PepsiCo has increased the nutritional profile of its snacks and foods through the introduction of products like Smartfood Delights, reduced-fat Doritos, and gluten-free Quaker Oats.

 

PURCHASE, N.Y. — PepsiCo, Inc. is reshaping its product portfolio to capitalize on consumers’ increasing interest in health and wellness. For the first quarter ended March 19, net income attributable to PepsiCo was $931 million, equal to 64c per share on the common stock, down 24% from $1,221 million, or 81c, for the prior-year period. Net revenue for the quarter fell 3% to $11,862 million from $12,217 million. On a constant currency basis, core earnings per share grew 11% and organic revenue grew 3.5%.

Global snacks organic volume increased 1.5% during the quarter, said Indra Nooyi, chief executive officer of the Purchase-based company.

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

“The growth of our everyday nutrition products, which accounts for a quarter of our global net revenue, is outpacing the growth of the balance of the portfolio,” Ms. Nooyi said during an April 18 earnings call with financial analysts. “And we've had a significant amount of activity underway to transform our portfolio… we've increased the nutritional profile of our snacks and foods through the introduction of products like Smartfood Delights, which grew volume over 75% in the first quarter; reduced-fat Doritos, the top-selling Frito-Lay snack brand in schools, which grew volume 30% in the first quarter; and gluten-free Quaker Oats just to name a few.

“Net-net we feel pretty good about our portfolio transformation efforts.”

During the quarter, Frito-Lay North America operating profit increased 11% to $1,018 million on productivity gains and lower raw materials costs, which were offset partially by operating cost inflation and higher advertising and marketing expense. Segment revenue grew 3% to $3,418 million.

Operating profit for Quaker Foods North America advanced 68% to $166 million, as revenue fell 3% to $617 million. In addition to productivity gains and lower raw material costs, operating results benefited from lapping an impairment charge in the first quarter of the prior year associated with PepsiCo’s dairy joint venture, which ceased operations in the fourth quarter of 2015.

Performance in PepsiCo’s international markets reflected the negative impact of foreign currency translation and higher marketing expense, which more than offset the positive impact of productivity gains. Latin America posted an operating profit of $175 million, down 20% from the year-ago period, and revenues of $1,042 million, down 26%. The Europe Sub-Saharan Africa segment saw operating profit fall 40% to $67 million and revenue decline 9% to $1,359 million. The Asia, Middle East and North Africa segment had an operating loss of $148 million and revenue to $1,065 million, up 1% from the year before.

For the full year, the company expects to generate approximately 4% organic revenue growth excluding the impact of an extra week, and an 8% increase in core earnings per share on a constant currency basis excluding the deconsolidation of Venezuela operations.