This week has seen PepsiCo put the Kendall Jenner debacle behind it and deliver an upbeat earnings report that downplayed worries about whether Americans are turning away from sugary soft drinks.
Amid lower than expected promotional spending and productivity gains, its critical North American division gained ground and reported an uptick in both second-quarter revenue and profit. PepsiCo’s revenue increased by 2% to a total of $15.7 billion in the last quarter, with net income up 5% from the same quarter last year at $15.57 billion. The company’s stock rose 1.3% to $115.75 in pre-market trading.
Results were good across Euro and some of this was down to the sale of its minority stake in Britvic. Talking about the results, Indra Nooyi, the company’s chief executive said that the company will continue to deliver strong and stable results and that it will do so by transforming its portfolio to ensure that it has more and more reduced and sugar-free options as well as focusing on more premium products. It has already slashed the amount of sugar and saturated fat in many of its products to deal with the changing demands of consumers across the globe.
“We continue to deliver strong, reliable results – even as our industry is witnessing some strong shifts. Going forward, we have paths in place to improve the trajectory of the business. We are trying to move the portfolio to more premium products and to focus on price realisation, letting marketing drive the topline,” she commented.
Perhaps most interestingly, the firm has said that it will go “more aggressively” after productivity to reduce costs and that there will be a real opportunity for Pepsi to look more at ecommerce, such as launching select online grocery forms.
“We want to make sure our snacks are more deliverable, not just through click-and-collect. We want to look at the cold delivery of beverages to support the exploding growth of ecommerce,” she explained. “There are infinite possibilities to create impulse buying through technologies online.”
The company will also begin to look at analysing customer habits and how they are influenced by mobile technology through both communicating with customers and looking at big data.
Wells Fargo analyst Bonnie Herzog said that while Pepsi has done “a good job of pulling its pricing lever to offset volume softness,” the upside to the stock is limited given current fundamental trends and the fact that hopes for a potential buyout has already added to a premium to the company’s valuation.