PepsiCo looking to leverage Quaker

by Eric Schroeder
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Quaker Real Medleys oatmeal, PepsiCo
PepsiCo is working with its retail partners in the United States to leverage the Quaker brand.

PURCHASE, N.Y. — One of PepsiCo, Inc.’s five areas of transformation as part of its Performance with Purpose vision revolves around making healthier foods and beverages. The company’s Quaker Oats business is a natural fit to realize that vision, said Indra K. Nooyi, chairman and chief executive officer.

As part of an April 25 conference call held in conjunction with the release of PepsiCo’s first-quarter results, Ms. Nooyi said the company has hit the mark on health and wellness in the United Kingdom with the Quaker Super Goodness brand of porridge. Now, the company is working with its retail partners in the United States to leverage the Quaker brand.

Indra Nooyi, PepsiCo
Indra K. Nooyi, chairman and c.e.o. of PepsiCo

“I’d say the Quaker business internationally, outside the United States, is doing very well,” Ms. Nooyi said. “(We’re seeing) solid growth, we’re entering new markets, it’s doing very, very well. In the U.S. … the Quaker hot cereals business I’d say, over the past few years, has been flat to very slightly down. And the only reason why the overall portfolio looks negative is because its center-store business in grocery stores and the overall center-store category is down high single-digits, sometimes even low double-digits in some quarters. And so while we are outperforming the center-store categories handsomely, I think our next challenge is, how do we leverage our relationships with retailers to reinvent center store?”

Ms. Nooyi said PepsiCo is in the process of having that conversation with its retailers, asking them how PepsiCo can help them rethink the center store so that it can bring growth back to that category.

Quaker Breakfast Flats, PepsiCo
PepsiCo is asking retailers how it can help them rethink the center store so that it can bring growth back to that category.

“We need to do that in order to bring interest back to that whole cereal aisle and therefore Quaker,” she said. “By itself, Quaker remains a much-loved brand, and it’s profitable. And our hope is that with the rejuvenation of center store, our categories grow, too.”

Net income at PepsiCo, Inc. in the first quarter ended March 25 totaled $1,318 million, equal to 91c per share on the common stock, up 41% from $931 million, or 64c per share, in the same period a year ago. Net revenue in the quarter increased 2% to $12,049 million from $11,862 million.

Operating profit in the company’s Frito-Lay North America division totaled $1,060 million in the first quarter, up 4% from the same period a year ago, on a 2% increase in sales to $3,499 million.

Frito-Lay snacks, PepsiCo
Operating profit in PepsiCo’s Frito-Lay North America division totaled $1,060 million in the first quarter.

Quaker Foods North America posted operating income of $164 million during the quarter, down 1% from $166 million a year ago. Revenues for the division also were lower, falling 3% to $598 million from $617 million.

Operating profit in the North America Beverages unit totaled $505 million, up 4% from $485 million, while sales increased 2% to $4,460 million from $4,361 million. 
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