PepsiCo is to place more emphasis on producing products “backed by science” under its plans to create a nutrition business unit to develop new products in a series of food categories.
The US food and drink giant said today (7 October) that a “global nutrition group” to “deliver breakthrough innovation” in fruit and vegetables, grains, dairy and functional foods.
The unit, chairman and CEO Indra Nooyi said, will allow the company to achieve its goal of turning a US$10bn company into a $30bn nutrition business by 2020.
“As we move more into nutrition we have to think about products backed by science, and that is what we are focusing on,” Nooyi told analysts on the firm’s earnings call. “Our objective is to position PepsiCo globally as a leader in wholesome and convenient nutrition, and we believe we can through four target platforms that will put us in a uniquely advantageous position.”
In order to enable PepsiCo to “move even more aggressively” and reach its global target, Nooyi confirmed the appointment of a CEO and president for the new business unit.
Dr Mehmood Khan, PepsiCo’s chief scientific officer, will assume the additional role of CEO of the unit, while Jaya Kumar, president of Quaker Foods North America, will move into the new role of president of global nutrition platforms, reporting to Khan.
“This group will collaborate with businesses across the global to ensure rapid growth,” Nooyi added. “Through this [division], we will be able to harness the best of PepsiCo, centralising very important innovation and development of products based on science.”
CFO Hugh Johnson told analysts that the returns from the new division will be seen “over time”.
He said: “We are making investments in things that will support our future in nutrition….salt reduction, sweeteners…these are things that are going to pay back over time but are types of investments that will drive the long-term value of the company.”
The announcement came as PepsiCo published its third-quarter numbers, which included a move to trim the top end of its earnings guidance.
PepsiCo’s third-quarter net profit was up 12% at $1.92bn. Revenue increased 40% to $15.51bn. The company said it had enjoyed “solid” volume, revenue and profit results, driven by “broad-based gains across its snack and beverage portfolio” and its recent bottling acquisitions.
However, PepsiCo said it was now targeting an 11-12% rise in earnings per share on a constant-currency basis. Its previous guidance was for growth of 11-13%.
Nooyi, however, brushed off analysts concerns over the drop in guidance and said the firm would continue to invest in order to “solidify growth and expand the value of the company”.
“We feel very good about where we’ve been so far and about quarter four,” Nooyi said. “In today’s macroeconomic environment, to deliver the EPS growth that we did for a company of our size and scale, I think this is a fantastic performance.
“We expect [macroeconomic] conditions to persist and are planning accordingly, with an efficient cost structure to ensure we remain competitive and grow profitability.”