PepsiCo struggled in Europe during the 2015 second quarter (Q2), reporting an overall 24% profit drop for snacks and beverages. Revenues across Europe were $2.7bn, down from $3.6bn the previous year.
Indra Nooyi, chairman and CEO of PepsiCo, said the UK market had proven particularly challenging given the “high street battle” going on.
“I wouldn’t call it a price war; I just think that the retail environment in the UK remains interesting. The high street retailers are going through their own set of challenges – you have got the entry of the discounters,” she told analysts in yesterday’s earnings call.
This, she said, was causing a reset of the entire competitive situation in the UK.
“Being one of the major food and beverage companies in the UK, and the largest salty snack company for the UK, I think we have to be careful how we make our transition with the high street retailers and the discounters.”
Nooyi said that in the short-term, PepsiCo had lost some market share in the UK but said there were “plans in place” to recover share and navigate through environmental changes.
However, she said regaining market share losses in tough retail environments took time.
“We have to make changes in the business model very, very carefully,” she said.
Nooyi said difficulties in the UK had to be addressed at a time Europe as a whole also remained fairly volatile.
“The Europe is a difficult economy. Between east and the west there is some sort of volatility there all the time…I think it’s very important we play a very judicious game between revenue and profits. And we have been playing that game very, very carefully,” she said.
US snacks strong, global promise
By comparison, PepsiCo’s US snack business Frito-Lay North America (FLNA) posted a steady Q2 – pulling in $3.4bn in revenues; up 2% on the previous year.
“Frito-Lay North America delivered another quarter of very strong results,” Nooyi said.
Beyond North America, she said there was a lot of growth in savory snacks.
“We came from a salty crisp snack background and we are expanding more and more into other savory snacks; be it crackers, be it nuts and seeds… there is a lot of opportunity there.”
The CEO said growth in snacks across the globe would be driven by two focuses – complimentary products like dips and taking share from macro-snacking.