Last year, PepsiCo, Inc. (NYSE:PEP) made a brief announcement that it was coming out with a new product, but not until this month were details made available.
Previously, all we knew was that the product would be a protein-based drink targeted at women. In the initial announcement, Pepsi stressed that this product, “Won’t show up on a shelf the way you envision it.” No one is exactly sure what that means.
But now that Pepsi has made the patent available, we have a better idea of the direction in which Pepsi is going: the new product will be a 4 oz protein shot targeted at women.
Pepsi is reaching into a new market here. It is essentially creating a new market segment, a protein shot. Traditionally, there have been energy and protein drinks, as well as energy shots. PepsiCo, Inc. (NYSE:PEP) is combining the two.
This product could easily become a billion dollar brand for Pepsi, especially with Pepsi being the first major player in this product category. Pepsi will use this product as part of its new PLAY — which stands for Protein, Liquid, Activity, and You-time — drink initiative.
However, the details of the product are still vague even after reading the patent. It appears that Pepsi might launch a number of products in this category. Here is a quote from the patent application, “The high protein beverage products disclosed here include…frozen ready to drink beverages, coffee beverages, tea beverages, dairy beverages, powdered beverages, liquid concentrates, strong water compositions, flavored waters, enhanced waters, fruit juice, and fruit juice flavored beverages.”
This rather broad description covers most drink categories and gives Pepsi the flexibility to move its protein product into any of these segments should it choose to.
This type of forward thinking, coupled with the anticipation of PepsiCo, Inc. (NYSE:PEP)’s new product, should give Pepsi an edge over The Coca-Cola Company (NYSE:KO) moving forward. Take a look at their stock performance year-to-date:
Pepsi’s stock has definitely fared better this year. Year-to-date, The Coca-Cola Company (NYSE:KO) has grown a little over 14%, while PepsiCo, Inc. (NYSE:PEP) has risen over 20%. Both stocks had a big jump this past week as the Dow bounced back and Pepsi announced better than expected revenue growth.
However, one of the companies’ biggest weaknesses is in the soft drink market.
Pepsi and The Coca-Cola Company (NYSE:KO) are both coming to grips with the fact that the soft drink market is shrinking. Last year saw the biggest decline in three years as soft drink sales volume declined 1.2%. The previous two years saw declines as well–sales declined 1% in 2011 and 0.5% in 2010.
Due to the decline of the soft drink market both companies are seeking revenue from what has been termed “good for you” products. Not to be outdone by PepsiCo, Inc. (NYSE:PEP)’s new foray into the protein market, this past December Coca-Cola announced that it was getting more involved in the protein market and was buying a stake in the maker of Core Power, a high protein milkshake line.
Conclusion
Pepsi has the edge going forward, as its push into a new product category gives it the potential for greater growth in the near future. This will provide more of an impetus for investors to get excited about PepsiCo, Inc. (NYSE:PEP), thus giving it better long term performance than Coca-Cola.
The article Pepsi’s Secret Billion Dollar Product originally appeared on Fool.com and is written by Sean Sullivan.
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