On the money: PepsiCo confident about snacks potential
PepsiCo reported a net sales increase in its Frito Lay North America uni
PepsiCo said its snacks business is growing "very, very well" globally with "room to grow further" after sales and profits from that part of the food giant's business increased in 2012.
The US snacks and beverage giant yesterday (15 February) posted a fall in full-year profits and sales as a 53rd week in 2011 results left a tough comparison. Net profit was down 4%, with sales slipping 1.5%.
However, on an organic basis, net revenue was up 5%, with snacks sales volumes increasing 3%, a faster rate than the 1% growth seen from PepsiCo's beverages. Emerging markets helped PepsiCo's snack sales. PepsiCo reported "low double-digit volume growth" in snacks sales in Asia, the Middle East and Africa in the fourth quarter.
On the firm's earnings call yesterday, Davenport & Co. analyst Ann Gurkin asked what potential there was for increasing snacks sales outside the US.
CEO Indra Nooyi told analysts that internationally, PepsiCo's snacks business is "doing very, very well".
"Mexico, Latin America all over Western Europe, East Europe, Middle East, you name it, Asia Pacific. There is not a country in the world that our snack business is not doing well. More importantly many, many countries of the world, the snack business piggybacks off of our beverage business very nicely. So our snack business is looking good," Nooyi said.
PepsiCo could benefit from the "low" snacks consumption per capita in "many countries", she said. "We have lots of room to grow going into the future. So good prospects."
The company also enjoyed higher snacks sales in North America in 2012. Net sales from its Frito-Lay North America unit were up 2%. Sales increased 4% on an organic basis, on the back of a five percentage-point increase in volume. Operating profit grew 2% reflecting productivity initiatives, partially offset by higher commodity costs and a "significant" increase in advertising and marketing investments.
Wells Fargo analyst Bonnie Herzog said Frito-Lay appears to be "on a more positive trajectory" after reporting "impressive" sales growth. "Frito appears to be holding its own as the investments made in brand building and innovation have paid off as evidenced by the strong volume results," she said.
Nooyi sounded an upbeat note on the outlook for 2013.
"Overall, we feel good about the state of the company, our execution capabilities, and the calibre of our associates. There are still considerable unresolved economic and political issues in the US and Europe, and there are number of emerging and developing markets that are also subject to economic and political volatility. So it's against this uncertain macro backdrop that we are providing our outlook.
She added: "We believe we have a stronger business as a result of investments we made and the actions we took in 2012. And we are well positioned as we head into 2013 with lots of runway for growth in the future."
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