This post is a combination of a “Peter Lynch” personal view using Wardley maps to reflect some of the things I discovered around Pepsi and its Alvalle brand.
Alvalle is a brand acquired by Pepsi in 1999. They basically produce Gazpacho and Salmorejo (the original recipe comes from Córdoba, Andalusia).
Both recipes are very traditional in the south of Spain, specially in summer when temperature is high and you want to take something fresh. Tomatoes in summer and Spain used to be very cheap (right now are cheap, but not as in the past) and this make these recipes very popular since centuries.
This week there were a promotion of Salmorejo and I took one to test it. I have bought several times and it’s a decent product. My surprise came when I tried it: It tasted as Gazpacho, no as Salmorejo.
For those that are not familiar with both recipes, here is the list of ingredients for the traditional recipes:
- Gazpacho: Tomato, onion, green pepper, cucumber and water.
- Salmorejo: Tomato, bread, egg (optional), vinegar and garlic.
Me as a consumer
I’m not the only “type” of consumer of this type of products, but looking into myself could be more insightful than looking for a generic customer analysis. I’m sure Pepsi has one, but it’s not available to me 🙂 .
The expansion of these local products that are popular in Andalusia, Murcia, Extremadura and some of other areas, is taking decades. The adoption of people from doing the recipe at home and acquire a bottle that you just have to serve is taking time.
For instance, I use to do salmorejo in summer at least once a week. But sometimes, when I’m in a rush and I have not time or energy to cook, I take a couple of bottles and then that meal is ready in 5 minutes.
Other use is the small bottles are being located on the small convenience stores, so when you go there you can take a soda (sugar), juice (sugar), cold coffee (powder milk and something they call “coffee”), energetic drinks (sugar +++), bier, and now a small bottle of Gazpacho, cold.
From my education, I have the bias of classify gazpacho as a healthy drink, and right now if you see the ingredients, it’s a fair compared with the alternative. So if the options are these ones, my personal preference is going to take water or gazpacho, that right now has a convenient price.
In Seville, where I live, there is in the supermarket at least 2 brands, and on the big chains minimum 3 brands and probably one of them is “organic”.
I remember to find these products in the supermarket since 2013 – 2014.
My intuition is:
- Point #1: Gazpacho is the more consumed drink, it’s the most popular and I assume the one that is more exportable to other regions/countries.
- Point #2: The consume at home is the main use, but the introduction of the product on convenience stores is creating new habits.
- Point #3: Gazpacho and Salmorejo are ordered in restaurants. Some of them are home made and some others, you can detect easily that are from a “bottle”.
Moves from Pepsi in the recent years
Some different things have happened in the last months:
- Directed investment: In 2020 Alvalle opens a new factory in Murcia (40.000m2).
- They have changed the salmorejo recipe. What? yes, let me explain.
Changes in the Salmorejo product
I have consumed Alvalle salmorejo in the past, and it tasted like salmorejo. This year, as commented above they have changed the recipe.
- Alvalle’s Gazpacho: Tomato, onion, green pepper, cucumber and water.
- Alvalle’s Salmorejo: Tomato, onion, green pepper, cucumber and bread.
They have created “Salmorejo Cordobés“, which respect the original recipe. But this one is not on the shelf of the supermarket, on purpose or by chance? Probably in Córdoba they are distributing this one. There the Salmorejo is something that belongs to their heritage and to touch the recipe can be seen as an offense. By chance my sister lives there now and she confirmed me my toughts. When his husband (born in Córdoba) realized this fact, his word were “what the f***!!”
Right now all brands of Gazpacho sells 1 liter gazpacho between 2,95€ to 3,30€, Organic ones are around 3,60€ to 4,00€. Alvalle is defining their 1 liter product at 2,80€ (pushing the consumer decision using price).
Position of Gazpacho and Salmorejo
The introduction of new products like this in the market takes time and a lot of investment. My thoughts are right now that Alvalle is going aggressively on Gazpacho (point #1 of the map below), and is doing a bet on Salmorejo (offering as a subproduct of gazpacho that contributes to simplify the production and the supply chain, changing the taste of the product).
Point #2 of the map below: changing the recipe is a risky move, for traditional consumers as me, I’m out, I probably will try “Salmorejo Cordobés” once I find it. But for other consumers where salmorejo is a new not known alternative probably that recipe and that taste is fine. Who knows?
I’m sure Pepsi and Alvalle have figured out that a non Spanish consumer is 98% not able of making distinction of the taste of the original recipe and the selected recipe. I’m sure too that so many Spanish consumers do not take the difference or it just does not matter to them.
Point #3 of the map below: They are doing small bets with other products: watermelon gazpacho, ajo blanco, gazpacho with beet, and other types of gazpachos.
I visited Alvalle’s UK site, and they only advertise Gazpacho. Same happens in different countries. Right now, May 2021, the map of advertised products by country are:
We can see how Gazpacho is evolving on each country at different speed, they are probably measuring the impact of consume and entering this new products as soon as the generic one is growing up.
Finance data related to Alvalle
I was not able to find any data about revenue or volumes of Alvalle business.
A Wardley map with the different products (May 2021)
I have tried to find specific data related to volumes but I was not able to find anything. So I have done the map based on my experience as a consumer (sorry, it’s 100% biased).
Alvalle factory is located in an area where intensive agriculture is the main industry. This enable to access to all their raw material is around 2 hours and a half away from the factory. This could be seen also as a risk in case there is a major natural problem in Almería. In any case, with the amount of raw material they acquire, they have a strong power on suppliers.
Summary of gameplays
Pepsi is clearly increasing their bet on Alvalle products and the presence of products in Seville (where I have data) has increased in the last 3 years.
Looking forward to see the evolution of this entrepreneurship, and how these new products fit in the market.
Right now Pepsi is the only giant investing on this family of products, the first mover, for instance I did not find anything on Coca Cola.
Note: I do not have Pepsi stocks in my portfolio, and this is not an investment advice.