Snacks outshone beverages for PepsiCo in its full year 2013 results and CEO Indra Nooyi said the category would become its new heavyweight.
Snacks were up 3% in volume and organic growth terms, compared to beverages that saw a 1% growth in full-year 2013.
Speaking to analysts in the company’s FY2013 results call yesterday, Nooyi said snacks would outpace beverages in future growth and pull in two-thirds of the company’s overall future revenue.
“As a result, over time, our business mix will gradually shift to be more heavily weighted towards snacks."
She said that PepsiCo would also focus on emerging markets, where most future growth was set to come. For the year, PepsiCo reported strong growth in China, she said, as well as Pakistan, Saudi Arabia, Brazil, Mexico, and Turkey.
"These markets have a long run rate for growth, driven by increasing demand for our convenient, on-trend, affordable products supported by rapidly growing middle class. The investments that we’ve made in these markets place us in an advantaged position," she said.
How about breaking up snack and beverages?
In July last year, Nelson Peltz – a stakeholder with a $1.5bn stake in PepsiCo – suggested that the company should acquire Mondelez and split its beverage and snacks businesses . PepsiCo management has since been in lengthy meetings to decide if such a move would benefit the company.
Speaking on the matter, Nooyi said that after an exhaustive assessment the company would not make such a move. “Decoupling our beverage and snack business in North America would significantly reduce our relevance to our customers.” She added that PepsiCo would also significantly lose out on market share and a number of synergies in North America should it split snack and beverages.
She said that snacks and beverages drove each other and that they were “truly better together” – a reference to the company’s ‘power of one’ strategy.
“Our entire portfolio is focused on taste and convenience. Our products are purchased together and consumed together. Our presence in beverages supports our snacks growth.”
Latin American Foods outshines Frito-Lay, Quaker still struggling
Overall, PepsiCo reported a 9% rise in net income to $6.74bn for the full year 2013, with net sales totting up $66.42bn, up 1% on the previous year.
Frito-Lay North America, Latin American Foods (LAF) and Quaker Foods North America all posted volume growth, but sales and profits varied across the group.
Based on sales and profit for the full year, LAF was the strongest region with sales up 7% and profits up 17%. Frito-Lay posted a 4% surge in sales and a 6% rise in profit, but sales were down 1% for Quaker with an even bigger drop in profit (11%).