PepsiCo reported strong results in its first quarter, as its three North American divisions saw positive impact on both net revenue and volume growth due to Covid-19.
As a result of the coronavirus pandemic, PepsiCo has witnessed increased consumer demand, particularly in its food and snacks business.
In the three months ending 21 March, PepsiCo reported net revenues of $13.88 billion, representing a 7.7% increase compared to last years results. The company’s food and snack business represented approximately 55% of its consolidated net revenue.
While PepsiCo has benefited from an increase in at-home consumption, the company noted a decrease in immediate consumption and away-from-home channels which has negatively impacted its beverages business.
PepsiCo Beverages North America and Frito-Lay North America – PepsiCo’s two largest divisions – both reported 7% growth in net revenue to $4.84 billion and $4.07 billion, respectively.
Frito-Lay witnessed 5% volume growth driven by double-digit growth in its Cheetos and Tostitos brands and variety packs, partially offset by a decline in its Mexican tortilla chip Santitas.
PepsiCo Beverages’ revenue, meanwhile, was driven by 14% volume increase in non-carbonates beverages with strong performance by its overall water portfolio, Gatorade sport drinks and Lipton ready-to-drink teas. However, the drinks unit’s operating profit fell 24% reflecting the impact of certain charges as a result of the pandemic.
Within the Quaker Foods North America unit, net revenues increased 7% to $634 million driven by double-digit growth in oatmeal, ready-to-eat cereals and its Rice-a-Roni brand.
In its Europe segment, its net revenue grew 14% to $1.84 billion supported by the $3.2bn acquisition of SodaStream due to an extra month of sales for the carbonated water machine maker.
“From community relief efforts to making, moving, and selling our products, PepsiCo employees around the world overcame immense challenges and disruptions. Our first quarter results reflect these efforts and the agility of our business which delivered high single-digit net revenue growth,” said PepsiCo Chairman and CEO, Ramon Laguarta.
Laguarta added: “This gives us confidence that the investments behind our Faster, Stronger and Better framework are working – as we invest in our brands, supply chain and go-to-market systems, manufacturing capacity, capabilities and culture, and our society by integrating purpose into everything we do.”
Despite a strong first quarter, PepsiCo, like Coca-Cola, also withdrew its 2020 guidance because of uncertainty in relation to Covid-19.
Within its financial report, PepsiCo announced that it had closed its $3.85 billion acquisition of Rockstar Energy Beverages and signed a new distribution agreement with Vital Pharmaceuticals to become the exclusive distributor of Bang Energy beverages in the US.
According to PepsiCo: “Together, these brands coupled with Mountain Dew, position PepsiCo to better participate and capture its fair share within an attractive and highly profitable category.”
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