PepsiCo's Diet of Profits

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Health experts' public alarm, a media blitz, and even a few reality shows have done little to affect America's obesity problem. The U.S. remains the fattest nation on earth, or so says a Harris poll released earlier this month.

Never fear, though, because PepsiCo (NYSE: PEP) has sprung into action! Today the beverage and snack giant's Frito-Lay unit announced the 100 Calorie Mini Bites line. The line offers Baked! Cheetos, Doritos Nacho Cheese, Doritos Cool Ranch, and Cheetos Asteroids snacks in 100-calorie serving packages; they're aimed at consumers who are watching their weight but unwilling to go cold turkey on such salty delights.

The actual health benefits of the new product line are debatable. Smaller portions may help some reduce calorie intake. But for obese people with impulse control problems, offering a smaller portion of Doritos is like offering a recovering drug addict just a little bit of crack. A small amount can quickly turn into whole lot more. In addtion,100 Calorie Mini Bites are sold in packs of 5, which means that a 100 Calorie Mini Bite could quickly become a 500 Calorie Mega Feast.

But from a strictly business angle, the 100 Calorie Mini Bites look like a good idea. Kraft's (NYSE: KFT) Nabisco unit introduced its own 100-calorie snack portions in 2004, and the products have done well. The Nabisco 100 Calorie Packs ranked fourth in Information Resources Inc.'s 2005 Top 10 New Product Pacesetters report, after racking up $107 million in sales.

What's more, the new product line also carries the possibility of high margins. To the extent that the company can charge higher per-unit costs -- while meaningfully covering higher costs of production -- this represents a strategy that has been used to meaningful effect by other consumer giants looking for higher margins. No doubt packaging drives up the 100 Calorie Mini Bite's cost, but to me it seems likely that part of the price also represents potentially richer profits for PepsiCo.

In the end, the 100 Calorie Mini Bites are a wise move on PepsCo's part -- just don't expect them to end the battle of the bulge.

For more on health initiatives:

• Kraft's Diet Pitch
• ADM's Fat Opportunity
• Kraft Cuts the Calories

Kraft is a Motley Fool Income Investor pick.

Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.