With Robust Quarter To Its Credit, Pepsi Looks At 'Very Full' Acquisition Pipeline

No. 2 beverage giant PepsiCo, boosted by a 16% rise in first-quarter income, says its acquisition pipeline is "very full" and one where the "hit rate is likely to be much higher" than in the past, its chairman/CEO told investors during a conference call yesterday.

Indra Nooyi said the potential targets are "uniquely suited to PepsiCo's strengths" and range in deal size from $5-10 million to a few billion dollars. "All are filling up white spaces, getting us into geographics we have not been in or adding new capabilities that we desperately wanted," she said.

The news comes on the heels of reports this week from Beverage Business Insights that talks between Pepsi rival Coca-Cola and Vitaminwater marketer Glaceau are nearing a deal in the next few weeks. Heating the industry up further is speculation that Glaceau's 30% owner Tata may go after Cadbury Schweppes Americas Beverages, the newsletter said, to get a major footprint in North America.

And Us magazine reported yesterday that actress Jennifer Aniston is about to become the global face of Glaceau's smartwater, an "electrolyte enhanced" drink with the slogan "Water that's the envy of all water."



Back at the Pepsi ranch, the company said the 16% rise in first-quarter net income was boosted by stronger sales of Frito-Lay snacks and noncarbonated beverages, including Aquafina and Lipton Iced Tea, which rose 8% in volume with strong sales in water, enhanced water and on-going strength in the ready-to-drink tea business.

Frito-Lay did particularly well because of its Doritos and SunChip lines. Revenue in the segment rose to $2.55 billion from $2.39 billion a year ago. Revenue gains more than offset cost increases, including a 13% increase in advertising and marketing expenses and the ubiquitous hike in corn prices.

Net income was $1.1 billion compared to last year's same-period $947 million.

PepsiCo Beverages North America had revenue of $2.09 billion, up from $1.99 billion. First-quarter beverages volume in North America rose 1%, helped by sales of noncarbonated drinks. The company said it saw double-digit volume growth in Lipton iced teas and a low-single-digit increase in its Gatorade.

As for its acquired energy drinks, the company said it is "gaining traction" and was up 40% in the first quarter.

Revenue in the Quaker Foods North America unit rose to $463 million from $443 million.

PepsiCo International profits increased 29% on strong snacks and beverage growth.

Pepsi credited its momentum to its "choreography" campaign in which it is changing its can packaging 35 times this year and inviting consumers to help do so. "Choreography is truly changing the way we interact with consumers," the company said.

This summer, Pepsi has many promotions and events lined up, from headline sponsorship of a 24-hour "Live Earth" concert series with seven concerts on seven continents to promote environmental awareness to TV spots next month with MLB players highlighting the brand's role as the league's official soft drink.

In June, a Mountain Dew promotion tied to July Fourth's debut of the movie "Transformer" will offer to "Transform your summer." Sierra Mist Free ads will promote the new "Shrek" iteration due out May 18.

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