In push to get healthy, Pepsi may have pushed too hard in 3Q
PURCHASE, N.Y. (AP) — A shift by PepsiCo from sodas to more healthy and low-calorie drinks crimped sales in the third quarter, even with strong snack sales pushing profits up 8 percent compared with last year.
PepsiCo has attempted to walk in step with American tastes, which potentially means less Pepsi and Mountain Dew.
CEO Indra Nooyi acknowledged Wednesday that the company gave too much shelf space to its newer, low-calorie drinks and spent too much marketing them.
The transformation at PepsiCo will continue, but the company plans to return more of its focus to the brands that drive sales, including Pepsi and Mountain Dew, and it will promote them accordingly.
Nooyi also blamed the sales slump on cooler summer weather, which hurt Gatorade the most. Revenue from beverages in North America, PepsiCo's biggest market, fell 3 percent.
"Our performance did lag the industry," said Nooyi. "No question about it."
Snacks offset some of those declining sales on the drink side, however.
The North America Frito-Lay business rose 3 percent thanks to higher demand for its jalapeno-flavored Cheetos and Ruffles chips. There is an "increasing desire for bold flavors" on which PepsiCo has been able to capitalize, Nooyi said.
The company reported net income of $2.14 billion, or $1.49 per share, in the 12 weeks ending Sept. 9. That compares with $1.99 billion, or $1.37 per share, in the same quarter a year ago. Adjusted earnings were $1.48 per share, beating the $1.42 per share that analysts expected, according to Zacks Investment Research.
Revenue rose 1 percent to $16.24 billion, short of the the $16.41 billion analysts had projected.
The Purchase, New York, company said it now expects its earnings for the full year to be $5.23 per share, up from its previous forecast of $5.13 per share. Wall Street has projected full-year per-share earnings of $5.16.
Shares of PepsiCo Inc. fell $1.44, or 1.3 percent, to $107.69 shortly in early trading