Comment - PepsiCo continues growth drive
The bottler deal appears to be one of PepsiCo’s shrewdest business moves
PepsiCo's growth plans certainly appear to be on track as the bottler deal it signed in March looks to be one of its shrewdest business moves yet.
Shares rose US$1.32 or 2.13% to reach $63.37 at 10.10am ET yesterday (20 July), which is a pretty notable gain, particularly considering earnings growth for its second quarter was rather standard and unexciting.
The US soft drinks maker saw its quarterly profits drop 3%, which the company attributed to currency fluctuations and costs to integrate its bottlers.
Last August PepsiCo announced the $7.8bn acquisition of its two largest bottlers. With a growing number of consumers in North America migrating from soda to healthier beverages, owning its bottlers was no doubt a shrewd move, allowing the company to be more nimble in its route to market, Morningstar analyst Philip Gorham recently said in a research report.
But as predicted, The Coca-Cola Co wasn’t far behind, with its bottler acquisition in February mimicking PepsiCo's deal.
However, PepsiCo may well steal the lead here as its global scope stretches far beyond beverages to include Frito-Lay and Quaker.
That said, PepsiCo CEO Indra Nooyi insisted yesterday that the company is focused on continuing to transform its beverage portfolio in North America.
“The investments we made last year are coming to bear fruit,” she said on a conference call with analysts.
The firm’s second quarter results surpassed analysts’ forecasts by a comfortable margin and its US drinks business benefited from the launch of a new Gatorade line, which PepsiCo said in the call would be the focus of further innovation in the near future.
PepsiCo is certainly recovering its stride,” Credit Suisse analyst Carlos Laboy told the Atlanta Journal. “The resumption of consistent and quality earnings should establish the basis for outperformance” despite a murky economy.
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