US: PepsiCo to axe 3,300 jobs

PepsiCo said today (14 October) that it would cut around 3,300 jobs from its business after posting a 10% fall in quarterly net income.

The US food and beverage giant announced the job losses amid problems at its drinks business in the Americas, which saw profits tumble 11% during the three months to 6 September.

Nevertheless, PepsiCo said its "Productivity for Growth" programme would affect all parts of its business and help it respond to "challenging" economic conditions.

"The programme includes actions in all segments of the business that the company believes will simplify the organization for more effective and timely decision-making; increase cost competitiveness across the supply chain; and upgrade and streamline the product portfolio," PepsiCo said.

The company said about 40% of the jobs to be lost would come from plans to close up to six plants and other initiatives to streamline capacity. Those plans will be announced by the end of the year, PepsiCo said.

The company is eyeing pre-tax savings of US$1.2bn over the next three years, with up to $400m of those savings expected to materialise next year.

PepsiCo admitted that the cutbacks will lead to a charge of $550-600m in the fourth quarter of 2008.

Chairman and CEO Indra Nooyi said: "A primary focus will be restoring growth to our North American beverage business. At the same time, we will increase our investment in developing markets, make selective investments to continue growing our global snacks business and accelerate our global R&D initiatives to help secure our future innovation pipeline. We firmly believe that now is the time to invest in our future growth."

Looking at PepsiCo's third-quarter results, the company said net income fell 10% to $1.58bn for the three months to 6 September. Net revenue, however, was up 11% to $11.24bn.

PepsiCo Americas Beverages was the company's only division that saw operating profit fall during the quarter. The company's food units all saw earnings rise, although its Quaker Foods North America business saw revenue fall 5% due to the flood at Quaker's major manufacturing site in Cedar Rapids in July. Operating profit from the division was up 7%.

Operating profit from PepsiCo's Frito-Lay North America business rose 6%, with revenue up 9%.

"Broad-based pricing actions" at PepsiCo's Mexican snacks businesses Sabritas and Gamesa drove a 23% rise in revenue from the company's Latin America Foods division. The unit also posted a 22% jump in operating profit.

At PepsiCo International, operating profit grew by 18% on the back of a 20% rise in revenue. Snacks volumes were up 4%. The company saw double-digit volume growth from its snacks businesses in the Middle East, China and India. Higher prices, however, meant PepsiCo saw a "low-single-digit decline" in snacks volumes in Australia.

Snacks volumes in the UK and the EU inched up 1%. PepsiCo said the result was held back by a calendar change in how it reports its results in Iberia, which reported three weeks fewer numbers than a year ago.

Nooyi added: "Our worldwide snacks and international beverage businesses performed well once again. We were adversely impacted by continued weakness in the U.S. liquid refreshment beverage category, which resulted in disappointing performance in our domestic beverage business. We are taking important steps to revitalise our beverage portfolio."