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PepsiCo maintains polarized snacks strategy

By Kacey Culliney , 19-Oct-2012
Last updated on 19-Oct-2012 at 12:37 GMT

Pepsico will continue to drive penetration in premium and value snacks as the business arm stood stable amid a 5% overall profit slip for Q3, its CEO said.

The snacks and beverage giant reported a decline of 5% in overall net revenue for the third quarter (Q3) on Wednesday but said it remains on track to hit full-year targets.

Global snacks revenue grew steadily across the board and the firm reiterated its polarisation strategy of driving penetration in both the premium and value market sectors with its brands.

In the company’s earnings call, Indra Nooyim chairman and CEO said: “The good news is in premium we are now gaining share. In mainstream, the share is stabilizing and we are now moving into positive territory. We need to make sure we crack to code on our value business in a responsible way without diluting anything we’re doing in the mainstream business.”

Hugh Johnston, CFO of PepsiCo, said that commodity highs had hit the Frito-Lay business.

“The market has been more price-driven as we have seen exceptional commodity inflation. But as we see commodities normalize you can expect to see Frito-Lay go back to a more normal algorithm,” Johnston said.

Premium tastes of Frito-Lay

As PepsiCo pushes forward in the premium arena, it noted strengths in its Frito-Lay business.

Brian Cornell, CEO of PepsiCo Americas Foods, said Frito-Lay's position in premium can be accelerated.

“We are seeing that take place today and we are pleased with the performance of brands like Stacey’s,” Cornell said.

Frito-Lay’s performance in premium was up 17% for Q3, he said.

Balancing act

However, it was made clear that PepsiCo’s strategy going forward with its snacks business would be one of fine balance between premium and value, while maintaining strength in the mainstream brands. This approach was started back in March. (See HERE )

Growth continues in the value sector, underpinned by consumers being more price-sensitive in the current climate, he said.

“As we go forward, we are going to take a very balanced approach,” Cornell said.

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