Analysis - PepsiCo must plug North American volumes leaks
PepsiCo has lost beverage volumes in North America
PepsiCo's North American beverage volumes will have dropped 20% in the four years before 2015 if current rates of decline continue, an analyst has warned.
Wells Fargo's Bonnie Herzog noted today (17 October) that the North American CSD category is “challenged” and that PepsiCo is “competing in a highly competitive marketplace”. However, Herzog added that there is “still meaningful work to be done” by the company to combat falling beverage volumes.
“We therefore anxiously wait to hear from PepsiCo about any structural changes that may be forthcoming and will continue to remain somewhat cautious … until it demonstrates evidence that beverages can return to top-line growth,” Herzog said.
In third-quarter results, released yesterday, PepsiCo's North American CSD volumes fell by mid-single digits. Non-carbonated beverage volumes declined low-single digits. The declines follow falls in previous quarters for PepsiCo, however the Coca-Cola Co, which released its Q3 results on Tuesday, saw CSD volumes in North America stay flat as overall volumes in the region climbed by 2%.
Meanwhile, CLSA analyst Caroline Levy said in a note today that, despite the volume declines, PepsiCo still managed to maintain its North American beverage margins in Q3 by increasing price mix by three percentage points. Coca-Cola's price mix remained flat, Levy added.
“PepsiCo appears to be running CSDs for profitability and looking to non-carbs for beverage growth,” the analyst said.
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