PepsiCo and Coca-Cola went head to head this week over Q3 results

PepsiCo and Coca-Cola went head to head this week over Q3 results

This week, both the Coca-Cola Co and PepsiCo released their third-quarter figures within a day of each other. First up was Coca-Cola, which also beat PepsiCo to the punch in terms of numbers. Sales, profits and volumes were all up, while PepsiCo took a financial hit, including a Q3 10% drop in global beverage sales.

Commentators were quick to defend PepsiCo, however, arguing that the performance marked a turnaround in the drinks and snacks maker's fortunes.

Barron's writer Avi Salzman compared it to Barack Obama's comeback performance against presidential challenger Mitt Romney in the US election debates this week. “Like a certain president in a high-stakes Wednesday-night debate, PepsiCo appears to have stopped the bleeding against its biggest rival,” Salzman said.

The Wall Street Journal said PepsiCo's Americas Beverages numbers looked underwhelming on the surface, with flat organic revenue and a 3% volumes decline.

“But, that decline stemmed from non-carbonated drinks, where volume fell 7%, as PepsiCo stopped selling some juice drinks that were no longer profitable and it declined to engage in a discounting war on packs of bottled water.”

Analysts said that the US turnaround was desperately needed by PepsiCo, which last year lost the number two CSD brand spot in the country as Diet Coke overtook Pepsi. However, the consensus was there is still work to do, with anti-obesity moves in the US that have recently targeted soft drinks not to be ignored. “The turnaround is still a work in progress,” one analyst said. Meanwhile Nasdaq's website reminded everyone that Coca-Cola still has a larger slice of CSDs in the US than PepsiCo and also a better market share in many international markets.

One market where PepsiCo appears to be leading Coca-Cola is China; and there was plenty to read about both companies' performances there.

Coca-Cola took stick for slowing volumes in the country, but blamed it on the country's cooling economy.

“As we look ahead to the next six months, it is reasonable to expect that China’s ongoing economic slowdown may have a short-term effect on our industry and on our business,” Coca-Cola CEO Muhtar Kent told the Financial Times. “In our view, the Chinese economy is undergoing a natural and necessary economic transition as the government places greater emphasis on controlling long-term inflation over injecting short-term economic stimulus.”

PepsiCo, on the other hand, said it was business as usual for their China JV with Tingyi, with PepsiCo CEO Indra Nooyi seeing no sign of the slowdown in recent visits. “From a consumer product perspective, especially small, basic food and beverages you don't really see the impact,” she told investors.

The difference in China between PepsiCo and Coca-Cola is their exposure. PepsiCo's involvement is through Tingyi, in which it owns a 5% stake, a smart move according to some.

“The consumer (in China) is slowing down," an analyst told the FT. "Plus, competition is on the rise as all companies are trying to grow - this isn’t a great combination usually. In some ways, PepsiCo look like they were geniuses in getting out of China when they did.”

Coca-Cola, however, is certainly not giving up in China. Last year, the company announced it is investing US$4bn in the country and Kent told the FT yesterday: “We’re sticking with the programme, if not doing even more.”

He won't be pleased, then, to hear the view of one Chinese analyst quoted yesterday. “With Chinese people increasingly health consciousness, their demands for carbonated beverages are on the decline.”