PepsiCo Has Strong Q2 Despite N.A. Beverage Declines

Pepsico products-double digit growt in Q2PepsiCo, Inc. saw 14% net income growth and 12% operating profit growth in the second quarter, according to the company. First-half net income also grew 14%, and operating profit grew 11%.

Food and other divisions compensated for weak North American beverage sales.

PepsiCo Americas Beverages (PAB) saw Q2 volume decline 1% (due to a 3% decline in North America), and operating profit decline 7%. Revenue increased 1%. Year to date, volume and operating profit are each down 1%, with revenue up 3%.

The company cited cross-brand sales declines in convenience stores and slowing growth in unflavored waters as key factors in the N.A. performance. The region's carbonated soft drink portfolio gained market share, but volume declined 2%. Low single-digit gains for Mountain Dew and Sierra Mist partially offset a mid single-digit decline for Pepsi. Non-carbonated beverages volume dropped 4% due to unflavored water performance. Volume gains for energy drinks Amp Energy (up by triple digits) and SoBe Life Water (up 50%) were partially offset by mid-single-digit declines in juice.



Latin American beverage sales, however, saw mid single-digit growth in carbonated brands and double-digit growth in non-carbonated brands.

Pepsico Americas Foods (PAF) saw 16% net revenue growth and 13% operating profit growth in Q2, bringing revenue and operating profit growth YTD to 15% and 10%, respectively.

Within PAF, Frito-Lay North America had a 2% volume gain in Q2, despite high single-digit price increases, and 3% volume growth YTD. Cheetos, Ruffles, Quaker Chewy Granola and SunChips saw double-digit growth in Q2. Cheetos and SunChips introduced new flavors and SunChips was supported by the "Made From the Sun" marketing campaign. FLNA's first-half net revenue grew 8%, and operating profit 6%.

Quaker Foods N.A. also saw a 2% volume gain in Q2, and first-half revenue and operating profit gains of 6% and 5.5%, respectively.

PAF's Latin American food performance was again the stand-out, with 41% revenue and 38% operating profit gains in Q2, and 39% and 33% gains for the first half.

(See "Big Beverage Company Growth Lies Overseas ," in Tuesday's Marketing Daily.)

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