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PepsiCo’s profit rises on snack sales, price hikes

Apr 19 2014, 03:07 IST
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SummaryPepsiCo reported a stronger-than-expected quarterly profit as the company sold more snacks around the world

PepsiCo reported a stronger-than-expected quarterly profit as the company sold more snacks around the world and hiked prices, including on its drinks. The company, which also makes Frito-Lay, Gatorade, Mountain Dew and Tropicana, said global snack volume rose 2% in the period. Global beverage volume was unchanged from a year ago, including in its closely watched North American drinks unit.

Coca-Cola also reported flat volume in the North America market earlier this week. Both companies have been offsetting ongoing declines in their flagship soda businesses by relying more heavily on other beverages, such as sports drinks, juices and bottled waters.

Even though beverage volume was flat in North America, PepsiCo managed to push up revenue by raising prices as well as introducing more expensive drinks such as Mountain Dew Kickstart, which is marketed as an energy drink of sorts for younger men.

Finding ways to charge customers more has been critical for Coca-Cola and PepsiCo, which are trying to make up for declines in cola volume. Both companies, for instance, have rolled out “mini-cans” that they say fit with people’s desire to control portion sizes. But the smaller sizes are also more profitable for the companies.

“Taking down pricing is not going to drive up demand all that much,” PepsiCo CEO Indra Nooyi said in an earnings call.

At its Frito-Lay North America unit, revenue rose 4%, reflecting a 3% increase in volume and slightly higher prices. For the first quarter ended March 22, the company earned $1.22 billion, or 79 cents per share. Not including one-time items, it earned 83 cents per share, above the 75 cents per share Wall Street expected. A year ago, it earned $1.08 billion, or 69 cents per share.

Revenue edged up to a better-than expected $12.62 billion. PepsiCo stood by its outlook for the year. It expects adjusted earnings per share to grow by 7%.

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