PepsiCo Sees Improvement as Snacks, Beverages Drive Growth in Third-Quarter 2010

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Researched by Industrial Info Resources (Sugar Land, Texas)--Food & Beverage Industry giant PepsiCo Incorporated (NYSE:PEP) (Purchase, New York) saw impressive results in the third quarter of 2010 as the company's snack and beverage products boosted revenues and profits. Net income was reported to be $1.92 billion for the quarter, an 11.94% increase from third-quarter 2009.

Total net revenue stood at $15.51 billion, a 40.02% increase from the same period last year. Among the factors that improved results in the Americas were a sharp growth in volume for ready-to-drink teas and Gatorade, which was boosted by the launch of the Gatorade G series, as well as the successful re-launch of the PepsiMax beverage. The Frito-Lay North America division saw the fastest volume growth among the top 20 food and beverage companies worldwide in measured channels; the division also improved its share of the salty snacks market.

Internationally, strong marketing and an unusually hot summer boosted snack and beverage volumes by 3% and 17%, respectively, in Europe. Strong marketing also boosted snack volumes by 16% in the Asia, Middle East and North Africa region, including a gain of more than 20% in India, while beverage volumes grew by 4% in the region, driven by sharp growth in China.

"Throughout the world, consumers remain very value-conscious," said Indra Nooyi, the chief executive officer and chairman of PepsiCo, in a conference call. "This is where the advantages that PepsiCo possesses in granular management of productivity and local execution of the market drove differentiated performance this quarter."

PepsiCo saw improved revenues in all four geographic segments and improved operating profits in three during the quarter. Of the three businesses within the Americas Foods segments, only Quaker Foods North America saw declines in revenue and operating profit:

• The Americas Foods segment reported $5.19 billion in revenue for the quarter, a 3.61% increase from third-quarter 2009, and $1.27 billion in operating profit, a 10.33% increase:
• The Frito Lay North America segment saw $3.24 billion in revenue, a 1.44% increase from the same period last year, and $907 million in operating profit, a 10.34% increase.
• The Quaker Foods North America segment saw $407 million in revenue, a 2.63% decrease from third-quarter 2009, and $126 million in operating profit, a 3.82% decrease.
• The Latin America Foods segment saw $1.54 billion in revenue, a 10.46% increase from the same period last year, and $238 million in operating profit, a 19.6% increase.
• The Americas Beverages segment reported $5.79 billion in revenue for the quarter, compared to only $2.66 billion in third-quarter 2009, and $1.02 billion in operating profit, a 67.55% increase.
• The European segment reported $2.76 billion in revenue for the quarter, a 47.39% increase from the same period last year, and $423 million in operating profit, a 33.02% increase.
• The Asia, Middle East and North Africa segment reported $1.77 billion in revenue for the quarter, a 14.89% increase from third-quarter 2009, and $244 million in operating profit, a 17.85% decrease.

PepsiCo plans to continue its growth into emerging markets with fresh programs and ideas, such as the Global Nutrition Group, which recently was created to explore the strong potential in fruit, vegetable, grain, dairy, and other nutritional products. The company plans to grow the Global Nutrition Group from the current $10 billion in revenues to $30 billion by 2020.

"There has been improvement in the consumer and economic environment," Nooyi said in the conference call. "Looking at the markets in which we operate, there is no doubt that economic uncertainty and high unemployment levels are keeping a consumer-led recovery at bay in many regions, especially in developed markets like the United States and western Europe. We expect these conditions to persist, and are planning accordingly, with a keen eye on delivering value to customers, with an efficient cost structure to ensure that we remain competitive and grow profitably."

Industrial Info is tracking more than $156 million in active PepsiCo projects in the U.S., including the $66 million expansion of the Dayville potato chip manufacturing and distribution center in Windham, Connecticut. The company plans to add two buildings of 50,000 square feet each to an existing 123,000-square-foot warehouse area and install a new production line to increase the production and distribution capacity. For more information, visit Industrial Info's North American Food & Beverage Project Database.

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