For twenty years, PepsiCo sent its snacks and its drinks to the same stores on two different trucks. Frito-Lay had its own warehouses, trucks, and drivers. Pepsi had its own. The products are just too different: drinks are heavy and low-margin, snacks are light, bulky, and need constant attention on the shelf.
The industry treated the separation as the right way to run it.
But on its July 9 earnings call, PepsiCo said it is undoing that.
The company is merging the two networks into shared "mixing centers" that store both products in one place and send them out on one truck. What started as a test in the company's Texas-Oklahoma region is now, in CEO Ramon Laguarta's word, "scaling."
"These are combined mixing centers where we put the inventory from the two categories," Laguarta said. "That gives us a lot of flexibility to service our customers and lowers our cost." Combined delivery and a combined fleet are newer and still early: "Those are big transformations, and it requires systems, required assets. But all of this is in motion and with positive return so far."
One building, both categories
The first big test site is already running. In Brookshire, Texas, west of Houston, PepsiCo built a "One North America" mixing center that holds Pepsi drinks, Frito-Lay snacks, and Quaker products under one roof:
Roughly one million square feet, leased from Hunt Southwest
About $5.3 million spent outfitting it
One of several sites in the Texas-Oklahoma region, where PepsiCo is proving the model before taking it national
What a mixing center actually is
Grocery distribution already has two standard buildings. A mixing center is a third:
A regular DC holds one product line and ships it on its own routes.
A cross-dock is a pass-through. Freight moves in and out without really being stored.
A mixing center stores both product lines, then loads them onto the same truck to the same store.
💡 Go deeper: how a mixing warehouse sits between a cross-dock and a regular DC, with the route-consolidation math behind it (open supply-chain textbook).
That third model is the one PepsiCo spent decades avoiding. A drink truck only makes money when it runs full. A snack route is a shelf-service job: the driver stocks the rack, rotates product, builds the display. The schedules, the handling, and the economics don't match. So the industry kept them apart.
For a store, the change is simple. Instead of a Frito-Lay truck and a Pepsi truck, you get:
One delivery instead of two
Fewer receiving windows and dock touches
One PepsiCo contact for both categories
Laguarta says the network change is part of a bigger cost push: "integrating our G&A and integrating our systems that would allow us to have a lower cost business that is more affordable and can invest in the growth spaces in the U.S."
Coca-Cola went the other way
Coca-Cola spent the last decade doing the opposite. It sold its bottling and delivery operations to independent partners and kept the lighter work: the brand, the concentrate, the data. Its owned bottling business went from nearly half of company revenue to about a tenth.
So the two biggest names in the aisle are now running opposite plays. Coca-Cola got out of the trucking business. PepsiCo kept its two truck networks and is merging them into one.
The bet
PepsiCo is betting that better systems and data now make it possible to run drinks and snacks through one warehouse and one truck. The two also fit together as freight.
Drinks are dense, so a beverage truck hits its weight limit while the trailer is still half-empty. Snacks are bulky, so a snack truck runs out of room long before it runs out of weight. Put both on the same truck and you use the weight and the space at once. The risk is losing what made the separate networks work: full trucks and well-stocked shelves.
Management says the pilot is making money. The real test is whether that holds outside Texas. PepsiCo picked Texas because it sells a lot of snacks there but not many drinks, so its beverage routes had extra room to fill. That made Texas the easiest possible place for this to work. In markets where PepsiCo already moves plenty of drinks, the trucks are fuller and the gain is smaller. If the model only works where the math starts that friendly, "scaling" is a smaller claim than it sounds.
PepsiCo can afford to keep finding out. The 2019 restructuring program paying for all this is past its most expensive years:
Restructuring charges fell to $49 million in the quarter, from $213 million a year earlier ($182 million from $426 million across 24 weeks).
Capital spending fell about 16%, to $1,266 million from $1,507 million.
The case against
The whole point of running your own delivery is control over the shelf. That is what the merger could break:
Service risk. Drinks and snacks need different handling and different visit schedules. One combined crew may not keep the shelves as well as two dedicated ones did.
This is not asset-light. A million-square-foot building plus new trucks and systems is real money spent defending a model that Coca-Cola, Mondelez, and Kraft Heinz all chose to exit or automate instead.
Labor friction. The Teamsters already oppose PepsiCo's driverless-truck deal with Gatik: "Driverless trucks are a clear and present danger to good-paying jobs and the safety and infrastructure of our local communities," a union spokesperson said. Merging fleets and cutting routes touches the same nerve. (Here is a video of one of Gatik's trucks running a full distribution-center-to-store leg.)
Texas may be the easy case. If the pilot only pencils because of Texas's product mix, the rest of the country will be harder.
What to watch
The idea travels beyond PepsiCo. If you run separate distribution for separate product lines, the wall between them may be a habit held in place by old systems, not a law. The test is whether the two lines actually fit: do they have opposite load profiles, so one fills the space the other wastes, and do they serve enough of the same stores to share a route? Where both are true, one network can probably do the work of two.
Whether it works outside Texas is the open question. Two numbers will answer it: how full the combined trucks run, and how well one crew keeps a snack shelf that used to get its own dedicated visit.
