PepsiCo eyes cost cuts to add fizz

Shares of New Yorkbased company rose less than 1% to $114.75 in early trading

PepsiCo Inc is getting a lift from higher prices at its Frito-Lay business and a push to cut costs, even as volume growth for its snacks and drinks stalled in North America.

The seller of Doritos, Sabra hummus and Mountain Dew posted second-quarter earnings yesterday of $1.50 (Dh5.51) a share, excluding some items. That exceeded the $1.40 average of analysts’ estimates.

While the food-and-beverage giant benefited from raising prices on chips and other snacks, organic volume didn’t increase in the Frito-Lay division. PepsiCo did harness growth from new, better-for-you products and continued its program of cost cuts, two initiatives led by Chief Executive Officer Indra Nooyi. The measures aim to annually save at least $1 billion, which the company is reinvesting in research and development and innovation.

The gains come after a disappointing first quarter for FritoLay, when the unit saw its first volume decline in North America in about five years. The company said at the time that the decline was temporary, impacted by the timing of Easter and New Year’s.

The company raised its 2017 earnings target to $5.13 a share, excluding some items, from previous forecast of $5.09.

Nooyi cited “pockets of macroeconomic challenges and increasingly dynamic retail and consumer landscapes” in a statement accompanying the results.

Shares of Purchase, New Yorkbased PepsiCo rose less than 1 per cent to $114.75 in early trading. The stock had climbed 9.2 per cent this year through Monday’s close. Sales gained 2 per cent to $15.7 billion last quarter. That beat the average projection of $15.57 billion.

PepsiCo has emphasised expansion of its so-called everyday-nutrition products, which include nutrients like grains, fruits, vegetables or protein. That category also encompasses water and unsweetened tea. Those products helped fuel results.

The company has also focused on a broader “guilt free” line-up that includes any drinks with fewer than 70 calories — plus food with lower levels of sodium and saturated fat. PepsiCo has faced particular trouble trying to reinvigorate its flagship diet softdrink brand. a