PepsiCo Inc. informed it would improve promotion for its cola brands in the U .S . and consider whether to separate or spin off it’s bottling procedures since it looks to reverse declines in their home market in which it had been aiming for healthier drinks.
The snacks and beverage huge posted larger quarterly revenue and sales as growth in the Frito-Lay food unit as well as in international markets offset sluggish demand for drinks such as Pepsi Cola and Gatorade in North America.
“The issue is in North America and the issue is really the last three quarters,” Chief Executive Indra Nooyi informed analysts on an earnings call.
Company heads are discussing their plan to get the business back on track with greater marketing expending and new products like Bubly sparkling water and a clear, lemon-lime Mountain Dew is working and will take the time to give good results.
Analysis indicates Pepsi’s “Pepsi Generations” campaign, which nods at the brand’s history, has enhanced connectivity to the brand, however it is quite early to determine its effect on sales, Chief Financial Officer Hugh Johnston said. “With advertising, you don’t flip a switch and the sales go up,” he said.
Ms. Nooyi also said the company is thinking whether to run its bottling operations as an independent unit, spin them off into a unique public entity or put them in the hands of multiple franchises. Its chief rival, Coca-Cola Co, is on track to complete a yearslong effort to refranchise its North American bottling system, an activity which has allowed it to significantly reduce costs, and experts have surmised Pepsi can follow suit.
Ms. Nooyi said the company hasn’t ruled anything out and will take its time reviewing the options. “We want to make sure we don’t engage in financial transactions for the sake of financial transactions,” she said.
Experts have raised the idea that Pepsi’s drinks business could be better managed individually from the snacks business . Heads pushed back on the call , saying the two sides are better in sync and more vital to merchants .
Mr . Johnston said Bubly has surpassed expectations in terms of distribution and “has all the signs” of being a product which will stay on , but didn’t give particular sales numbers . The drink grows PepsiCo’s appearance in the rapidly expanding sparkling water market, which grew 15% last year , according to Euromonitor . Ms . Nooyi has said she wishes the company launched Bubly years back .
Ms . Nooyi acknowledged its Gatorade sports drink has been losing market share to new competition but said the trends will reverse by themselves as time passes . One relatively new entrant , Body Armor , unveiled an ad campaign last week that paints Gatorade as outdated and less natural . The same day , PepsiCo said it was introducing an artificially sweetened sugar-free version called G Zero . While asked whether the timing was intentional , Mr . Johnston said , “We’re Gatorade , we announce things on our calendar .”
Overall , PepsiCo revealed revenue of $12 .6 billion and net income of $1 .3 billion , or 96 cents a share on an adjusted basis . Revenue in its North America beverages unit , which adds about one-third of its total sales , decreased 1% , or 2% on an organic basis , which excludes currency variations , acquisitions and divestitures . Organic volume of beverages dropped 3% . The segment’s operating profit decreased 22% . Revenue increased 3% in its Frito-Lay North America sector , and was flat in Quaker Foods North America . Revenue and operating profit improved in international segments .