PepsiCo sales boosted by pricier ‘guilt-free’ premium snacks
Nooyi reported Pepsico group organic revenue was up more than 3% globally, driven by snacks.
Net income for the quarter rose to $2.11bn from $2.01bn a year earlier, while operating profit was 1% higher at $2.99bn.
Sales in the Frito-Lay snacks division also rose 3.5% in North America, even though volume didn’t increase from a year ago.
Guilt-free snacking
“We feel very good about the business, with innovation, pricing and execution, all on target.”
The company has expanded its “everyday-nutrition” product line-up, adding nutrients like grains, fruits, vegetables and protein; cutting levels of saturated fat, sugar and sodium; and adding unsweetened tea and smart drinks like LifeWTR to compete against Coca-Cola’s Smartwater.
It recently launched a “first-to-market” Overnight Oats Cup to capitalize on the growing consumer trend of preparing chilled oats using a variety of healthy ingredients.
“Our product transformation efforts to date have resulted in a portfolio where we now derive approximately 45% of our net revenue from products that we refer to as guilt-free,” added Nooyi.
Beating analysts’ estimates
Charging higher prices, cutting expenses and adding more premium products to the mix was a strategy that worked for Nooyi, contributing to second quarter earnings that topped Wall Street estimates and boosted the food giant’s annual forecast.
On Tuesday, the Doritos maker posted second-quarter earnings of $1.50 a share, exceeding analysts’ estimates of $1.40.
Guidance re-iterated (FY17):
- Organic growth of at least +3%
- FX headwinds of -2% for net sales
- 53rd week impact of -1%
- Cash flow from operations: $10bn
- Free cash flow: $7bn
- Net capital spend: $3bn
- Dividend payments: $4.5bn
- Share repurchases: $2bn
Revised guidance (FY17):
- FX impact to core EPS -2% (prior: -3%)
- Adjusted EPS now $5.13 for FY17 (prior: $5.09)
The New York-based company raised its 2017 earnings target to $5.13 a share from a previous forecast of $5.09.
Sales gained 2% to $15.7bn in Q2, beating the projection of $15.6bn.
“We feel very good about the business, with innovation, pricing and execution, all on target,” added Nooyi.
She said that Frito-Lay was the biggest Q2 contributor to the total US food and beverage retail of all the $5bn-plus manufacturers.
Feeling good about the future
Nooyi said the company expects to “remain very much on track to deliver our full year financial target of at least 3% organic revenue growth and 8% core constant currency EPS growth.
“We feel very good about where we stand.”
PepsiCo generated approximately $63bn in net revenue in 2016.
