On April 17, PepsiCo reported first-quarter results. Organic revenue for the newly-reorganized Pepsi Beverages North America grew +2.5% on volume that declined -2.0% (including a -4.0% decline for carbonated soft drinks and a water-driven 1% increase in non-carb drinks). Global beverage volume was up +2%. The company’s total organic revenue (not including currency adjustments and other structural changes) grew +5.2%, the best quarterly increase in more than three years. The company reiterated its full-year earnings guidance. PepsiCo shares jumped +3.8% on the day, reaching an all-time high.
CSDs. During a conference call with analysts to discuss the results, Chairman and CEO Ramon Laguarta said carbonated soft drinks (CSD) are a “very critical category,” adding that progress in PepsiCo’s beverage business will rely on a “balance” between CSDs and non-carbonated products. “We’re treating both sides of the market with a very clear, intentional allocation of resources, with CSDs taking a very important role,” he said. Brand Pepsi has been the priority, starting with increased investment last year, Laguarta said. According to retail data tracked by BD, trademark Pepsi gained dollar share (+0.2) during the first quarter of this year as volume share was flat. Pepsi-Cola’s dollar share was flat while Diet Pepsi and Pepsi Zero Sugar each added +0.1 share point. Now PepsiCo is focusing on Mtn Dew, Laguarta said. While core Dew has lost roughly a half share point in both dollars and volume this year, the product was trending up in more recent retail data. Laguarta expressed optimism about the recently launched Game Fuel, developed for video game consumers.
SodaStream. When asked about the recently-acquired SodaStream International, Laguarta called the maker athome sparkling beverage appliances a “long-term strategic bet” with “multiple dimensions.” He said the company positions PepsiCo with the growing number of consumers who want to customize beverages at home. He reiterated as well that SodaStream is a sustainability play. “We can provide consumers with very good beverage experiences without packaging, without waste,” he said. Declining to disclose specific sales figures, Laguarta said SodaStream’s performance has “accelerated.” He add that the brand’s most important performance indicator, household penetration, has increased in Europe, the US and Canada, which are SodaStream’s largest markets. PepsiCo, meanwhile, is adding flavor innovation, customer relationships and direct-to-consumer opportunities to the business, Laguarta also said.
Cytosport. During the same conference call, PepsiCo CFO Hugh Johnston said PepsiCo expects to use newlyacquired Cytosport and Gatorade’s protein shake line to craft a “premium and mainstream approach” to the protein drink business. Laguarta said he believes the category will “grow fast in the coming years” and PepsiCo wants to have “full ownership of the full value chain so we can innovate with multiple brands to make sure we cover all these spaces.”
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