Lagging sales in core brands hurt PepsiCo’s 3Q trade
Soft drinks giant PepsiCo has said that a focus on healthier and low-calorie drinks may have hurt third quarter sales.
The company’s CEO Indra Nooyi said that the company stocked shelf space with more of its newer, low-calorie drinks and spent too much on marketing promoting them at the expense of its core brands such and Pepsi and Mountain Dew.
PepsiCo, like all soft drinks companies have been playing a balancing act to reformulate its portfolio to reflect changing consumer tastes towards healthier, low-calorie beverages and away from the high-calorie drinks. So the company has to balance between growth of its newer low-calorie drinks and defending its position as the bulk of the firm’s beverage sales still come from its core brands –Pepsi and Mountain Dew.
Revenue in the third quarter ending 9th September rose 1% to $16.2bn, from $16bn in the previous year.
The soft drinks giant said that its Frito-Lay North America Division saw a 3% sales lift in the period to $3.8bn, from $3.7bn, while its North American Beverages Unit posted a 3% sales decline due to heavier emphasis on newer low-calorie drinks at the expense of its core brands.
The company’s Quaker Foods North America rose 1% in the period to $578m.
PepsiCo said it saw stronger growth on the international market where it generates 40% of its revenue.
Latin American market grew 6% to $1.9bn, helped by productivity gains, a favourable promotional spending accrual adjustment and prior-year incremental investments.
Europe Sub-Saharan Africa posted a strong 8% growth to $3bn, from $2.9bn, driven by productivity gains and prior-year incremental investments.
Asia, Middle East and North Africa saw sales decline of 4% to $1.56bn, from $1.63bn, negatively impacted by higher raw material costs (in local currency terms, driven by a weak Egyptian Pound) and operating cost inflation. Unfavourable foreign currency translation also weighed on the company’s operating profit by 13%.
The company said that third quarter profit rose 8% to $1.14bn, from $1.99bn in the previous year.
PepsiCo raised its adjusted earnings per share growth from 8% to 9%, as exchange rate impact is likely to be less than expected.
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