PepsiCo posts higher earnings
Despite there are fewer people drinking sodas, PepsiCo released its quarterly report that shows higher quarterly earnings on Wednesday. The company credits its earnings on its successful snack business plus a larger global reach. Therefore, it used those aspects to compensate for the continuing declines in sales in the soft drink market across the U.S.
CEO Indra Nooyi spoke to analysts on Tuesday. Nooyi said about 40 percent of Pepsi’s North American drinks are made up of carbonated beverages. Those figures exceeded some 50 percent of the company’s beverages just a decade ago. The change has been blamed on a “fundamental shift” in consumer preferences.
As people seem to focus more on healthier and more natural options, the soft drink category is seeing a decline of at least 3 percent per year. Nooyi noted that during the last few months the decline in diet soda popularity has accelerated as people have begun saying that they don’t want artificial sweeteners. The diet drink decline is moving more rapidly than the soda maker had ever anticipated, she added.
She said that for Pepsi to stay a leader in the soda business, they must work diligently during the next two to three years to come up with new, innovative products, so they must work to find a new, safe low calorie sweetener that consumers are willing to accept in their products. Therefore, she is basically saying that PepsiCo must work to adapt to the changes that are occurring in the soda industry.
Coca-Cola, the company’s leading competitor, released its earnings report on Monday. Coke indicated it has seen its sales volume improve by 2 percent during the last quarter. Those figures were mostly credited to successful offerings of non-carbonated and non-soda beverages.
After the report, PepsiCo’s shares jumped 1.6 percent to hit $81.89 in early trading. The company’s net income was $1.91 billion, $1.23 per share during the third quarter. That is an increase of 1 percent from a year ago, when net income was $1.21 per share, or $1.90 billion. With items excluded, earnings set at $1.24 per share, which is higher than the expected $1.17 per share.