PepsiCo food businesses prop up bottom line

by Eric Schroeder
Share This:
Search for similar articles by keyword: [PepsiCo]

PURCHASE, N.Y. — Net income at PepsiCo, Inc. rose 5% on a 2% increase in revenues during the third quarter of fiscal 2014, boosted in part by strength in Frito-Lay North America, Quaker Foods North America and Latin America. Net income in the third quarter ended Sept. 6 was $2,008 million, equal to $1.32 per share on the common stock, up from $1,913 million, or $1.23 per share, in the same period a year ago. Net revenues increased to $17,218 million from $16,909 million.

Organic revenue gains of 3% in the quarter, reflecting a 2-percentage point increase in organic volume and 1percentage point of effective net pricing, boosted the Frito-Lay North America segment, which had an operating profit of $1,025 million, up 5% from $977 million during the same period a year ago. The segment had revenue of $3,526 million, up 3% from $3,424 million.

Indra Nooyi, chairman and chief executive officer of PepsiCo, said during an Oct. 9 conference call with analysts that Frito-Lay has lost some share to premium players who don’t last long in the market. But she said the company has to be careful not to react to players who are not long-term players in the marketplace.

“Frito has been playing a very, very responsible game,” Ms. Nooyi said. “What we’ve been trying to do at Frito is to say let’s make the core very solid, deliver on the core and start expanding the shoulders of the business in a profitable way. And I think Frito in this very difficult environment has done a very good job balancing (pound) growth, revenue growth and profit growth, and that is why you are seeing relatively steady performance from Frito in what I would consider is a very challenging overall retail environment for all kinds of food.

“Center of the store is particularly challenged but I would say overall food industry sales are challenged, but Frito has been a shining star. So I think overall whether this is a new normal or not I don’t know. It really depends on the overall environment. But within this environment, Frito has been performing quite well, and the share losses have been coming down. And we don’t like any share losses, I will be honest with you, but we have to make sure the business behaves very responsibly, and that’s what we have been doing.”

Operating profit for the Quaker Foods North America segment was $150 million, up 9% from $137 million during the same period a year ago. Revenue for the segment was $586 million, down 3% from $604 million a year ago.

“At Quaker Foods North America, we have launched Quaker Express Cups to capitalize on the ever-growing demand for greater on the go convenience and Quaker Warm & Crunchy Granola, which delivers both the wholesome goodness of Quaker oatmeal and the satisfying crunch of multigrain granola,” Ms. Nooyi said. “So while center-of-the-store category growth remains challenged, the success of these and other new products launched by Quaker have contributed to value share gains in each of Quaker’s key categories — hot cereals, ready-to-eat cereal and snack bars — both in the quarter and year to date.”

Latin America Foods operating profit was $327 million in the third quarter of fiscal 2014, up 11% from $295 million a year ago. Net sales rose 6% to $2,178 million from $2,049 million.

For the nine months ended Sept. 6, net income attributable to PepsiCo was $5,202 million, or $3.40 per share, up 4% from $4,998 million, or $3.20 per share, during the prior year. Net revenue for the third quarter of fiscal 2014 rose slightly to $46,735 million from $46,297 million.
Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

 

 


The views expressed in the comments section of Baking Business News do not reflect those of Baking Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.