Pepsi bottles
This year, PepsiCo was reporting earnings growth as a single company.

As PepsiCo, Inc., enjoyed earnings growth (raising guidance as 2015 has proceeded) and emphasized product innovation, management achieved another objective — less talk about splitting into two companies.

Last year, management was under pressure as Nelson Peltz, founding partner in investment firm and PepsiCo shareholder Trian Fund Management, encouraged the company to separate its global snacks and beverages businesses into two independent public companies.

This year PepsiCo was reporting earnings growth as a single company. For the 24 weeks ended June 13, PepsiCo, Purchase, N.Y., achieved net income of $3,201 million, or $2.14 per share, which was slightly above $3,194 million, or $2.08 per share, in the same time period of the previous year. Net revenue of $28,140 million, however, was down 5% from $29,517 million. The first-half performance led PepsiCo to change its target for earnings-per-share growth for the fiscal year to 8% from 7%.

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

“Additionally, our emphasis on productivity continues to help fund investments in our business while also contributing to our margin improvement,” said Indra Nooyi, chairman and c.e.o. of PepsiCo, when second-quarter results were given July 9. “We remain on track to deliver our five-year $5 billion productivity savings through 2019.”

Early in the year, PepsiCo named to its board of directors William R. Johnson, the former c.e.o. of H.J. Heinz Co. and an adviser to Mr. Peltz. Since then, the sniping between Trian and PepsiCo has subsided.
PepsiCo in the current fiscal year was on track to deliver about $1 billion productivity savings and $8.5 billion to $9 billion in cash returns to shareholders. The PepsiCo share price on the New York Stock Exchange has stayed above $90 per share for a good deal of calendar year 2015 after dipping below $80 per share early in 2014.

New product introductions may fuel future earnings growth. Innovation as a percentage of total revenue reached 9% in 2014, Ms. Nooyi said in a July 9 earnings call. New products that have achieved $100 million in annual retail sales or on pace to achieve that figure include Tostitos Cantina, Mountain Dew Kickstart, Doritos Cheetos Fun Multipack, Gatorade Fierce Blue Cherry and Frost Glacier Cherry.

“Our intention is to continue to invest in innovation, build upon our already strong capability base and further sharpen our holistic innovation process to drive greater growth for our customers, create compelling products for our consumers, and ultimately increase the contribution of new products to our total revenue,” Ms. Nooyi said.

Within PepsiCo Americas Beverages, operating profit for the 24 weeks was $1,371 million, up 6%. A number of consumers wanting to avoid aspartame led PepsiCo to drop the sweetener from its Diet Pepsi products in North America. A blend of sucralose and acesulfame potassium replaced aspartame.

Frito-Lay North America had 24-week operating profit of $1,927 million, up 7%. F.L.N.A. reported initial success with a new, smaller 8-oz bag of Lay’s potato chips designed for today’s smaller households.

Operating profit dropped 23% to $231 million for Quaker Foods North America and 12% to $489 million for Latin America Foods. PepsiCo Europe had 24-week operating profit of $434 million, down 28%.