Cost-efficiency measures pull PepsiCo India back to profitability

INDIA – Snacks and beverage major PepsiCo India has reported US$25.89 million net profit for the year 2017/18 after seven years of making losses, reports ET Retail.

PepsiCo’s return to profitability since 2011 was attributed to cost-efficiency measures, higher capacity utilisation and focus on high-margin products.

According to its latest filings with the Registrar of Companies, turnover declined 7% to US$815.28 million during the year, weighed down by advertising and promotion expenses which climbed 15.7% over the previous financial year.

The fourth quarter witnessed double-growth momentum, helped by strong performance from Kurkure, Quaker and Doritos brands and encouraging results from its carbonated portfolio.

The company said it launched 80 products and variants, including flavours, packaging formats and pack sizes, between 2015 and 2018.

PepsiCo’s new energy drink, Sting launched in the market last year together with its new high-margin products Pepsi Black were starting to gain momentum in the market.

“Focus on profitable channels, packs and innovation, cost management and productivity to offset inflation, local agriculture programmes and procurement for citrus and corn, and maximising capacity utilisation were factors that brought balanced growth,” PepsiCo India chief financial officer Rajdeep Datta Gupta told ET.

According to him, the company managed to leverage cost lines through higher capacity utilization while strong cost-management helped offset inflation.

Rationalizing portfolio

Varum Beverages has a tie-up with PepsiCo to distribute its Tropicana juices, Gatorade sports drinks and Quaker Oats.

In 2014, the RJ Corp group controlled company acquired PepsiCo’s bottling operations in north and east India with an aim to optimize costs, enhance efficiencies and downsize its asset-heavy operations.

The company announced a three-year initiative to transform its portfolio for sustainable and profitable growth in 2016.

In addition to reinvesting in marketing expenses to enhance operational productivity, PepsiCo in August announced plans to acquire at-home carbonated drink maker SodaStream for US$3.2 billion.

PepsiCo reported surge in global profits, fuelled by its salty snacks, which have consistently offset slowing soft drinks sales.

The better-than-expected third-quarter earnings released at the time of CEO Nooyi’s exit showed signs of growing consumer demand for its teas, Gatorade, namesake cola and other beverages in North American.

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