PepsiCo’s Q2 profit slumps on sluggish sales of trademark soda

PepsiCo on Tuesday reported a 2.4% revenue growth for the second quarter of 2018 to $16.09bn.

However, the results did not mirror the performance of its North American Beverages unit, its largest segment, which declined by 1% to $5.1bn.

The firm’s North American beverages unit has been posting declining sales for four consecutive quarters (since third quarter of 2017), a worrisome trend for the soda giant to consider operating it as a separate unit or spinning it off into a stand-alone public entity or do what its main rival Coca-Cola has done by refranchising them to multiple franchisees.

PepsiCo CEO Indra Nooyi last quarter blamed the drop in sales of its soda unit on increased marketing and advertising spend by its main rival Coke on its cola brand. So she said Pepsi would respond by increasing spending on three of its largest beverage brands – Gatorade, Pepsi and Mountain Dew.

“So we intend to stay the course” and continue to increase advertising and marketing spending through the end of the year, Ms. Nooyi said.

The company’s Chief Financial Officer, Hugh Johnston echoed the same sentiment, saying “those brands will continue to get very strong support”.

Mrs Nooyi noted on Tuesday that the increased marketing has slowed the decline in Pepsi sales in North America.

However, the company saw better performance in its North America Frito-Lay snacks business, which saw a 4% revenue growth to $3.8bn.

Its best performance, however, came from its Europe Sub Sahara Africa segment which grew 11% to $3.1bn. The Latin America business segment posted a modest 1% growth.

Quaker Foods North America declined 5%, while the company’s Asia, Middle East and North Africa division fell 2%.

Overall, PepsiCo reported a 14% drop in profit to $1.82bn from $2.1bn from the same period in 2017.

The firm said it would stand by its financial targets for the rest of the year.

Source: products

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