PepsiCo has seen volumes pressure in North America

PepsiCo has seen volumes pressure in North America

The “clock is ticking” on PepsiCo's flatlining US beverage business as Coca-Cola Co's aggressive price promotions further jeopardise volumes, an analyst has warned.

Wells Fargo's Bonnie Herzog said in a note today (25 July) that PepsiCo must prove its integrated snacks and drinks model “does more than simply subsidize ongoing weakness in North American beverages”. The beverage unit also saw negative pricing as PepsiCo followed a promotions strategy that Herzog said has offset volumes declines.

However, she added: “This strategy may fall apart if Coca-Cola maintains its heavy promotions, which we suspect could accelerate PepsiCo volume declines and lead to the acceleration of negative top-line growth.”

In Q3 results released yesterday, PepsiCo posted an increase in profits and sales, however gains mostly came from snacks and international sales, while North American beverages faced “ongoing challenges”, Herzog said.

The warning follows pressure from PepsiCo investor Nelson Peltz for PepsiCo to hive off its beverage unit and operate it as a separate company. Peltz last week said PepsiCo's structure “just doesn't work any more”, while yesterday PepsiCo CEO Indra Nooyi suggested the company is to announce structural changes early next year.

Stifel analyst Mark Swartzberg said today that the changes are only likely to affect PepsiCo's North Amercian beverage unit and not alter its global structure.