PepsiCo reports strong start to year despite struggles with soda business

PepsiCo on Thursday reported its first quarter results for 2018, with revenue growing 4% to $12.6bn from $12bn in 2017. The growth was helped by a 3% sales rise in its Frito-Lay North American snacks business.

On the International front, the company reported strong growth in Latin America and Europe Sub-Saharan Africa, which recorded 14% and 15% growth, respectively.

The soft drinks giant said its Quaker Foods North American division had flat sales, while its North American Beverages unit, which houses its soda drinks declined by 1%.

“North American beverages sector continues to work through some challenges,” said the company’s CEO Indra Nooyi.

“The overwhelming driver is that, despite moderately increasing our media on trademark Pepsi over the past three years, our share … has fallen dramatically relative to our key competitor, who has substantially stepped up their media spending on colas over the past two years,” Nooyi added.

The company said it plans to step up promotional spend on its trademark Pepsi-Cola, and improve brand communication as it launches its Pepsi Generations ad campaign.

PepsiCo has been faced with choosing whether to invest more resources into its newer on-trend drinks while supporting its profit-making but slower growing core fizzy drinks like Pepsi-Cola.

The company said it benefited from the new US Corporate tax rate which dropped to 18.3% in Q1 from 22.7% last year. However, any savings it received from the new tax rate was offset by announced bonuses it paid out to some U.S.-based employees.

The firm said that net income grew 2% in the quarter to $1.34bn.

The soft drinks maker announced it was weighing whether to spin-off its bottling unit; however, no final decisions have been made.

PepsiCo reaffirmed its 2018 outlook, with full-year organic revenue growth of at least 2.3 percent.

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