PepsiCo, Inc. (PEP), Costco Wholesale Corporation (COST): Stock Up on Samplers

Page 1 of 2

It wasn’t long ago that few had heard of Sabra Dipping Company, half of which is owned by PepsiCo, Inc. (NYSE:PEP).  Hummus is a spread/dip that is low in fat, high in protein, and even higher in market noise level because of increasing nutrition awareness.  But aside from being a healthy snack, many know about it because it gives itself away for free.  Pepsi is a global snack ruler because of it’s marketing power, and no marketing is more powerful than sampling.

PepsiCo, Inc. (NYSE:PEP)

Dipping in

Many of us enjoy snacking, and enjoy it even more when there’s no cash involved. Sabra gave away 10,000 packages (2 ounce samples) in U.S. cities. It’s a marketing technique that should be used more often but is generally risky for smaller companies. For PepsiCo, Inc. (NYSE:PEP) it’s nothing because its Frito-Lay division operates at a margin around 34%.

Estimated sales of Sabra eclipsed $315 million last year. It is the largest maker of hummus in the country, but competition in the healthy snack world is intense.  Refrigerated flavored spreads, the majority of which are types of hummus, brought in $530 million in 2012, an 11% jump from the previous year.

PepsiCo has mastered sampling. Take for example the team up with other companies such as Yum! Brands, Inc. (NYSE:YUM). If you’ve been to a baseball game recently, you’ve probably heard of the co-op withTaco Bell and the infamous “Doritos Locos Tacos” campaign.  Now, the casual investor may look past PepsiCo, Inc. (NYSE:PEP) because it ranks second in the cola department, but a little research shows it generates 61% of its $8.8 billion in free cash flow from Frito-Lay and other food brands. The same division generates 52% of revenue.  Sampling new snacks and more global brand exposure should help PepsiCo, Inc. (NYSE:PEPcontinue its 41 consecutive years of dividend increases.

Sampling works even better in retail stores such as Costco Wholesale Corporation (NASDAQ:COST) and Whole Foods Market, Inc. (NASDAQ:WFM). These two are more than grocery stores–they’re food destinations. They use sampling to get their quality products into shopping carts.

No free lunch

Three years ago, a Minnesota man was arrested for taking too many free samples. So an investor may wonder if companies lose significant money on samples. And the answer would be no, generally these types of businesses aren’t worried about the product they give away.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!