Frito-Lay delivers strong performance

by Eric Schroeder
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Recent innovation at PepsiCo includes new oatmeal products with added protein and reduced sugar.

PURCHASE, N.Y. — Strength within the Frito-Lay and Quaker Foods units of PepsiCo, Inc. was not enough to drive a year-over-year increase in earnings for the Purchase-based food and beverage giant.

For the year ended Dec. 27, 2014, net income attributable to PepsiCo was $6,513 million, equal to $4.27 per share on the common stock, down 3% from $6,740 million, or $4.32 per share, during the prior year. Net revenue for the year was flat at $66,683 million, which compared with $66,415 million during fiscal 2013.

Despite the sluggish results, Indra Nooyi, chairman and chief executive officer, said the company was pleased with the results in light of “significant macroeconomic volatility being experienced in so many markets around the world.”

“We performed well in this challenging environment largely on the strength of our brand and product portfolios and diversity of our geographic footprint,” Ms. Nooyi said in a Feb. 11 conference call with analysts. “So while certain markets were hit with political disruptions, economic downturns or significant currency devaluation, other markets in our portfolio not experiencing these issues were able to offset their impacts to deliver overall strong results.”

Operating profit in the Frito-Lay North America segment was $4,054 million in fiscal 2014, up 5% from $3,877 million during fiscal 2013. The segment had revenue of $14,502 million, up 3% from $14,126 million.

“Frito-Lay North America delivered strong performance,” Ms. Nooyi said. “Frito delivered 3% organic revenue growth for the full year and 3.5% in the fourth quarter, and 6% core constant currency operating profit growth both for the quarter and the full year. Market share results have shown steady improvement, and we gained savory snack value share in the fourth quarter.”

Operating profit for the Quaker Foods North America segment was $621 million, up 1% from $617 million during fiscal 2013. Revenue for the segment was $2,568 million, down 2% from $2,612 million.

“Quaker Foods North America performed well with some challenged categories,” Ms. Nooyi said. “Despite the category challenges, core constant currency operating profit was up 8% in the quarter, and we gained value share for the full year in each of our core categories, hot cereal, ready-to-eat cereal and snack bars. So very strong performance by our businesses based in the Americas, and the U.S. in particular.”

Latin America Foods operating profit was $1,211 million in fiscal 2014, down 2.5% from $1,242 million in fiscal 2013. Net sales rose 1% to $8,442 million from $8,350 million.

In her remarks to the analysts, Ms. Nooyi mentioned PepsiCo’s attention to strengthening its innovation engine. She said the company has built “a robust and sustainable innovation pipeline” that is among the strongest in the company’s history. She pointed to Gatorade’s new whey protein bars as an example, and other recent innovations include Quaker 3-minute steel cut oatmeal and cappuccino-flavored Lay’s potato chips.
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