Pepsi's Results Gets Boost From Snacks, Sugar-Free Drinks -- Update
February 13 2020 - 9:53AM
Dow Jones News
By Jennifer Maloney and Dave Sebastian
Strong sales of salty snacks lifted PepsiCo Inc.'s sales for the
fourth quarter, as sugar-free versions of Pepsi and Gatorade are
helping turn around the company's challenged North America beverage
business.
PepsiCo is hoping a new drink called Mountain Dew Zero Sugar
will revive sales of that brand, which has been flagging for years.
The new soda, featured in a Super Bowl ad this month, tastes closer
to the original drink than Diet Mountain Dew, Chief Financial
Officer Hugh Johnston said in an interview.
"Mountain Dew consumers, like everyone else, at some point you
typically see...they're going to shift over to a low- or no-sugar
product," he said.
Sales volume was flat in the quarter for the company's North
America beverage business unit, though revenue grew 4% -- its
highest quarterly growth rate since 2015, Mr. Johnston said.
In the Frito-Lay North America division, sales rose 3%, driven
by growth of snacks such as Doritos, Cheetos and Lays potato chips.
Flamin' Hot flavors of those brands performed well in the quarter,
as did a potato-chip snack called Poppables, Mr. Johnston said.
The company last year increased advertising and marketing
spending by 13%, throwing support behind its struggling core
brands. That investment has paid off, Mr. Johnston said. He
predicted that Gatorade Zero "in a couple of years" would reach a
billion dollars in annual sales.
The beverage-and-snacks giant this year plans to introduce a
caffeinated version of Bubly, its flavored seltzer brand, following
the announcement of a similar product coming from rival Coca-Cola
Co. And in April, PepsiCo plans a limited U.S. release of a drink
called Pepsi Café that combines cola and coffee. Coca-Cola has been
rolling out a coffee version of its namesake cola overseas.
The company's Quaker Foods North America unit, which sells the
Quaker Oats, Rice-A-Roni and Aunt Jemima brands, is also improving,
though oatmeal had only "an okay year," Mr. Johnston said. The
company is working on improving sales execution for oatmeal and
will look to launch new oatmeal products or flavors, he said.
PepsiCo's sales rose 5.7% to $20.64 billion for the quarter
ended Dec. 28, 2019, from the prior year. The company said its
organic revenue grew 4.3% for the latest period and said it
anticipates the metric, which strips out the effect of currency
swings and acquisitions, to grow 4% in 2020.
The company also said it has increased its annual dividend to
$4.09 a share from $3.82 a share, payable in June.
Net income fell to $1.77 billion, or $1.26 a share, from $6.85
billion, or $4.83 a share, a year earlier. The company booked $4.93
billion in income-tax benefits in the same period last year.
Adjusted earnings were $1.45 a share, ahead of the $1.44 a share
analysts were looking for. The company expects adjusted per-share
earnings to grow 7% in 2020.
Write to Jennifer Maloney at jennifer.maloney@wsj.com and Dave
Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
February 13, 2020 09:38 ET (14:38 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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