On the money: PepsiCo confident about snacks potential

By Michelle Russell | 15 February 2013

PepsiCo reported a net sales increase in its Frito Lay North America uni

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."

Sectors: Cereal, Dairy, Financials, Snacks

Companies: PepsiCo

View next/previous articles

Currently reading -

On the money: PepsiCo confident about snacks potential

There are currently no comments on this article

Be the first to comment on this article

Related research

Pepsico inc in Packaged Food (World)

PepsiCo has benefited from its strong presence in sweet and savoury snacks, which continue to make up the majority of its sales in packaged food. It did however reduce its reliance on this category with the acquisition of Russian dairy player Wimm-Bi...

PepsiCo do Brasil Ltda in Packaged Food (Brazil)

PepsiCo do Brasil is expected to strengthen its presence in biscuits through brand extensions of popular and traditional brands such as Toddy and Quaker, which received investment to introduce biscuits variants in late 2012. The company also aims to ...

Ethnic/Traditional Snacks Market in United States to 2016

The report presents detailed data on consumption trends in the Ethnic/Traditional Snacks category in United States, analyzing consumption volumes and values. It also provides indispensable data on distribution channels, profiles of companies active i...

Related articles

US: Danone eyes US yoghurt growth with YoCrunch buy

Danone has acquired US yoghurt maker YoCrunch in a bid to drive continued growth in the highly competitive US yoghurt category.

Best bits: PepsiCo, Unilever face calls for radical change

PepsiCo and Unilever are facing suggestions from parts of the investment community they should embark on wholesale changes to boost growth. Dean Best looks at whether the companies will listen.

Quote, unquote: just-food's week in words

PepsiCo was forced to shrug off a call to break up the business and merge its food operations with Mondelez International again last week as the company issued its first-half results. CEO Indra Nooyi urged the market to "look beyond the noise" surrounding pressure from activist investor Nelson Peltz. Elsewhere, Premier Foods CEO Gavin Darby revealed it was asking suppliers to sign up to "strategic partnership" as part of its plans to cut numbers by half.

Read further items in this columns

On the money

Food companies discuss and dissect their latest results.

Welcome to the home of food information, insight & intelligence

Not a member? Join here

Decrease font sizeDecrease font sizeDecrease font size Increase font sizeIncrease font sizeIncrease font size Comment on this article Email this to a friend Print this page