(Reuters) – PepsiCo Inc’s quarterly sales and profit beat Wall Street estimates on Wednesday, as the beverage maker’s advertising and marketing push helped drive sales of its snacks, sparkling waters and low-sugar sodas globally.
FILE PHOTO: Cases of Pepsi are shown for sale at a store in Carlsbad, California, U.S., April 22, 2017. REUTERS/Mike Blake/File Photo
Shares of PepsiCo hit a record high of $125.92 in morning trading after the company said its core sales grew at the fastest pace in more than three years.
The results come as a boost for Chief Executive Officer Ramon Laguarta who took over from Indra Nooyi six months ago. Under his watch, Pepsico has spent more on advertising, raised production capacity, while tweaking its supply chain to focus more on healthier snacks and beverages.
The changes have helped Pepsi respond better to shifting consumer preferences at a time when packaged food and beverage companies are battling high transportation and labor costs, while trying to find the right product mix to cater to a more health-conscious consumer.
The company has modified some of its recipes using healthier ingredients and is tinkering with product sizes and marketing to keep shoppers reaching for its products.
PepsiCo recently launched a new flavor of Cheetos under its Simply snack brand and introduced a blackberry and peach flavor for its bubly sparkling water that was promoted by singer Michael Buble.
As a result, advertising and marketing spending rose 11 percent, CFO Hugh Johnston told Reuters.
“It is clear evidence that the advertising that we’ve been putting into the market place is working … may be most encouragingly the Pepsi business,” Johnston said.
Sales of Pepsi sodas, which include Diet Pepsi and Pepsi Zero Sugar, grew 3 percent, driving organic sales at its North America beverage unit, its biggest revenue generator.
Lay’s potato chips, Off The Eaten Path snacks and bubly also sold well, he said.
Total organic or core sales – a keenly watched metric that strips out currency fluctuations and acquisitions – rose 5.2 percent.
PepsiCo maintained its target of 4 percent organic revenue growth and earnings of $5.50 per share for the year.
“With guidance unchanged, Pepsi may be in a position to increase spending behind its brands. Something we feel is strategically important and will bear fruit down the road,” Altman Advisors CEO Benjamin Altman said.
Excluding items, PepsiCo earned 97 cents per share. Net revenue rose 2.6 percent to $12.88 billion. Analysts were expecting profit of 92 cents and revenue of $12.70 billion, according to Refinitiv’s IBES.
Reporting by Nivedita Balu in Bengaluru; Editing by Anil D’Silva