Pepsi Says Pricing Lifts Results--Update

By Joshua Jamerson Features Dow Jones Newswires

PepsiCo Inc. said higher pricing helped boost results in the latest quarter as volumes of its snacks and beverages in North America were pressured amid shifting consumer tastes.

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Chief Executive Indra Nooyi said first quarter profit and revenue, which topped Wall Street estimates, came "despite challenging food and beverage industry trading conditions in North America and continued volatility in a number of developing and emerging markets."

The Purchase, N.Y., maker of Frito Lay snacks, Gatorade and its namesake cola has been putting an emphasis on products it dubs "guilt-free," which include diet sodas as well as snacks with low levels of sodium and saturated fat, as consumers look for alternatives to sugary snacks and drinks. The company is aiming for sales growth of such products to outpace the rest of its portfolio by 2025.

For example, as bottled water consumption outpaces soda in the U.S. for the first time, Pepsi is trying to get a piece of the premium bottled-water category with LIFEWTR, which made its debut with a Super Bowl ad this year to compete with Coca-Cola Co.'s smartwater.

PepsiCo's chief financial officer, Hugh Johnston, said that LIFEWTR is "a huge success right out of the block," adding that it "continues to sell out as quickly as we can make it."

PepsiCo's beverage volumes were about flat in the latest quarter, with North American beverage segment posting a 1% drop. Rival Coca-Cola Co. reported Tuesday that its volumes world-wide were even with the year-ago quarter.

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Diet Pepsi continues to struggle, but Pepsi Zero Sugar, which was featured during the Super Bowl halftime show, is picking up some of those sales. Mr. Johnston cited a line of unsweetened tea as another alternative.

"Where the consumer wants to go, we're going to have great products," he said.

Quaker Foods, which includes the Rice-A-Roni and Aunt Jemima brands, is hurting as consumers shop more around the perimeter of the store rather in the center aisles. PepsiCo is innovating more with snack bars and working with retailers to try to get store shoppers into the aisles.

PepsiCo's Frito Lay volumes fell 1.5% and Quaker Foods volume fell 1%. However, companywide, organic revenue rose 2.1% from the year-ago quarter.

Earlier this month Pepsi yanked a commercial after a backlash swept across social media. The 2 1/2 -minute spot was developed by Pepsi's in-house Creators League Studio. Analysts are likely eager to hear how the company plans to pivot from its marketing misstep when executives host a conference call later Wednesday morning.

Over all, for the March quarter, Pepsi posted earnings of $1.32 billion, compared with $931 million a year ago. Earnings-per-share of 94 cents topped the consensus estimate of 92 cents. Revenue of $12.05 billion topped estimates of $11.98 billion.

Shares, which have climbed more than 9% so far this year, were inactive in premarket trading.

Jennifer Maloney contributed to this article

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

April 26, 2017 08:30 ET (12:30 GMT)