Frito-Lay drives PepsiCo Q1 sales

By Douglas Yu contact

- Last updated on GMT

Frito-Lay North America recorded a net revenue of $3.62bn in Q1 2018
Frito-Lay North America recorded a net revenue of $3.62bn in Q1 2018
PepsiCo posted a 4.3% net revenue growth and a 2.3% organic revenue growth in Q1 2018, driven by Frito-Lay’s ‘solid performance’ in North America, according to PepsiCo CEO Indra Nooyi.

Frito-Lay North America recorded a quarterly net revenue of $3.62bn, increasing by 3% from last year’s $3.50bn, while its operating profit remained at $1.05bn this year.

The Cheetos maker said its flat operating profit was “negatively impacted by operating cost inflation, as well as a bonus extended to certain US employees in connection with the TCJ (Tax Cuts and Jobs) Act and higher raw material cost.”

Overall, the US foods giant reported a total quarterly revenue of $12.56bn by the end of March 24, 2018, compared to $12.05bn during the same period the year before.

PepsiCo's gross profit was $6.91bn in Q1, increasing by 2% from $6.76bn last year.

Scaling up Lay’s Poppables

Nooyi said Frito-Lay North America has experienced a “balanced volume growth and continued strong market share results”​ during the period because of the company’s “great marketplace execution, innovation and creative brand marketing.”

For example, PepsiCo recently introduced Lay’s Poppables Honey Barbeque and a 12-count multipack of Poppables Sea Salt having created the new growth platform for Frito-Lay (Lay's Poppable) in 2017.

Red Rock Deli
Pic: PepsiCo

“We continue to drive net revenue growth through increased trial and household penetration, which, when combined with increased purchase frequency from the expanded product line-up and year long media support, should continue to scale up this promising new brand extension,”​ said Nooyi.

‘Lift and shift’ global strategy

Nooyi noted Frito-Lay would further benefit from PepsiCo’s “lift and shift”​ global strategy.

Part of the strategy is to roll-out the company’s Australian potato chips brand, Red Rock Deli, to the US, as it addresses “millennials’ desire for high-quality food offerings, with credentials like non-GMO and no artificial flavors or colors,”​ she said.

Red Rock Deli comes in three flavors: red curry & coconut, Himalayan pink salt & lime and cracked pepper. It was rolled-out across selected outlets and online in the US earlier this month.

Additionally, the company noted Lay’s Oven Baked has expanded to 14 international markets and plans to triple that number over the next two years.

Growing Quaker sales

PepsiCo reported it’s oatmeal business, Quaker Foods North America, reached $601m in Q1 net revenue compared to $598m last year, boosted by the “continued success of Overnight Oats and supported by a new ad campaign highlighting the functional benefits of oatmeal,”​ said Nooyi.

However, similar to Frito-Lay’s, the unit’s quarterly operating profit declined by 5%, reaching $155m versus $163m a year ago.

Nooyi said the company forecasts a 2.3% full-year 2018 organic revenue growth, in line with 2017.

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