On the money: Commodities remain "major headwind" for PepsiCo
PepsiCo CFO Hugh Johnston said the consumer outlook remains "especially challenging"
PepsiCo has said that it expects a "highly competitive environment" in 2011, with commodity costs remaining a "major headwind" for the snacks and beverage giant.
Speaking on an earnings call for the media today (10 February), PepsiCo CFO Hugh Johnston told reporters that as the Doritos maker remains mindful of the "challenging" trading conditions in developed markets and the prospect of growing competition in the beverages sector.
"The consumer outlook remains especially challenging and employment remains high in most developed markets," Johnston said. "We are prepared for what could be a highly competitive environment, particularly in the beverages department. This will largely be stepped up in emerging markets where we have seen very fast growth.
However, Johnston added: "On the other hand, we are bullish on emerging markets where growth has been strong."
PepsiCo this morning announced a 6% increase in full-year profits for 2010, driven by gains from its global snacks and beverage businesses and the acquisition of its bottlers in early 2010.
The firm grew its core earnings per share - earnings excluding one-time charges - by 12% on a constant-currency basis in 2010, hitting its target of 11-12% growth.
However, the firm revealed that it expects its core earnings per share growth to slow in 2011 due to higher commodity costs, "difficult" conditions in developed countries and investment in emerging markets.
Johnston told reporters: "Commodity costs remain a major headwind for us, we expect to see exceptionally high levels of inflation...we are driving productivity to offset as much of these increases as possible."
He added: "What I do have is a high level of confidence in, is that commodities will continue to be volatile. It's likely to be volatile and inflationary in coming years."
Nevertheless, Johnston indicated that PepsiCo's moves to hedge against some commodities had a "favourable" impact on its Frito-Lay business in the second half of 2010.
However, he added: "We can't hedge everything, there are certain markets and certain things that there is no effective hedging strategy for that are in the market at the moment."
"We have to focus on individual categories that we are playing in, find the balance of driving profit growth that we think is appropriate, and ensuring that we have appropriate pricing strategies in place that will continue to drive the franchise for the long term, that is the ultimate driver of value creation."
PepsiCo shares climbed 2.1% to $63.05 at 11:35am ET today.
In the third part of this month's just-food management briefing, Jonathan Thomas looks at how two multinationals - PepsiCo and Unilever - have tried to use social media to connect with consumers....
With the sun having shone over much of the UK today (25 July) - and with England winning the Test match against India at Lord's - just-food is reluctant to dampen the mood but, in recent days, there h...
PepsiCo's UK and Irish arm has made slower progress in its bid to boost sales of healthier products than it might have hoped. Ben Cooper examines how the company has reported its performance against t...
Analysts on Wall Street have questioned whether US food and drinks giant PepsiCo could also consider dividing itself in two after Kraft Foods announced plans to break up of its business....
- How Windsor buy is part of Ajinomoto's global push
- Focus: Fonterra's bid to weather dairy volatility
- Industry awaits WHO reply on beefed-up ad pledges
- On the money: Diamond's faith in on-trend range
- Focus: Does size matter for Thai Union Frozen?
- Kellogg, Burton's, Ulker "on UB bid shortlist"
- Kerry, Premier team up on frozen NPD in UK
- Nestle sells baby food brands Alete, Milasan
- Nestle forms new unit to "leverage scale"
- PepsiCo eyes Middle East growth with R&D centre