Speaking in today’s analyst earnings call for its second quarter (Q2) results, chairman and CEO of PepsiCo Indra Nooyi said: "In any portfolio there are always areas that need some attention". She said Quaker (along with North American Beverages) were the two segments that needed this focus.
“This is a great business with great brands, high margins, high returns on capital, and it generates a lot of US cash flow. So there is a lot to like about this business,” Nooyi said.
“But a good deal of this business lives in the center of the store…and that makes it a challenge to grow, especially as consumers increasingly seek convenience,” she said.
Innovation wins for Quaker
Despite this, Nooyi said PepsiCo has had some “innovation wins” for the brand – one being the Real Medleys variant.
The oatmeal product is packed in a small, convenient and portable package to target on-the-go consumers and just needs to be microwaved with water.
BakeryandSnacks.com recently spoke to a Mintel analyst who said there is a clear consumer trend towards ‘al-desko’ breakfast with demands for re-sealable, easy to open packaging.
PepsiCo has since expanded this successful new brand beyond the cereal category and into bars, she said. However, the brand still has “a lot more potential for growth”, she added.
Quaker’s international cracker business is also doing “exceedingly well” with a 5% volume growth for Q2, she said.
“But we’re still in the early innings of capturing the full potential of this business in North America. We are focusing on driving innovation that truly excites consumers and for us it’s a work in progress and we have the right resources and talent dedicated to getting this business on a firmer footing,” she added.
Q2 results breakdown
Quaker Foods America saw a net revenue decline of 1% for Q2. Core constant operating profit also declined 14% - driven principally by product innovation and investment impacts, PepsiCo said.
Frito-Lay North America was stronger with a 4% increase in net revenue. PepsiCo Americas Foods and Latin America Foods also surged in net revenue by 5% and 9% respectively.