PBG full-year profits beat expectations

PBG full-year profits beat expectations

Pepsi Bottling Group (PBG), the soft drinks bottler, said its carbonated soft drinks (CSD) category needs more marketing and innovation in order to get it “back to the right spot”.

Speaking at the group's full-year earnings conference call yesterday (2 February), CEO Eric Foss said that CSD category performance was “down slightly” over the last year in the US and North America, but added that it had been “more resilient” than the non-carbonated category.

“I think the reality is … to get the category back to the right spot, there’re a variety of things that need to be done, one of which is more marketing, more innovation," said Foss.

"I think getting the value price tag right, which we actually feel pretty good about and just getting more in-store excitement is something else that’ll be needed. So certainly, there’s an opportunity for everybody in the industry to spend their marketing money wisely to try to stimulate more consumer demand,” Foss said.

PBG yesterday reported full-year profits ahead of guidance, despite a slip in sales.

Net profits for the 12 months to the end of December 2009 more than tripled to US$612m.

Volume sales, however, fell by 3% for the year, reflecting 2% falls in the US and Canada, 4% in Mexico and 8% in Europe.

Stifel Nicolaus analyst Mark Swartzberg said that private label carbonated soft drink volume growth has been steadily decelerating in 2009, although branded drinks have shown more promise.

He added yesterday that North America's soft drink environment remains “challenging”, with PepsiCo losing volume share.

“PepsiCo's North America beverages volumes are more than a year into mid single-digit declines, with profit trends worse than that. We have modelled continued volume and profit declines in 2009 and 2010, but declines could be greater than expected.”