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  1. PepsiCo profit tops expectations, it focuses on new products

PepsiCo profit tops expectations, it focuses on new products

PepsiCo's quarterly profit topped Wall Street's expectations as it slashed costs and worked to reshape its stable of drinks and salty snacks to keep pace with shifting tastes.

By: | New York | Published: July 7, 2016 8:52 PM
retro pepsi PepsiCo’s quarterly profit topped Wall Street’s expectations as it slashed costs and worked to reshape its stable of drinks and salty snacks to keep pace with shifting tastes. (Reuters)

PepsiCo’s quarterly profit topped Wall Street’s expectations as it slashed costs and worked to reshape its stable of drinks and salty snacks to keep pace with shifting tastes.

The maker of Gatorade, Mountain Dew and Frito-Lay chips said it is now getting 9 percent of its revenue from new products and responding to the growing interest in options that are seen as wholesome or ”craft” – though it said sales of such sodas were still low in volume.

In a conference call with analysts, CEO Indra Nooyi noted the introduction of 1893, a craft cola named after the year Pepsi was invented, as well as Mountain Dew Black Label, which is marketed as being made with ”real sugar” and ”herbal bitters.”

Nooyi said the company’s decision to bring back Diet Pepsi made with aspartame in the U.S. less than a year after changing the sweetener also reflected PepsiCo’s ability to adapt. It had swapped out the aspartame in Diet Pepsi last summer, citing consumer concerns over the artificial sweetener. But sales of the soda plunged, and the company said last month that it would bring back the old formula – while continuing to sell the new one as well.

That led some analysts to question whether PepsiCo’s beverage portfolio was getting too complicated. But Nooyi said Thursday the company needs to adjust to a marketplace that is becoming more fragmented anyway.

”We have to learn how to handle complexity, not walk away from it,” she said.

Nooyi, who told analysts that she sees herself running the company for several more years, also noted that the broader soda market in the U.S. is in decline, and PepsiCo is focusing on areas with bigger growth potential.

PepsiCo Inc. and Coca-Cola, like many other packaged food companies, have been slashing costs as they face weaker growth in saturated markets such as the U.S. and economic volatility overseas. Coca-Cola Co. reports its quarterly results later this month.

For the quarter ended June 11, PepsiCo Inc. said revenue from its Frito-Lay North America unit rose on stronger sales volume and pricing. The North American beverage unit, which includes Diet Pepsi, Gatorade and other drinks, also saw revenue tick up, as pricing offset a dip in volume.

The food and beverage company lifted its full-year earnings outlook and shares gained more than 2 percent in early trading Thursday to $108.09.

For the quarter, the company earned $2.01 billion, or $1.38 per share. A year earlier the Purchase, New York-based company earned $1.98 billion, or $1.33 per share.

Earnings adjusted for non-recurring gains came to $1.35 per share. That beat the $1.28 per share average that analysts surveyed by Zacks Investment Research expected.

Revenue declined to $15.4 billion from $15.92 billion, hindered by a stronger dollar and the deconsolidation of PepsiCo’s Venezuelan operations. Analysts polled by Zacks expected $15.4 billion in revenue.

The company now anticipates full-year earnings of $4.71 per share, up from its previous guidance for $4.66 per share. Analysts surveyed by FactSet predict earnings of $4.73 per share.

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