PepsiCo said Frito-Lay North America is the “jewel” of its crown as the food and drinks group reported an “outstanding year” from the snacks division in 2022.
Speaking after PepsiCo reported an overall 14.4% organic increase in its top line for the year ended 31 December, CEO Ramon Laguarta hailed Frito-Lay North America as the “jewel” of the portfolio, having seen double-digit operating profit growth for potentially the first time.
Frito-Lay North America booked an 11% rise in core, constant-currency operating profit for 2022, or a 9% increase on a GAAP basis.
“The Frito business is the jewel of PepsiCo,” Laguarta said. “We’ve put a lot of investments in the last couple of years and the business continues to respond better every year.
“The operating profit growth of Frito this year is in the double digits which we haven’t seen in history almost.”
He said PepsiCo will continue to invest in Frito-Lay North America “because that’s the highest-margin business in PepsiCo and the highest ROIC that we can have in our investment”.
Frito-Lay North America saw a 27% operating margin for the full year. CFO Hugh Johnston said: “Obviously, when you have a margin that high, your goal should be to grow that business as fast as you possibly can.
“Obviously, you can’t continue to see margins go down but at the same time with 11% dollar operating profit growth for Frito Lay, that’s terrific operating profit growth. That’s an equation we’re certainly happy with for the year. We feel like Frito had an outstanding year and we would love to have a couple more like this one.”
On the wider prospects for the company’s North America business, which grew organically by 11% in the 12 months to 31 December, Laguarta said: “We feel good about the progress that PBNA [PepsiCo Beverages North America] is making in the triangle of growing the top line, improving the margins and keeping share and that’s the balance.”
Outside of the US, PepsiCo took a significant hit (-420%) to its operating profit in Europe in Q4. The group blamed 400 percentage points of the decline on impairment costs relating to its SodaStream business.
At a group level, PepsiCo’s revenues were US$28bn in its fourth quarter, beating analyst expectations of $26.84bn. The Walkers brand owner said it had increased prices by an average of 16%, more than offsetting organic volume declines of 2%.
Top line for the year to 31 December came in at $86.4bn, while operating profit stood at $11.5bn.
Looking ahead, the group said it was expecting a 6% increase in its top line for 2023, adding it does not anticipate having to further raise prices despite ongoing inflationary pressure.