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‘We eat with our eyes’: Pepsi plays with purple sweet potatoes and various carrot colors as it races to remove dyes, says VP of R&D

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Pepsi has a new challenge: keeping products like Gatorade and Cheetos vivid and colorful without the artificial dyes that U.S. consumers are increasingly rejecting.

PepsiCo, which also makes Doritos, Cap’n Crunch cereal, Funyuns and Mountain Dew, announced in April that it would accelerate a planned shift to using natural colors in its foods and beverages. Around 40% of its U.S. products now contain synthetic dyes, according to the company.

But just as it took decades for artificial colors to seep into PepsiCo’s products, removing them is likely to be a multi-year process. The company said it’s still finding new ingredients, testing consumers’ responses and waiting for the U.S. Food and Drug Administration to approve natural alternatives. PepsiCo hasn’t committed to meeting the Trump administration’s goal of phasing out petroleum-based synthetic dyes by the end of 2026.

“We’re not going to launch a product that the consumer’s not going to enjoy,” said Chris Coleman, PepsiCo’s senior director for food research and development in North America. “We need to make sure the product is right.”

Coleman said it can take two or three years to shift a product from an artificial color to a natural one. PepsiCo has to identify a natural ingredient that will have a stable shelf life and not change a product’s flavor. Then it must ensure the availability of a safe and adequate supply. The company tests prototypes with trained experts and panels of consumers, then makes sure the new formula won’t snag its manufacturing process. It also has to design new packaging.

Experimenting with spices to color Cheetos

Tostitos and Lay’s will be the first PepsiCo brands to make the shift, with naturally dyed tortilla and potato chips expected on store shelves later this year and naturally dyed dips due to be on sale early next year. Most of the chips, dips and salsas in the two lines already are naturally colored, but there were some exceptions.

The reddish-brown tint of Tostitos Salsa Verde, for example, came from four synthetic colors: Yellow 5, Yellow 6, Red 40 and Blue 1. Coleman said the company is switching to carob powder, which gives the chips a similar color, but needed to tweak the recipe to ensure the addition of the cocoa alternative wouldn’t affect the taste.

In its Frito-Lay food labs and test kitchens in Plano, Texas, PepsiCo is experimenting with ingredients like paprika and turmeric to mimic the bright reds and oranges in products like Flamin’ Hot Cheetos, Coleman said.

The company is looking at purple sweet potatoes and various types of carrots to color drinks like Mountain Dew and Cherry 7Up, according to Damien Browne, the vice president of research and development for PepsiCo’s beverage division based in Valhalla, New York.

Getting the hue right is critical, since many consumers know products like Gatorade by their color and not necessarily their name, Browne said.

“We eat with our eyes,” he said. “If you look at a plate of food, it’s generally the different kinds of colors that will tell you what you would like or not.”

Consumer demand goes from a whisper to a roar

When the Pepsi-Cola Company was founded in 1902, the absence of artificial dyes was a point of pride. The company marketed Pepsi as “The Original Pure Food Drink” to differentiate the cola from rivals that used lead, arsenic and other toxins as food colorants before the U.S. banned them in 1906.

But synthetic dyes eventually won over food companies. They were vibrant, consistent and cheaper than natural colors. They are also rigorously tested by the FDA.

Still, PepsiCo said it started seeing a small segment of shoppers asking for products without artificial colors or flavors more than two decades ago. In 2002, it launched its Simply line of chips, which offer natural versions of products like Doritos. A dye-free organic Gatorade came out in 2016.

“We’re looking for those little signals that will become humongous in the future,” Amanda Grzeda, PepsiCo’s senior director of global sensory and consumer experience, said of the company’s close attention to consumer preferences.

Grzeda said the whisper PepsiCo detected in the early 2000s has become a roar, fueled by social media and growing consumer interest in ingredients. More than half of the consumers PepsiCo spoke to for a recent internal study said they were trying to reduce their consumption of artificial dyes, Grzeda said.

Synthetic and natural colors are in FDA’s hands

Some states, including West Virginia and Arizona, have banned artificial dyes in school lunches. But Browne said he thinks consumers are driving the push to overhaul processed foods.

“Consumers are definitely leading, and I think what we need to do is have the regulators catching up, allowing us to approve new natural ingredients to be able to meet their demand,” he said.

The U.S. Food and Drug Administration has said it’s expediting approval of natural additives after calling on companies to halt their use of synthetic dyes. In May, the FDA approved three new natural color additives, including a blue color derived from algae. In July, the agency approved gardenia blue, which is derived from a flowering evergreen.

The FDA banned one petroleum-based dye, Red 3, in January because it was shown to cause cancer in lab rats. And in September, the agency proposed a ban on Orange B, a synthetic color that hasn’t been used in decades.

Six synthetic dyes remain FDA-approved and widely used, despite mixed studies that show they may cause neurobehavioral problems in some children. Red 40, for example, is used in 25,965 food and beverage items on U.S. store shelves, according to the market research firm NIQ.

