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PepsiCo and Coca-Cola’s profit aided by growth in emerging markets

By Helen Glaberson , 21-Jul-2011
Last updated on 21-Jul-2011 at 16:08 GMT

Emerging markets were key to growth for beverage giants PepsiCo and Coca-Cola in the second quarter of 2011.

In response to factors such as high commodity costs, the firms also said they were going to increase prices in the third quarter of 2011.

Pepsico’s net income increased to $1.88bn in the second quarter ending 11 June, up 18 per cent from $1.60bn last year.

Despite “challenging conditions in the North American beverage market” PepsiCo said growth boosted by gains across its worldwide beverage and snacks businesses and the acquisition of Russian dairy and juice company Wimm-Bill-Dann (WBD).

Global beverage volume increased by five per cent, including a three-percentage-point impact from the WBD acquisition, said the firm.

Stressed consumers

Volume performance was led by growth in emerging markets, where organic volume increased four percent in beverages and nine percent in snacks, said PepsiCo.

"Our global portfolio in both snacks and beverages is growing volume and net revenue, our global snacks portfolio, in particular, posted another strong quarter with balanced top- and bottom-line growth. We continue to enjoy robust top-line growth in key emerging markets," said PepsiCo chairman and CEO Indra Nooyi.

However, the CEO said the consumer in developed markets continued to be stressed, with the competitive environment in North America beverages being particularly challenging.

In response, Noovi said the firm was going to increase pricing in the third quarter.

“We remain confident in our ability to continue to profitably grow our overall business, even in this uncertain economic environment," said the CEO.

Emerging markets

Although Coca-Cola’s North American sales were sluggish in the second quarter of 2011 earnings were also lifted due to growth in emerging markets such as China, Russia and Mexico.

In the firm’s results, ending on 1 July 2011, Coca-Cola reported an 18 per cent growth in net income to $2.80bn from $2.38bn last year.

Revenue leapt up by 47 per cent to $12.74bn, driven by last year's purchase of Coca-Cola's North American bottling operations, price increases, and a six per cent increase in foreign exchange rate increases.

Volume growth

Worldwide volume grew by six per cent in both the quarter and year-to-date.

Excluding new cross-licensed brands such as Dr Pepper, worldwide volume grew five per cent.

Volume rose six per cent in Latin America, five per cent in Europe, seven per cent in the Eurasia and Africa segment and seven per cent in the Pacific region.

North American volume recorded a one per cent growth.

The firm said it has continued to see a growth in sparkling beverages, with worldwide brand Coca-Cola volumes increasing by 4 per cent in the quarter driven by a number of global markets, such as China (24 per cent), Russia (17 per cent), Mexico (7 per cent), and France (7 per cent).

Prices rises

In a bid to offset high commodity prices, Coca-Cola raised its prices by one to two per cent in the second quarter and, like PepsiCo is maintaining its plan to increase them further during the second half of the year, stating a three to four per cent rise.

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