Dive Brief:
- PepsiCo reported an unexpected boost to its quarterly profit Tuesday, with higher prices for drinks and snacks driving net income to $2.11 billion from $2.01 billion a year earlier, according to a company release. Company revenue rose 2.1% to $15.71 billion in Q2 from $15.40 billion in the year-ago period.
- In its North America beverage business, revenue rose 2% to $5.24 billion and net pricing jumped 1%. Revenue from the beverage giant's Frito-Lay North America segment saw an uptick of 3%, boosted by a 1% rise in volume and 3% rise in net pricing. Overall, its North America revenue fell 1%, while Asia, Middle East and North Africa revenues dropped 8%.
- The company claims it's on track to meet its 2017 financial goals. "The power and durability of our brand and product portfolios, strong marketplace execution, and the balance of our geographic footprint enabled us to deliver strong operating results in the midst of pockets of macroeconomic challenges and increasingly dynamic retail and consumer landscapes," chairman and CEO Indra Nooyi said in the earnings report.
Dive Insight:
PepsiCo's impressive Q2 performance follows a series of healthy financial quarters, reflecting the long-term success of Nooyi's vision to transform the company from a soda-centered beverage maker to a leader in the healthy snack and drink space.
The company's financial growth was also driven in part by the sale of its minority 4.5% stake in British bottler Britvic for an undisclosed amount.
PepsiCo has centered its strategy on selling smaller, higher-margin beverage packs in developed markets rather than large discount packs to mitigate waning consumer interest in soft drinks. Rival Coca-Cola has also leveraged this strategy to fight falling demand for sugary beverages, which has ravaged the soda space as consumers continue to embrace soda taxes. Last year, Coca-Cola reported an 11% dip in revenue year over year and announced it would cut 1,200 jobs as part of a new $800 million cost savings plan.
PepsiCo expects to meet organic revenue growth of at least 3% for 2017, consistent with its previous guidance for the fiscal year. The company also predicts it will yield approximately $10 million in cash flow from operating activities, dividend payments of about $4.5 billion and share repurchases of approximately $2 billion.
While PepsiCo has succeeded in diversifying its portfolio — which includes food brands such as Frito-Lay, Quaker Oats and Sabra — it has been looking to buy another large company to stimulate growth. Nooyi, said at the Beverage Forum in Chicago that the company has yet to find a brand that would deliver the results it needs.
“There isn’t a large company that we have not looked at,” she said. “So far, of all the companies we’ve seen, we don't see too many opportunities. There’s not too many of them with robust portfolios that are better than ours. We have to be very judicious on what we take on, but more importantly we have to make sure we integrate the acquisition to derive long-term growth out of it.