PepsiCo puts the fizz back in as profits exceed expectations

Shares in soft drink maker rise as US sales and investment in new products pay off

PepsiCo has boosted advertising behind its trademark colas – Pepsi, Diet Pepsi and Pepsi Zero – to claw back market share from Coca-Cola. Photograph: Luke Sharrett/Bloomberg

PepsiCo has boosted advertising behind its trademark colas – Pepsi, Diet Pepsi and Pepsi Zero – to claw back market share from Coca-Cola. Photograph: Luke Sharrett/Bloomberg

 

PepsiCo posted stronger than expected profit on Tuesday, boosted by beverage sales in North America that rose after a year of declines and as investments in marketing and developing new products for emerging markets paid off.

Shares of the company were up nearly 1 per cent in early trading.

The sales rebound in North America came as PepsiCo expanded its portfolio with more non-carbonated drinks and sparkling water, launching brands such as Lifewtr and Bubly, while adding healthier options to its sports drink line Gatorade.

The company also boosted advertising behind its trademark colas – Pepsi, Diet Pepsi and Pepsi Zero – to claw back market share from larger rival Coca-Cola.

North America beverage sales rose 2.3 per cent in the third quarter ended September 8th, but were short of analysts’ average estimate of a 5 per cent increase, according to Thomson Reuters.

Snack division

Frito-Lay, the company’s snack division, also saw sales rise 2.6 per cent in North America, but that fell short of estimates due to slowing demand for salty snacks.

Faced with lagging demand for sugary sodas and salty snacks in its home market, PepsiCo has over the years shifted to building scale in emerging markets, where organic sales rose 10 per cent in the quarter, helped by marketing and new product launches in Mexico, India and China.

“We continued to see very strong operating performance from our international divisions, propelled by developing and emerging markets,” Pepsi’s outgoing CEO Indra Nooyi said in a statement.

Ms Nooyi will step down as Pepsi’s chief executive officer on Wednesday, handing the reins to company president Ramon Laguarta. She will stay on as chairwoman until early 2019.

Organic revenue

PepsiCo said it now expects its full-year organic revenue, which excludes acquisitions and forex impact, to grow at least 3 per cent, up from a prior forecast of a 2.3 per cent rise.

The company, however, expects a stronger dollar to hit full-year core earnings per share by one percentage point.

Net income attributable to the company rose to $2.50 billion, or $1.75 per share, in the third quarter, from $2.14 billion, or $1.49 per share, a year earlier.

Excluding one-time items, the company earned $1.59 per share, beating analysts’ estimates of $1.57.

Net revenue rose 1.5 per cent to $16.49 billion. Analysts on average had expected revenue of $16.36 billion.

– Reuters