PURCHASE, N.Y. — Ramon L. Laguarta, who took over as the chairman and chief executive officer of PepsiCo, Inc. this past October, often sums up his priorities for the company in three words — Faster, stronger, better. To meet his expectations the company is building new capabilities, strengthening its brands and investing in its capacity to grow. Based on PepsiCo’s second-quarter performance, his priorities are having a positive impact.
Net income for the quarter ended June 15 totaled $2,035 million, equal to $1.44 per share on the common stock, and an improvement of 12% over the same period of the previous year when the company earned $1,820 million, or $1.28 per share.
Sales ticked up 2.2% to $16,449 million from $16,090 million the year prior.
The company is making several investments to transform PepsiCo and accelerate top-line growth to a range of 4% to 6%. Such investments include additional advertising and marketing spending, data analytics to sharpen consumer insights, manufacturing capacity and e-commerce capabilities. The company has undertaken a number of productivity programs to save money that is being reinvested.
“If you think (about) what we’ve been doing, we’ve been investing in what you could call more short-term levers of acceleration,” Mr. Laguarta said July 9 during a conference call to discuss the second-quarter results.
The initiatives led to positive sales growth in two of the company’s largest business units: PepsiCo Beverages North America and Frito-Lay North America. Beverage unit sales rose 2% to $5,322 million during the quarter from $5,193 million the year prior. Operating profit slipped 8% to $690 million from $747 million.
Mr. Laguarta said the sales growth was attributable to price realization in the company’s Pepsi and Mountain Dew brands.
“And our ready-to-drink coffee and water volumes grew in the high and mid-single digits, respectively,” he said. “We’re encouraged by the steady improvement we’ve seen in the business and we believe that, as we execute our planned investment agenda, we’ll see a return to sustained competitive performance.”
Frito-Lay North America sales rose 4.5% to $4,010 million from $3,837 million the previous year. Operating profit rose 4% to $1,249 million from $1,200 million.
“We delivered good net revenue growth in our key trademarks, including Lay’s, Doritos, Cheetos and Ruffles,” Mr. Laguarta said. “In addition, we posted good growth across all channels in the U.S., led by high single-digit growth in convenience and dollar stores. We continue to invest across the business with the aim to drive sustainable better-than-industry growth, and this includes investing in plant and warehouse capacity, routes, sales technology, enhanced consumer and shopper data and insights, and brand media.”
Mr. Laguarta added that he sees a “tailwind” propelling PepsiCo’s snacks business.
“We’re seeing, in our snacks business, macro snacks, pretty healthy growth,” he said. “We’re seeing good acceleration versus previous years. The number of occasions are going up. The price per occasion is growing nicely. And we’re capturing above fair share of that growth as a company.”
PepsiCo’s net income during the first half of fiscal 2019 totaled $3,448 million, equal to $2.44 per share, and an increase of 9% when compared to the first half of fiscal 2018 when the company earned $3,163 million, or $2.21 per share.
Sales during the six-month period rose to $29,333 million from $28,652 million the year prior.