PepsiCo 3Q profit climbs on snack, beverage sales

PepsiCo Inc has found its recipe for success in this economic environment: raise prices and grow overseas.

PepsiCo, like many United States companies, recently have faced a balancing act during this period of global economic uncertainty. Many consumer brands from McDonald's to Nike have raised prices as they try to offset their higher costs for ingredients, packaging and fuel. At the same time, they've had to look elsewhere to expand their business as consumers in developed markets like the US have cut back on spending.

PepsiCo, maker of such products as Mt Dew soda, Gatorade drink and Lay's potato chips, showed Wednesday that the emphasis on higher prices and growing its overseas business paid off in the third quarter. The company reported that its profit rose four per cent for the period, beating analysts' expectations.

PepsiCo earned US$2 billion, or US$1.25 per share, for the quarter that ended September 3. That's up from US$1.92 billion, or US$1.19 per share, in the same quarter last year. Excluding charges related to its acquisition of Russian juice and dairy company Wimm-Bill-Dann and other one-time items, earnings were US$1.31 per share. PepsiCo's revenue climbed 13 per cent to US$17.58 billion.

The results beat analysts' expectations of US$1.30 per share on revenue of US$17.11 billion, according to FactSet.

The company increased its sales volume in both snacks and beverages during the period. Its biggest revenue gains came from overseas, with Europe reporting a 37 per cent revenue increase because of higher prices and the addition of Wimm-Bill-Dann. Revenue for Asia, the Middle East and Africa rose 25 per cent on increased prices and volume growth, particularly in emerging markets. The Latin America Foods unit posted a 19 per cent increase in revenue, led by Mexico and Brazil.

PepsiCo Americas Beverages has been its softest segment as consumers have cut back on spending and shown a preference for other drinks.

PepsiCo CEO Indra Nooyi said Wednesday that PepsiCo may have pushed volume too much in years past rather than develop the identity and popularity of its brands more. The company has worked to improve the popularity of some of its brands such as Pepsi Max, which has no calories and has greatly increased its sales.