Pepsico marketing push sends beverage sales fizzing in key North American market

Doctors To Call For A 'Fat Tax' On Sugary Soda
Pepsico grows its drinks arm in North America (Source: Getty)

Pepsico beat analysts’ expectations as net income grew 16 per cent year-on-on year to $2.5bn (£1.9bn) in the company’s third quarter.

Its fortunes were spurred by 2.5 per cent organic growth in the company's North American beverages division, after outgoing chief executive Indra Nooyi refused to countenance a spin-off of the business in her time in charge.

This compared to a one per cent decline in the second quarter, as a marketing push helped it claw back sales from rival Coca Cola.

Read more: Coca-Cola moves for Costa coffee brand in £4bn deal

Revenue grew 1.5 per cent year on year to $16.49bn, $130m higher than expected, as global organic growth hit five per cent, with an insurance payout from the 2017 Mexico earthquake helping Latin America grow by 10 per cent.

Adjusted earnings per share were $1.59, against $1.57 expected.

However, even with North American beverages growth, operating profit in the market dropped 14 per cent, the company said, citing higher transportation and commodity costs and increased advertising expenditure.

Nooyi said: “We are pleased with our results for the third quarter.

“We continued to see very strong operating performance from our international divisions, propelled by developing and emerging markets; Frito-Lay North America generated solid net revenue and operating profit growth; and North America beverages delivered another quarter of sequential improvement in top-line performance.

“On the strength of our year-to-date results, we have revised upward our full-year organic revenue growth target.

“Additionally, given the recent strengthening in the US dollar we have revised our full-year core earnings per share target to reflect our updated expectation of an approximate one percentage point headwind from foreign exchange translation.”

Read more: PepsiCo buys SodaStream for $3bn

Nooyi leaves the top job after 12 years tomorrow, and will be replaced by company president Ramon Laguarta.

The latest results will be seen as a vindication of her refusal to sell the company’s drinks business, in the face of calls for a spin-off due to poor sales.

Critics said the company should focus on its growth areas in its snacks section, which includes Lays chips.

Related articles