Accessibility/Mobile Features
Skip Navigation
Skip to Content
Editorial News
Business
Classified Sites

The Canadian Press - ONLINE EDITION

PepsiCo sticks by North American drinks unit despite struggles

FILE - In this photo taken May 16, 2011, file photo, the Pepsi logo is seen on a delivery truck at Walmart in Springfield, Ill. PepsiCo Inc. reports quarterly financial results before the market opens on Thursday, Feb. 13, 2014. (AP Photo/Seth Perlman, File)

Enlarge Image

FILE - In this photo taken May 16, 2011, file photo, the Pepsi logo is seen on a delivery truck at Walmart in Springfield, Ill. PepsiCo Inc. reports quarterly financial results before the market opens on Thursday, Feb. 13, 2014. (AP Photo/Seth Perlman, File)

NEW YORK, N.Y. - PepsiCo plans to hang onto its struggling North American drinks unit, with hopes that the introduction of naturally sweetened, lower-calorie sodas will help revive sales.

The company has been under pressure to spin off the business and focus on its stronger Frito-Lay snack unit, most notably by activist investor Nelson Peltz of Trian Fund Management.

The calls for a split come as PepsiCo's drinks, which include Mountain Dew, Tropicana and Aquafina, have lost ground to bigger rival Coca-Cola Co. in recent years. U.S. soda consumption in general has also been on the decline, with people worried about the calories in regular soda and the artificial sweeteners in diet sodas.

But PepsiCo said Thursday that it concluded after an "exhaustive" review involving "bankers and consultants" that its current combined snacks and drinks structure would maximize shareholder value.

"That decision has been made for a good period of time going forward," Chief Financial Officer Hugh Johnston said in a call with reporters.

The strength in snacks and weakness in drinks played out again in the company's fourth quarter, with Frito-Lay delivering volume growth of 3 per cent in North America. Volume for carbonated soft drinks, by contrast, fell in the "mid-single digits" despite stepped-up marketing. Non-carbonated drinks, which include Gatorade and Aquafina, increased in the "low-single digits."

Still, CEO Indra Nooyi stressed that PepsiCo's drinks and snacks are complementary to each other. She also downplayed the company's exposure to colas, noting that they make up less than 25 per cent of North American beverages.

Nooyi also noted that PepsiCo plans to test new natural sweeteners in carbonated drinks this year that could help improve results. Dr Pepper Snapple Group Inc. announced similar plans this week. Coca-Cola, which introduced a similar concept in Argentina last year, reports next week.

In the meantime, PepsiCo also announced another cost-cutting program that will save $5 billion over the next five years from actions including factory closures and investments in automated manufacturing. The company says about 40 per cent of the savings will come from work force cuts, although it did not specify how many jobs would be affected.

PepsiCo has about 278,000 employees, according to FactSet.

For the period ended Dec. 28, the company earned $1.74 billion, or $1.12 per share. That compares with $1.66 billion, or $1.06 per share, a year ago.

Excluding charges and other items, earnings were $1.05 per share, topping the $1 per share Wall Street expected.

Revenue rose 1 per cent to $20.12 billion, helped by results in Latin America and Asia. Analysts on average were looking for revenue of $20.1 billion, according to FactSet.

For the year, PepsiCo earned $4.32 per share, up from $3.92 per share in the previous year.

PepsiCo Inc.'s annual dividend will be raised by 15 per cent. It will boost 2014 share repurchases to about $5 billion.

Its stock was down 3 per cent at $78.89 in morning trading.

  • Rate this Rate This Star Icon
  • This article has not yet been rated.
  • We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high. If you thought it was well written, do the same. If it doesn’t meet your standards, mark it accordingly.

    You can also register and/or login to the site and join the conversation by leaving a comment.

    Rate it yourself by rolling over the stars and clicking when you reach your desired rating. We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high.

Sort by: Newest to Oldest | Oldest to Newest | Most Popular 0 Commentscomment icon

You can comment on most stories on brandonsun.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

There are no comments at the moment. Be the first to post a comment below.

Post Your Commentcomment icon

Comment
  • You have characters left

The Brandon Sun does not necessarily endorse any of the views posted. Comments are moderated before publication. By submitting your comment, you agree to our Terms and Conditions. New to commenting? Check out our Frequently Asked Questions.

letters

Make text: Larger | Smaller

Brandon Sun Business Directory
Submit a Random Act of Kindness
Why Not Minot?
Welcome to Winnipeg

Social Media

Canadian Mortgage Rates