Earnings results

Frito-Lay’s balance of core and premium snacks drives PepsiCo Q3 2017 sales

By Douglas Yu contact

- Last updated on GMT

Frito-Lay North America’s Q3 net revenue reached $3.8bn.  Pic: ©Flickr/AnneCN
Frito-Lay North America’s Q3 net revenue reached $3.8bn. Pic: ©Flickr/AnneCN
PepsiCo said the favorable balance of Frito-Lay’s core portfolio and premium products has contributed to its Q3 sales this year.

PepsiCo’s organic revenues increased by 1.7% for the quarter, and by 2.3% year-to-date, said the company.

“We expect our full year core EPS of $5.23, which is two percentage points or $0.10 higher than our previous expectation,”​ said PepsiCo’s chairman and CEO Indra Nooyi.

“This improvement is being driven by the strength of our year-to-date results, coupled with an improved outlook on foreign exchange impact.”

The Frito-Lay brand

Frito-Lay North America’s Q3 net revenue increased by 3%, reaching $3.8bn, while its year-to-date net revenue reached $10.97bn, increasing by 3%, PepsiCo reported.

Frito-Lay North America had “another quarter of very strong results, with a good balance of volume growth… which is being fueled by effective price pack management and innovation backed by great marketing,”​ Nooyi said.

Within the brand’s portfolio, Cheetos drove 6% net revenue growth in Q3 with new products, such as Cheetos Paws, Jalapeño Cheetos, as well as the Simply Line and Mac n’ Cheetos. Nooyi said the new product development was achieved by engaging consumers via an online campaign.

Additionally, Ruffles drove net revenue 11%, benefiting from flavor innovation, such as Spicy Jalapeño Ranch and Flamin’ Hot.

PepsiCo’s CFO, Hugh Johnson, pointed out Frito-Lay’s share gains and sales growth in c-stores were less driven by the company’s competitor Kellogg’s exiting direct store delivery (DSD), but rather more by its “wonderful balance”​ between core and premium items.

“We saw double-digit net revenue growth in premium and better-for-you offerings such as Sun Chips, Smartfood Popcorn, and Miss Vickie’s and in our variety of our top brands in convenient single-serve packages,”​ Nooyi said.

PepsiCo launched a line of healthy snacks under its Simply Organic​ portfolio earlier this year, which analysts said could help the company expand into organic grocery stores, such as Whole Foods, BakeryandSnacks recently reported.

“Frito-Lay, on a standalone basis, was once again the number one contributor to total US food and beverage retail growth among all five million plus manufacturers [in Q3],”​ Nooyi said.

E-commerce

PepsiCo also made progress in e-commerce during Q3, according to Nooyi.

She mentioned the company is increasingly collaborating with its retail customers to drive online sales by “using big data and predictive analytics to shape real-time marketing messages, dynamic merchandizing, and tailored offers.”

In 2017, “our e-commerce retail sales are projected to be up 80% in the US and nearly double in China,”​ Nooyi said. 

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