Sabra 'well on its way' to becoming our next $1bn brand, says PepsiCo

28-Sep-2016 - Last updated on 29-Sep-2016 at 20:20 GMT

Sabra operates what is claimed to be the world’s largest hummus manufacturing facility in Chesterfield County, Virginia

Hummus and dips brand Sabra now generates an estimated $800m in annual retail sales in the US, and is “well on its way to becoming $1bn brand,” according to joint venture partner PepsiCo.

While Sabra - which is jointly-owned by PepsiCo and Israeli food manufacturer Strauss Group – is best known for hummus, it has also started to build a meaningful presence in guacamole, salsa, baba ganoush and Greek yogurt dips and spreads, said PepsiCo CEO Indra Nooyi.

Speaking on PepsiCo’s third quarter earnings call, Nooyi spent several minutes outlining the growth of brands with a healthier product positioning in PepsiCo’s portfolio, noting that Naked’s net revenue (premium fruit, veg juices) had doubled over the last six years with estimated annual retail sales now topping $1bn.

Meanwhile, sports hydration beverage Propel Water, by the makers of Gatorade, “is enjoying renewed success in North America with year-to-date volume up 6%,” said Nooyi, while Pure Leaf (which launched in 2012) “has grown to more than $650m in estimated annual retail sales,” she revealed.

She did not mention Pepsi True, the sugar and stevia-sweetened cola product.

India, China, Russia, 'showed some signs of improvement in Q3'

Asked by analysts on the call to speak to the overall climate PepsiCo is operating in, she said: “We’re in a troubled global economic environment. But in spite of that, I'd say, a lot of the emerging, developing markets in Q3 showed some signs of improvement.

“India is looking good. Even China is looking much [better] than it did in the early part of the year… Then if you come over to Europe, Russia, clearly, we are seeing signs of improvement. And this is even before the oil prices started to stabilize and improve. Eastern Europe still looks all right. Western Europe is not getting worse, so that's a good sign.

“And when you come to Latin America, look, we have good businesses there. And there's no question, Argentina had a troubled year. Brazil is having its share of troubles. But I'd say that, overall, the economy seemed to be holding up.”

naked pressed — Naked’s net revenue has doubled over the last six years. Pictured: Naked Pressed, a new line of cold-pressed, high pressure processed (HPP) juices

Q3, 2016: Strong results in non-carbonated beverages, offset declines in carbonated soft drinks in North America

PepsiCo's net revenue declined 1.9% in the third quarter, dented by foreign exchange translation and the Venezuela deconsolidation [PepsiCo deconsolidated its wholly owned subsidiaries in Venezuela, eliminating their assets and liabilities from its balance sheet, in 2015] while organic revenue grew 4.2%. Adjusted diluted earnings per share (EPS) were $1.40 on revenues of $16bn.

The North America Beverages segment reported +3% organic revenue growth; while Frito-Lay North America notched up organic revenue growth of 3.5%. Organic net revenue was down 2% at Quaker Foods North America, although it continued to gain market share, noted Wells Fargo analyst Bonnie Herzog.

"While the macro environment remains broadly challenged globally and we likely have reached an inflection point for raw material costs returning to inflationary levels, overall the ongoing strength of the US consumer remains evident in PepsiCo's results. We were particularly impressed with North America Beverages [in which strong results in non-carbonated beverages, particularly water and Gatorade (both up mid- to high-single-digits) offset a 3% decline in carbonated soft drinks].

"Further, we were encouraged by sequential improvements in developed and emerging markets, particularly China and Russia, and double-digit revenue growth in several key markets like China, Mexico, and Brazil."