PepsiCo feasts on snack growth for first quarter gains

By Neil Merrett

- Last updated on GMT

Related tags Cent United states

Beverage giant PepsiCo has increased sales by about nine per cent
to $7.4bn (€5.3bn) during a strong first quarter for the year, as
it continues to expand its global operations, particularly through
its snack and potato chip lines.

The group revealed yesterday that across the board growth in its global sales had helped lift operating profit for 12 weeks to 24 March by about 13 per cent over the same 2006 to $1.4bn (€1bn). The results highlights the growing importance to global beverage companies of diversifying operations into new markets and products. Through its non-US markets, PepsicCo's operating profit increased by about 29 per cent to $372m (€272m), over the same period last year. Although costs rose, operating margin increased to 19.3 per cent from 18.7 per cent over the same period. International growth was driven predominantly by a 13 per cent volume gain particularly within the snack operations of PepsiCo's three regional markets. International beverage sales also showed strong growth, the company said. The group's Asia Pacific operations led this rise, undergoing a 19 per cent volume increase. The Europe, Middle East and Africa segment matched Latin America for double digit growth, each with 12 per cent volume gains. International beverages trailed slightly with volumes up by 7 per cent, aided by double digit growth within the increasing market for non-carbonated beverages. Europe, Middle East and Africa dominated the segment with a 9 per cent increase in volume, closely followed by Latin America, which was up eight per cent. The strong performance of PepsiCo's beverage brands in markets like Russia, Venezuela and Brazil was seen as the most important factors for the increase. Single digit declines in Thailand were blamed for preventing a similar performance in Asia's regional beverage segment, though even this failed to significantly dent volume, which increased by six per cent. In North America, through its Frito-Lay snack division, sales increased by 6.7 per cent to $2.6bn (€1.8bn), driven by the success of its Doritos and SunChips brands. Sales of the group's salty snacks grew six per cent overall offsetting a single digit decline in its Lays branded potato chips. The groups other macro snacks sales grew 13 per cent However, PepsiCo Beverages North America posted a 0.7 per cent decline in operating profit to $425m (€311m), due to stagnant volume increase of 1 per cent. The volume increase reflected non-carbonated beverages offsetting a three per cent dip in carbonated soft drinks. PepsiCo's chairman Indra Nooyi said the results highlighted the strength of the company's brands globally. "Our international business performed well on virtually every dimension,"​ she stated. "Volume gains in snacks and beverages were broad-based, operating margins expanded, and growth was balanced across developed and emerging markets." ​ As a result, she was confident that the company remained on track to meet its ambitions for the year. "Our business momentum is strong coming out of the first quarter, which increases our confidence in the full-year outlook."

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