Pepsico Claims Food And Beverage Domination Despite Currency Troubles
The food and drink giant said on its earnings call Wednesday that it was driving more retail sales growth than any of its competitors, even as a strong U.S. dollar crimps the profitability of its global operations.
Pepsico has anointed itself king of U.S. food makers, claiming on its fourth quarter 2014 earnings call Wednesday that its portfolio of products, including Quaker Oats, Frito-Lay, Tropicana, and Gatorade, was the largest contributor to retail sales growth in the U.S. among all food and beverage producers.
The nearly $1 billion in retails sales growth Pepsico produced was more than the next 27 food and drink makers combined, according to Chairman and CEO Indra Nooyi, citing IRI data. Nooyi said on the call this was due, in part, to new business deals and product innovation.
What kind of innovation exactly? According to Nooyi, the “Better Together” food pairing programs, which encourage the simultaneous consumption of two Pepsico products, like Doritos Loaded and Mountain Dew Solar Flare, helped catapult Pepsico to Street-beating profits in the fourth quarter.
New products that were popular in the U.S., like Doritos Jacked and Deep Ridged Chips, were introduced to new markets, also contributing to sales growth in Europe and Latin America.
But while Pepsico may be blessing the rest of the world with Jacked Doritos, it appears as though some nations were not so good to Pepsico in return. Profit fell 25% in the quarter, and revenue decreased by 1%, thanks in large part to a strong dollar and weak currencies and economies abroad. Collapsing currencies in Russia and Venezuela meant earnings from there translated into fewer dollars, hitting the company’s margins — although Nooyi called the company’s Russian customers “resilient”.
“In a country like Russia, because our categories are in juice and dairy, stuff that the Russian consumer really needs, the businesses have been quite resilient. Now, we have to wait and see how 2015 shapes up,” she said. “But I’d say for our categories and the nature of the products that we offer them the portfolio has remained quite resilient even going into 2015. But let’s watch and see what happens.”
Back at home for U.S. consumers, Pepsico introduced new carbonated beverage products like Mountain Dew Kickstart, Pepsi Cola Made with Real Sugar, and Mountain Dew Baja Blast, which, according to Nooyi, “generated double digit estimated annual retail sales growth in 2014 after achieving over $100 million in their launch year.”
While new products might have been hits, the wider marker for soda is still looking grim. In North America, the volume of carbonated soft drinks sold by Pepsi fell by 2%, even as non-carbonated drinks increased by 4%. It seems American consumers still haven’t absorbed the message from the big beverage lobby that soda isn’t bad for you.