But even if decades of research has shown that synthetic colors are safe, PepsiCo has to weigh public perceptions, Grzeda said.

“We could just blindly follow the science, but it probably would put us at odds with what our consumers believe and perceive in the world,” she said.

Passing taste and texture tests

PepsiCo also has to balance the needs of consumers who don’t want their favorite snacks and drinks to change or get more expensive because of the costs of natural dyes. NIQ data shows that unit sales of products advertised as free of artificial colors fell sharply in 2023 as prices rose.

Susan Mazur-Stommen, a small business owner in Hinton, West Virginia, picked up some Simply brand Cheetos Puffs recently at a convenience store because they were the only variety available. She found the texture to be much different from regular Cheetos Puffs, she said, and their pallid color made them less appetizing.

Mazur-Stommen said she agrees with the move away from petroleum-based dyes, but it’s not a critical issue for her.

“What I am looking for is the original formulation,” she said.

Ultimately, PepsiCo does not want customers to have to choose between natural colors and familiar flavors and textures, Grzeda said.

“That’s where it requires the deep science and ingredients and magic,” she said.

___

Durbin reported from Detroit.



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Khosla-backed Formulary raises oversubscribed $4.6 million seed round for its AI-powered private fund manager software

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Alfia Ilicheva came from the world of public markets, including four years at one of the world’s largest hedge funds, Bridgewater. But when she transitioned over to the private side, including serving as the CEO of an Apollo-backed investment platform, she realized the difficulty of fund administration for operations like private equity and venture capital. Instead of having access to real-time and accurate data like at Bridgewater, which can rely on publicly available information, this new world was filled with manually compiled and fragmented data subject to human error and inconsistent metrics.  “How could it be that hedge funds are so into the future and private capital markets are so backward,” she remembers thinking. 

As private markets explode and AI makes automation increasingly possible, Ilicheva saw an opportunity to build the next generation of fund administration software for everyone from venture capital outfits to PE giants like Apollo. After initially planning to bootstrap the project, which she named Formulary, Ilicheva was introduced to Hari Arul, a partner at Khosla Ventures, who immediately saw the appeal of the idea. Khosla is leading Formulary’s $4.6 million seed round, which Ilicheva says is three times oversubscribed, with participation from Human Ventures, Serena Williams’s venture firm, and others. 

In the red-hot field of private investments, buoyed by the rise of private credit and massively valued companies like SpaceX and OpenAI, fund administration may not be the most alluring area for innovation. But the ability to track investments, returns, and performance—and accurately convey the information to investors, or limited partners—is a necessary foundation. 

The existing options fall into two camps: the service side, or high-touch accounting companies, like SS&C and Citco, or the software side, like Carta. As Ilicheva interviewed general partners and former clients in her user research, she realized that nearly everyone was dissatisfied with the existing options to the point that most turned to shadow fund administration, where they would hire outside firms but keep their own books at the same time. “When you raise a fund, your dream is to generate alpha by investing capital, not redoing someone’s work,” Ilicheva said. 

Ilicheva planned to find a happy medium between the two models by leveraging AI to massively scale up the service approach, creating software for their own in-house accountants, which Ilicheva playfully calls bionic accountants. “They’re really focused on having a grip on the numbers and delivering service, but they’re not manually entering things in an Excel spreadsheet, which has been the industry’s burden for the past decades,” she said.  

The challenge in creating a tech-enabled services company, of course, is scale, with a pure SaaS model able to grow at a much faster clip. When I asked Khosla’s Arul how he thought about the approach, he said the key is to deliver the vast majority of the product through technology: “It’s important for any entrepreneur or any investor to look at an AI-enabled services business and say, the margin of how this business runs looks more like a technology company than a services company.” 

Arul said that while Khosla is not yet using Formulary, which is just now coming out of stealth, he’s optimistic for a future where tedious processes like ensuring data accuracy for LPs can be fully, reliably automated. Ilicheva mentioned one possible future use case for Formulary as drafting LP letters, which Arul wholeheartedly endorsed, along with a portal where investors could communicate directly with the system to understand the value of positions, fund deployment, and future capital calls. “[That] sounds pie in the sky relative to what the reality is today,” Arul said, “But it doesn’t feel out of reach.” 

Leo Schwartz
X:
 @leomschwartz
Email: leo.schwartz@fortune.com

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Leaders at Davos are obsessing over how to use AI at scale

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  • In today’s CEO Daily: Fortune‘s AI editor Jeremy Kahn reports on the AI buzz at Davos
  • The big story: SCOTUS could upend Trump’s leverage to acquire Greenland.
  • The markets: Jolted by Trump’s renewed tariff threats.
  • Plus: All the news and watercooler chat from Fortune.

Good morning. I’m on the ground in Davos, Switzerland, for this year’s World Economic Forum. As Diane wrote yesterday, U.S. President Donald Trump’s arrival later this week along with a large delegation of U.S. officials eclipses pretty much every other discussion at Davos this year. But, when people here aren’t talking about Trump, they are talking about AI.

