PepsiCo is kicking off the quarterly reporting season with a bang. For the second time this year, the crisps and soft drinks manufacturer has raised its outlook, as price increases are well able to compensate for volume declines.
Plenty left for indulgences
Despite a 1 % drop in overall volume at PepsiCo in the last quarter (ending 3 September), the food giant recorded a 9 % increase in sales. Effective net prices have risen by 17 % – and consumers continue to accept this. People eat out less to save money, but treat themselves at home – for example with Lay’s crisps and Tropicana fruit juice.
Total sales reached 21.97 billion dollars and net profit went up to 2.7 billion dollars – even higher than the net profit of 2.22 billion dollars recorded a year ago. In Europe, PepsiCo grew by almost 1 %. It is already the 15th consecutive quarter that the company has beaten profit forecasts, and even the 20th time in a row that the company has beaten revenue forecasts, FactSet calculated.
Setting the tone?
Such is the satisfaction that PepsiCo is once again raising its full-year forecast. In July, it had already raised its revenue growth forecast from 8 to 10 %, and now Coca-Cola’s rival is already expecting a 12 % rise. However, the group believes that costs will continue to rise in the second half of this year. In response, the company will accelerate its cost-control initiatives, including smaller packaging and cost savings wherever possible.
As the first FMCG giant to announce quarterly results, the Pepsi producer could set the tone for its peers. If so, it will be a festive earnings season for brand-name manufacturers, despite the resistance they face from supermarkets. The latter argue that consumers are increasingly opting for private labels and are encouraging this trend with hard-hitting advertising campaigns. It remains to be seen whether other brands will prove as irreplaceable as Pepsi and Lay’s.