PepsiCo posts better sales, margins in tougher market

Beverage and snack food giant PepsiCo has reported better than expected second quarter 2015 results with organic (Non-GAAP, constant currency) revenue up 5.1% on higher selling prices, despite a challenging market in Europe and foreign exchange headwinds.

On a reported (GAAP) basis, net revenue fell 5.7% to $15.9 billion that reflected a 10 percentage point impact of weaker foreign currency exchange. Net income was flat at $1.98 billion.

Core gross margins expanded by 115-110 basis points (organic, non-GAAP basis). Snack volumes rose by 1%, while beverage volumes were flat at the company, whose major brands also include Gatorade.

US beverage pricing grew an estimated 4% as the company moves to more single-serve sales and smaller packages, helping offset sliding volumes.

PepsiCo said it generated more than $400 million in US retail sales growth, much of it coming from new products like Mountain Dew Kickstart energy-juice drink, and spicy Doritos Roulette chips.

“PepsiCo achieved strong financial performance in the second quarter. We delivered mid-single digit, organic revenue growth and strong gross margin expansion,” said chairman and CEO Indra Nooyi.

“Our results also reflect our keen focus on innovation, brand building and marketplace execution.”

PepsiCo is taking pricing actions, optimizing global sourcing and delivering $1 billion in productivity savings a year that position it well for the remainder of 2015.

Ms Nooyi said that PepsiCo, which has Smiths Snackfood Co brands in Australia, still has room to grow in snacks. The company started out from a salty crisp snack background to having a portfolio of savoury snacks including crackers, nuts and seeds, with a lot of opportunity there, she said.

Beginning August, PepsiCo will remove aspartame out of Diet Pepsi in the US in response to US consumer desire for a great tasting diet cola without aspartame. There are no changes to any PepsiCo beverages in Australia or New Zealand at this time, a spokesperson for the licensee in Australia, Schweppes Australia said.

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