PepsiCo CEO: ‘Our innovation is becoming more durable’

09-Oct-2014 - Last updated on 10-Oct-2014 at 00:52 GMT

Mtn Dew Kickstart, an ‘energizing’ sparkling beverage with 5% juice, vitamins, and caffeine, has been a hugely successful product launch for PepsiCo

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If you’ve got enough money - and clout - it’s not hard to make a big splash with a new product launch in year one. The real test comes in years two, three and four. And PepsiCo is proving that its innovations are still delivering after the initial hype has died down, claims CEO Indra Nooyi.

Speaking to analysts on the company's Q3 earnings call on Thursday, Nooyi said some key launches were still delivering strong growth in their second year on the market: “Our innovation has become increasingly more durable.”

Nooyi, who told analysts at the Barclays Back to School conference that “we're probably doing twice as much innovation as we did several years ago”, added:

“A number of 2012 and 2013 introductions, Tostitos Cantina, Mountain Dew Kickstart, Lipton Pure Leaf have all achieved more than $100 million in retail sales in their launch year and have generated double-digit retail sales growth in their second year.”

Meanwhile, new launches including Quaker Express Cups and Warm & Crunchy Granola have helped Quaker gain market share, added Nooyi, who unveiled a new stevia-and-sugar- sweetened cola under the ‘Pepsi True’ brand last week.

Whether this is a new normal or not I don’t know

Looking at snacks, Frito-Lay had lost some market share to “premium players”, but had performed strongly in a difficult climate, she said.

“People come in and out of the market and Frito has to be very careful not to react to players who are not long-term players in the marketplace. Whether this is a new normal or not I don’t know, it really depends on the overall environment, but within this environment, Frito has been performing quite well and the share losses have been coming down... Frito has been playing a very, very responsible game.”

As for beverages, Wells Fargo senior analyst Bonnie Herzog said she was encouraged by PepsiCo’s recent initiatives,adding: “We think that PepsiCo’s successful innovation in brand extensions (Mountain Dew Kickstart), line extensions (Real Sugar carbonated soft drinks), and package innovation (glass bottles) will continue to support a favorable trajectory.”

Q3 highlights

In the quarter ended September 6, PepsiCo posted a 5% increase in net profit to $2.01bn, while revenues rose 2% to $17.22bn. Organic revenue growth was up 3.1% driven by price increases and 1% volume growth in snacks and beverages.

Net revenues rose 3% at Frito-Lay North America, declined 3% at Quaker Foods North America, and were flat in PepsiCo Americas Beverages.

Latin America Foods was up 6%; Asia, Middle East & Africa was up 11%, while Europe was down 1%.

Click HERE to read about Nooyi's comments on proposed soda taxes in California.