At Davos last year, the hype around AI agents was pierced by the shock of DeepSeek’s R1 model, which was released during the conference. We’ll see if a similar bit of news upends the AI narrative again this year. (There are rumors that DeepSeek is planning to drop another model.) But, barring that, business leaders seem to be less wowed by the hype around AI this year and more concerned with the nitty-gritty of how to implement the technology successfully at scale.

On Monday, Srini Tallapragada, Salesforce’s chief engineering and customer success officer, told me the company is using ‘forward deployed engineers’ to tighten feedback loops between customers and product teams. Salesforce is also offering pre-built agents, workflows, and playbooks to help customers re-engineer their businesses—and avoid getting stuck in “pilot purgatory.”

Meanwhile, at a side event in Davos called A Compass for Europe, that focused on how to restore the continent’s flagging competitiveness, AI was front-and-center. Christina Kosmowski, the CEO of LogicMonitor, told the assembled CEOs that to achieve AI success at scale, companies should take a “top down” approach, with the CEO and leadership identifying the highest value use cases and driving the whole organization to align around achieving them. Neeti Mehta Shukla, the cofounder and chief impact officer at Automation Anywhere, said it was critical to move beyond measuring automation’s impact only through the lens of labor savings. She gave specific customer examples where uplifting data quality, improving customer satisfaction, or moving more workers to new tasks, were better metrics than simply looking at cost per unit output. Finally, Lila Tretikov, head of AI strategy at NEA, said Europe has enough talent and funding to build world-beating AI companies—what it lacks is ambition and willingness to take big bets.

Later, I met with Bastian Nominacher, co-founder and co-CEO of process analytics software platform Celonis. He echoed some of these points, telling me that to achieve ROI with AI generally required three things: strong leadership commitment, the establishment of a center of excellence within the business (this led to an 8x higher return than for companies that didn’t do this!), and finally having enough live data connected to the AI platform.

For further AI insights from Davos, check out Fortune’s Eye on AI newsletter. Meanwhile, Fortune is hosting a number of events in Davos throughout the week. View that lineup here. And my colleagues will be providing more reporting from Davos to CEO Daily and fortune.com throughout the week.—Jeremy Kahn

Contact CEO Daily via Diane Brady at diane.brady@fortune.com

This is the web version of CEO Daily, a newsletter of must-read global insights from CEOs and industry leaders. Sign up to get it delivered free to your inbox.



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Stock market today: Dow futures tumble 400 points on Trump’s tariffs over Greenland, Nobel prize

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U.S. stock futures dropped late Monday after global equities sold off as President Donald Trump launches a trade war against NATO allies over his Greenland ambitions.

Futures tied to the Dow Jones industrial average sank 401 points, or 0.81%. S&P 500 futures were down 0.91%, and Nasdaq futures sank 1.13%. 

Markets in the U.S. were closed in observance of the Martin Luther King Jr. Day holiday. Earlier, the dollar dropped as the safe haven status of U.S. assets was in doubt, while stocks in Europe and Asia largely retreated.

On Saturday, Trump said Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland will be hit with a 10% tariff starting on Feb. 1 that will rise to 25% on June 1, until a “Deal is reached for the Complete and Total purchase of Greenland.”

The announcement came after those countries sent troops to Greenland last week, ostensibly for training purposes, at the request of Denmark. But late Sunday, a message from Trump to European officials emerged that linked his insistence on taking over Greenland to his failure to be award the Nobel Peace Prize.

The geopolitical impact of Trump’s new tariffs against Europe could jeopardize the trans-Atlantic alliance and threaten Ukraine’s defense against Russia.

But Wall Street analysts were more optimistic on the near-term risk to financial markets, seeing Trump’s move as a negotiating tactic meant to extract concessions.

Michael Brown, senior research strategist at Pepperstone, described the gambit as “escalate to de-escalate” and pointed out that the timing of his tariff announcement ahead of his appearance at the Davos World Economic Forum this week is likely not a coincidence.

“I’ll leave others to question the merits of that approach, and potential longer-run geopolitical fallout from it, but for markets such a scenario likely means some near-term choppiness as headline noise becomes deafening, before a relief rally in due course when another ‘TACO’ moment arrives,” he said in a note on Monday, referring to the “Trump always chickens out” trade.

Similarly, Jonas Goltermann, deputy chief markets economist at Capital Economics, also said “cooler heads will prevail” and downplayed the odds that markets are headed for a repeat of last year’s tariff chaos.

In a note Monday, he said investors have learned to be skeptical about all of Trump’s threats, adding that the U.S. economy remains healthy and markets retain key risk buffers.

“Given their deep economic and financial ties, both the US and Europe have the ability to impose significant pain on each other, but only at great cost to themselves,” Goltermann added. “As such, the more likely outcome, in our view, is that both sides recognize that a major escalation would be a lose-lose proposition, and that compromise eventually prevails. That would be in line with the pattern around most previous Trump-driven diplomatic dramas.”



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