PURCHASE, NY. — The continued strength of trends in convenient foods, specifically salty snacks, boosted third-quarter revenues of Frito-Lay North America, a division of PepsiCo, Inc.
Ramon L. Laguarta, chairman and chief executive officer of PepsiCo, said Frito-Lay’s third-quarter share gains were consistent with the trends it saw last year and earlier this year.
“We’ve seen gains in, I would say, 70%, 75% of our markets in what we call convenient foods, the salty snacks,” Mr. Laguarta said in an Oct. 12 conference call with analysts to discuss financial results.
Operating profit at Frito-Lay North America in the third quarter ended Sept. 3 totaled $1.59 billion, up 17% from $1.36 billion in the third quarter of fiscal 2021. Net revenue in the unit also increased, climbing 20% to $5.56 billion from $4.65 billion.
The company cited its diversified portfolio, marketplace execution, and strong net revenue management capabilities as factors contributing to Frito-Lay’s top-line momentum. Volume was even with the prior year, excluding the joint venture with Sabra, the company said.
Many Frito-Lay brands delivered double-digit net revenue growth for the third quarter, including Doritos, Cheetos, Lay’s, Ruffles, Tostitos, and Fritos, PopCorners, Smartfood, Bare and SunChips.
“As with any one of our businesses, we’re looking at multiple ways to increase our revenue per kilo, in this case with continuing to maintain the consumer in our brands and obviously gain share as we do that,” Mr. Laguarta said. “So, visual pricing, lower promotions, pushing for the formats where we have higher revenue per liter or per kilo, moving into channels, obviously, where we can price more because the consumer has different price expectations. All those tools are well integrated into our full commercial program. And that’s the way Frito is doing it.”
Frito-Lay expanded the flavor profile of the Doritos brand with the launch of Doritos Tangy Tamarind, Doritos Ketchup, and Doritos Spicy Mustard; introduced Cheetos Bolitas, a bite-size ball with a soft, crunchy texture to the United States after an initial launch in Mexico; extended flavors with SunChips Black Bean Spicy Jalapeño and Southwestern Queso and PopCorners Cinnamon Crunch; and launched Lay’s Kettle Cooked Fritos Chili Cheese, Lay’s Cheetos, Lay’s Doritos Cool Ranch, and Lay’s Wavy Funyuns Onion as part of the Lay’s Flavor Swap lineup.
Responding to a question about how Frito-Lay has managed supply chain with the complexity it has added to the portfolio with all the different flavors and package sizes, Mr. Laguarta said, “We’re becoming much more digital.”
“We’re becoming much more insightful and precise as a company,” he said. “And that applies … to our supply chain. I think we’re becoming much more integrated in our demand forecast into supply and we’re able to execute a certain level of higher complexity in our business.
“I would say we’re not running a perfect company at this point, given all the challenges there are still in supply chain of ingredients and some of the transportation bottlenecks, but I would say we’re able to cope with higher levels of complexity throughout Frito-Lay … or any of the other organizations that we have around the world.
“However, I will say that we have very strict processes of portfolio optimization that are being run quarterly in each one of our businesses. So, on the one side, we want to have more complexity because we know that consumers appreciate personalization and a lot of variety is a key, I think, advantage for us in our categories. But at the same time, we go through rigid processes that eliminate unnecessary complexity and keep our cost down given supply chain.”
Frito-Lay’s core operating profit increased 17% in the third quarter and reflects the ongoing impact of inflationary pressures and a double-digit increase in advertising and marketing spend.
Within the Quaker Foods North America division of PepsiCo, Inc., operating income was $122 million, up 15% from $106 million in the same period a year ago. Net revenue was $713 million, up 15% from $618 million.
The company said lite snacks, cookies, oatmeal and ready-to-eat cereal categories each delivered double-digit net revenue growth; snack bars delivered high-single-digit net revenue growth; and rice and pasta delivered mid-single-digit net revenue growth. Third-quarter results reflected a high-single-digit increase in advertising and marketing spend, and “consumer-centric innovation focused on positive choices” with the launch of Quaker On-The-Go Snack Multipack, Quaker Puffed Granola, and Quaker Oat Flour.
Quaker’s net revenue growth and cost management initiatives contributed to its core operating profit growth of 15% in the quarter.Overall, net income at PepsiCo, Inc. in the quarter was $2.70 billion, equal to $1.95 per share on the common stock, up 21% from $2.24 billion, or $1.60 per share, in the previous year’s third quarter. Net revenue came in at $21.97 billion, up 9% from $20.19 billion in the previous year’s third quarter. PepsiCo’s share price on the Nasdaq closed at $169.39 per share on Oct. 12, up more than 4% from a previous close of $162.59.