PepsiCo sees silver lining in Q3 despite being weighed by a strong dollar

PepsiCo said on Tuesday that third quarter profit grew 16% to $2.49bn showing signs of renewed consumer demand for its brands including its namesake cola and other beverages.

While the firm’s Frito-Lay North America snacks business did a lot of the heavy lifting with 3% sales growth in the third quarter, the company’s flagship North America Beverage unit came back to life with a 2% growth, helped by a strong marketing push, albeit at a cost as Operating Profit for the business unit declined by 11% as a result of the increased marketing spend as well as rising transportation and commodity costs.

The company said it initiated price increases in September to mitigate the rising costs, the results of which won’t be known until the fourth quarter.

PepsiCo Chief Financial Officer, Hugh Johnston, said the company will continue with the increased marketing spend for its North America beverage business to sustain the growth.

Elsewhere, the company’s Europe Sub-Saharan Africa business unit grew 2% to $3.2bn.

The Quaker Foods North America, and Asia, Middle East and North Africa business segments both declined by 2% respectively, while Latin America business segment recorded flat sales in the three months to 8th September and 3% growth in the first nine months of the year.

Third quarter net sales grew 1.5% to $16.49bn and 3% to $45.1bn in the nine months to September.

Looking forward, PepsiCo said it expects 3% revenue growth for the full year, with 1% lower profits due to the negative effects of a strong dollar.

The release of the third quarter results marks the beginning of a transitional shift in leadership for PepsiCo as its long-serving CEO Indra Nooyi’s 12 year tenure ends. Spaniard, Ramon Laguarta will assume the CEO role of the soft drinks giant beginning October 3rd.

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