmeal and two new types of cereal will be at the center of Quaker's new product push and a marketing campaign to capture an evolving consumer market increasingly concerned with eating well.

 

But this isn’t your mother’s oatmeal. The new instant oatmeal will address what Quaker President Jaya Kumar said is a concern: People report not wanting oatmeal to be "mushy." Here's how:


The new formula will have 25% less sugar and will use larger whole-grain oats for improved texture. In addition to the health-inspired cuts to Quaker product formulas, PepsiCo plans to implement similar measure across all of its product lines, with 25% reductions in sugar and sodium coming within the next several years.

The decision to tinker with the company’s decades-old product lines comes after Quaker saw a 2.5% decline in revenue for the first half of 2010. The initiative is also part of Pepsi’s overall campaign to boost sales of its healthier products in the next decade, with a target of $30 billion.

 

Pepsi's new strategy comes at a dangerous time, when consumer spending is marked by people cutting back and pinching pennies at the supermarket. With so many people opting for cheaper generic brands and so many health-food companies on the market, this new venture is risky and could be an uphill battle.

Before Quaker can sell consumers on its healthful breakfast lines, it needs to persuade them to eat breakfast.

 

"We all inherently know breakfast is the most important meal of the day, and in fact nearly two-thirds of Americans say they feel satisfied after eating it. But still only about half of Americans eat breakfast every day," Kumar said.

 

Quaker plans to launch an "Amazing Mornings" ad campaign that pairs the company with Bob Harper, of NBC’s The Biggest Loser fame, to introduce the new cereal and oatmeal lines.

Whether or not Pepsi can capture a slice of the health-food pie with its Quaker update remains to be seen, but shareholders are surely hoping the most important meal of the day can put some profits in their pockets. PEP stock has fared moderately well in 2010, and shares are up nearly 7% year to date.


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