US soft drinks group PepsiCo said profits rose in the third quarter, but concerns have been voiced about the performance of the Frito-Lay snack food division.
Pepsi reported profit of US$996m for the quarter ended 7 September, compared with $890m in the year-ago period. Sales rose 4% to $6.38bn. The results met the high end of analysts’ expectations as polled by Thomson First Call.
Results at Frito-Lay North America, the company’s largest unit, were softer than expected after a disappointing second quarter. “It’s a sign their new products aren’t delivering the trial or the repeat that they had anticipated,” Legg Mason analyst Mark Swartzberg told Reuters, citing snacks such as Go Snacks, its travel container packs of chips; Doritos Extremes; and Bistro Gourmet potato chips.
Net sales at Frito-Lay North America grew 3%, boosted by new product volume, but offset by increased promotional allowances that were in place during a substantial part of the quarter. The unit’s operating profit grew 6% to $559m.
Meanwhile, comparable sales at Quaker Foods North America fell 4% to $380m, depressed by a 6% decline in volume. Pepsi attributed the decrease in volume to softness in ready-to-eat and hot cereals as well as the impact of a shorter 2002 reporting period for Canada Foods.
Third-quarter servings worldwide rose more than 4%, while snack servings world-wide also increased 4% and world-wide servings of beverages rose 5% from last year.