Product innovation pays for Frito-Lay, Quaker

by Monica Watrous
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Quaker Breakfast Flats, Tostitos Simply Black Bean Chips, PepsiCo, Frito-Lay
New Quaker Breakfast Flats and Simply Tostitos Black Bean chips contributed to organic revenue growth for PepsiCo in the recent quarter.

PURCHASE, N.Y. — Quaker Breakfast Flats biscuits, Simply Tostitos Black Bean chips and other recent product launches contributed to organic revenue growth for PepsiCo, Inc. in the recent quarter.

Operating income for Frito-Lay North America in the second quarter ended June 11 rose 8% to $1,083 million from $1,007 million in the prior-year period. Revenue for the segment increased 3% to $3,564 million from $3,452 million. For the Quaker Foods North America segment, operating profit increased 11% to $146 million from $132 million, and revenue advanced 3% to $561 million from $546 million in the quarter.

Overall, net income attributable to PepsiCo in the second quarter was $2,005 million, or $1.38 per share on the common stock, up 1% from $1,980 million, or $1.33, in the prior-year period. Net revenue fell 3.3% to $15,395 million from $15,923 million. Excluding the negative impact of foreign currency translation and the deconsolidation of Venezuelan operations, net revenue increased 3.3%.

Indra Nooyi, PepsiCo
Indra Nooyi, chairman and c.e.o. of PepsiCo

“Product innovation and portfolio transformation are enabling us to provide consumers the delicious and convenient products they want and to satisfy their constantly evolving demands across a broad spectrum of occasions and need states,” said Indra Nooyi, chairman and chief executive officer of PepsiCo, during a July 7 conference call with financial analysts. “We have ramped up our innovation engine and as a result, new products comprise approximately 9% of sales, or over $5 billion. We’ve achieved this by leveraging our global scale while simultaneously tailoring products to appeal to local tastes, addressing consumers’ evolving demands for convenience, taste and variety from the occasional treat to nutrition by transforming our product portfolio.

“So today, what we refer to as guilt-free products generates approximately 45% of our net revenue. And we are now recognizing consumers’ interests in craft, niche and premium products.”

Quaker Breakfast Flats, PepsiCo
Quaker Breakfast Flats are crispy baked snack bars made with oats, fruit, nuts and seeds.

Quaker Breakfast Flats, which are crispy baked snack bars made with oats, fruit, nuts and seeds, debuted during the quarter. The product was introduced “because consumers are increasingly seeking greater convenience, portability and nutrition in their breakfast,” Ms. Nooyi said.

“Turning to Frito-Lay, we continue to expand our portfolio with a particular focus on premium offerings and healthy snacking options. So for example, we’ve expanded our Simply line with the introduction of Simply Tostitos Black Bean chips made from real black beans.”

Other new products include SunChips Veggie Harvest chips, made with vegetables and whole grains, and Smartfood Delights sea salt caramel popcorn, which has 50% less fat than the brand’s white cheddar popcorn, Ms. Nooyi said.

PepsiCo Frito-Lay Sun Chips Veggie Harvest, Smartfood Delight Sea Salted Caramel popcorn
Other new products include SunChips Veggie Harvest chips and Smartfood Delights sea salt caramel popcorn.

“So as a result of initiatives like this year-to-date, our Frito-Lay U.S. premium portfolio growth is outpacing the growth in the balance of the portfolio by a factor of more than four times, and we are extending our value shared leadership position in premium salty snacks,” Ms. Nooyi said.

For the first six months of the fiscal year, PepsiCo net income declined 8% to $2,936 million, or $2.01 per share, from $3,201 million, or $2.14, in the same period of the year before. Net revenue fell 3.1% to $27,257 million from $28,140 million. 
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