USA – PepsiCo has reported an increase in its revenue by 1.3%, higher than the last year’s record of the same period, with its net profit growing by over 7.6% to US$2.14billion.
“This summer, we directed too much of our media spending and shelf space to new low-calorie much smaller brands at the expense of our Pepsi and Mountain Dew trademarks,” said CEO Indra Nooyi.
Pepsi had been under pressure to redevelop its portfolio to the changing market trends and consumer preferences, and like other big companies it had struggled between defending its core brands and spreading its new ones.
It has announced that by 2025, it expects at least two-thirds of its beverages to contain 100 calories or fewer per 12-ounce serving.
The big lesson from the quarter, Nooyi said, “is that it’s an endgame, not an all game. When we launch new products, we have to go for new shelf space.
The core shelf space, especially in convenience stores for the big brands, we have to protect the hell out of it, and that’s what we’re going to do.”
Pepsi reported earnings of US$ 1.48 a share, which were adjusted to beat the expected US$1.43 a share; it also recorded revenue of US$16.24billion versus an estimated US$16.31 billion, according to a Thomson Reuters survey.
The North American beverage business generated revenue of US$5.33 billion in the quarter, versus US$5.52 billion the year-earlier period; its operating profit dropped 10 per cent, to US$817 million from US$904 million.
The company depends on its core business, so balance between defending its position and sales can be very delicate, and it plans to continue its focus on low-calorie and zero-calorie offerings under the hood of its legacy brands, Nooyi explained when asked about the company earnings.
“We believe Pepsi’s results should still be viewed as disappointing and emblematic of the broader issues facing its portfolio and the stock,” said Jefferies analyst Kevin Grundy.
He also cited the increasingly challenging U.S. retail landscape, need for reinvestment and rapidly contracting trading multiples.
The third-quarter net income rose to US$2.14 billion, or US$1.49 per share, from US$1.99 billion, or US$1.37 per share, a year earlier while the revenue in the latest quarter was $16.24 billion versus an estimate of US$16.31 billion.
The soda and snack giant continues to see growth internationally, where it generates roughly 40% of its sales.
It reported 5% growth in organic revenue in Latin America, 6% growth in Europe and sub-Saharan Africa and 9% in Asia, Middle East and North Africa.