PepsiCo's decision to sell smaller cans pays off
Beverage sales rise as new packaging strategy helps company attract more consumers.
PepsiCo’s quarterly revenue and profit beat Wall Street estimates boosted by higher sales of its traditional Pepsi as well as snacks Lays and Doritos chips.
Beverage sales rose in the quarter as the company’s move from large cans to smaller ones helps it add consumers who occasionally like to “indulge” even while preferring healthier options.
“Core Pepsi is what is driving the improved performance in soda,” said CFO Hugh Johnston. “You have the consumer shifting from bigger volume packages into packages that are smaller … but the price realisation is quite good on them,” Johnston said.
Earlier in 2019, PepsiCo launched berry, lime and mango-flavoured sodas in 12-ounce cans and introduced variations of Cheetos and Doritos tortilla chips.
Rival Coca-Cola Co also saw a rise in overall sales in its past quarter, boosted by strong demand for its orange-vanilla cola, its first such launch since 2007 when it introduced vanilla Coke.
Pepsi and Coca Cola have also been trying to offer new products to cater to consumers who prefer healthier options like sparkling waters and teas.
Beverage volume fell 2% at PepsiCo’s North America beverage unit, due largely to higher sales of smaller packages of sodas and juices, but revenue from the business rose 2.5%.
Revenue in its snacking division, Frito-Lay North America, rose 4.5%, led by high single-digit growth in convenience and dollar stores, pushing total net revenue up 2.2% to $16.45bn.
Organic revenue, which excludes the effect of currency fluctuations and acquisitions, rose 4.5% in the quarter. Three analysts polled by Refinitiv IBES had expected a 4.87%. Net income attributable to the company rose 11.8% to $2.04bn from $1.82bn a year earlier.
Excluding one-time items, it earned $1.54 per share. Analysts had on average expected profit of $1.50 per share and revenue of $16.43bn.
Shares of the Purchase, New York-based company, which have risen 20% so far in 2019, were up marginally in early morning trade.