PepsiCo on Trop50: ‘We’re selling everything we can make’

By Elaine Watson

- Last updated on GMT

Related tags: Pepsico

Trop50 claims to offer the 'great taste of fruit juice with half the calories'
Trop50 claims to offer the 'great taste of fruit juice with half the calories'
Stevia-sweetened fruit drink Trop50 has been the runaway success story in PepsiCo’s US beverages business this year with volumes of the mid-calorie beverage up 50% in the third quarter, PepsiCo has revealed.

In a conference call about its third quarter results yesterday, PepsiCo chief executive Indra Nooyi said the Trop50 range, which adds water and stevia to juice to slash calories by 50%, “continues to perform exceedingly well”.

Volumes of Trop50, which chief financial officer Hugh Johnston said last month had “created a completely new juice platform​”, were up 50% in the quarter, revealed Nooyi.

“And that's on top of the 37% growth we had in the third quarter last year. We are selling everything we can make, and that's a good challenge for us to meet.”

Lay’s Kettle revenue up 20%

In the snacks category, the star performer was the new Lay's Kettle chips range, she said.

“Lay's Kettle revenue was up over 20% in the quarter and year-to-date, we outperformed all other kettle competitors in both volume and value share growth.”

Meanwhile, “Lay's, Doritos, Cheetos and Ruffles each posted solid revenue growth, driven by strong core innovation”​.

While times were tough in the US carbonated soft drinks market, Pepsi Max volumes had nearly doubled over the past two years, while major marketing tie-ups with the X Factor (Pepsi) and Call of Duty: Modern Warfare 3 (Mountain Dew) had been designed to re-invigorate its core brands.

But there was no silver bullet, she said: “Do we have more work to do in North America beverages? Yes, we do. This is a competitive business in a tough environment, and there are no quick fixes.”

There was no update on new mid-calorie launch Pepsi Next.

The sum of PepsiCo’s parts is NOT greater than the whole… (we’re not splitting up)

As for the group strategy, Nooyi firmly rejected the hypothesis - widely discussed following recent corporate re-engineering by Kraft and Sara Lee - that separating the snacks and beverage businesses would generate higher returns for shareholders.

Indeed, PepsiCo’s strength lay in its ability to develop cross-category solutions for customers in two complementary categories while boosting efficiencies by integrating sales, procurement, distribution, IT, R&D and accounting functions, she argued.

"Our Power of One initiative has been the topic of speculation, largely fueled by a number of high-profile corporate split-ups. I firmly believe that PepsiCo's value is maximized as one company. It was created as an integrated snack and beverage business, and its success is tied to this combination.

"This has been true in the past, and will remain in the future.”

Q3 results

PepsiCo, which has a stable of megabrands including Quaker, Fritolay, Tropicana, Gatorade and Pepsi, posted a 13% rise in net revenue to $17.6bn in the third quarter.

Earnings were $1.31 per share, ahead of analysts’ estimates. Global snacks volumes grew 8% while beverage volumes grew 4% over the period.

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