PepsiCo revenue grows behind pricing initiatives

by Jeff Gelski
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PURCHASE, N.Y. — While its net income stayed basically flat in the first quarter, net revenue for PepsiCo, Inc. rose 4% as the company effectively raised prices. Net income of $1,127 million, equal to 71c per share on the common stock, in the first quarter ended March 24 compared with $1,143 million, or 71c per share, in the first quarter of the previous year. Net revenue of $12,428 million compared with $11,937 million.

Net revenue benefitted from 5.5 percentage points of effective net pricing, which was offset by negative foreign currency translation of 1 percentage point.

“Our first-quarter results reflect the strength of our brands, which allowed us to implement significant pricing actions,” said Indra Nooyi, chairman and chief executive officer of Purchase-based PepsiCo, when results were given April 26. “Effective pricing and packaging initiatives drove 5% constant currency net revenue growth, allowing us to substantially offset approximately $300 million in commodity cost inflation.
“With disciplined pricing now in place, we’re doubling our focus on the other key initiatives for 2012. Our top priorities include stepping up our brand support through increased advertising and marketing, accelerating our innovation, and driving an aggressive productivity agenda that includes a significant restructuring program.”

PepsiCo reaffirmed its guidance for fiscal 2012 in that it expects a decline in core constant currency e.p.s. of about 5% from its fiscal 2011 core e.p.s. of $4.40.

Within PepsiCo Americas Foods, operating profit of $1,150 million in the first quarter ended March 24 marked a drop from $1,159 million in the previous year’s first quarter. Net revenue increased to $4,868 million from $4,652 million. PepsiCo Americas Foods includes Frito-Lay North America, Quaker Foods North America and Latin America Foods.

Within F.L.N.A. in the first quarter, operating profit grew to $780 million from $774 million and net revenue rose to $3,010 million from $2,904 million. Net revenue growth within F.L.N.A. was particularly strong in the convenience store, dollar and food service channels, according to PepsiCo.

Within Q.F.N.A. in the first quarter, operating profit declined to $187 million from $214 million. An inventory accounting change recorded in the prior year contributed 7 percentage points to the decline. Q.F.N.A. first-quarter revenue fell to $623 million from $640 million.

Latin America Foods first-quarter operating profit grew to $183 million from $171 million. Volume gains, positive effective net pricing and productivity initiatives offset commodity cost inflation. First-quarter revenue jumped to $1,235 million from $1,108 million.

Moving to PepsiCo Americas Beverages, first-quarter operating profit declined to $525 million from $558 million, primarily as a result of increased commodity costs. Net revenue declined to $4,448 million from $4,531 million. The impact of refranchising the division’s beverage business in Mexico reduced net revenue by 4 percentage points.

In Europe, first-quarter operating profit increased to $81 million from $63 million. First-quarter revenue jumped to $1,845 million from $1,626 million, which reflected the benefit of acquiring Wimm-Bill-Dann, a Russian food and beverage company with an emphasis in dairy and juice, and 5 percentage points of effective net pricing.

Within Asia, Middle East and Africa in the first quarter, operating profit grew to $148 million from $146 million and net revenue grew to $1,267 million from $1,128 million. Snacks volume increased 16%.

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