PepsiCo’s beverage business bounces back

NEW YORK: Indra Nooyi is stepping aside amid signs of a turnaround in PepsiCo Inc’s drinks business.

The company’s struggling North American beverage unit returned to growth in the third quarter, helping the company beat earnings estimates as the longtime chief executive officer hands the reins to deputy Ramon Laguarta today.

The maker of Mountain Dew and Tostitos also got a boost from its Frito-Lay unit, the salty-snack powerhouse that has buoyed Pepsi amid a drop in soda consumption.

“The portfolio continues to work very well,” chief financial officer Hugh Johnston said in an interview.

A lower tax rate helped boost core earnings per share to US$1.59, two US cents above the average prediction from analysts.

Pepsi warned that full-year core earnings per share would be US$5.65, down from its prior expectation of US$5.70, citing the strong dollar.

PepsiCo’s shares were little changed in early trading yesterday.

They had fallen 7.7% this year through Monday, while Coca-Cola Co rose 0.8%.

Amid its recent slump, Nooyi has vowed to fix the beverage unit.

The key business has been a sore spot for Pepsi as consumers increasingly turn away from sugary drinks.

In addition to pursuing cost cuts to boost profit, Nooyi has diversified the company’s portfolio, adding healthier options to adapt to changing preferences.

In the quarter, Pepsi’s key drinks business got a boost from core brands including Pepsi, Mountain Dew and Gatorade.

Still, operating profit slipped 14% in the quarter as the unit continued to be battered by higher aluminum and freight costs.