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April 17, 2003

US: Pepsi income up but CSD volumes decline

Soft drinks and snack food producer PepsiCo saw its net income grow 13% to US$777m for the first quarter, with earnings per share for the period up 17% to US$0.45. The company was boosted by a reduction in costs relating to the Quaker merger. But carbonated soft drink volume in the key North America region fell 2%, dragged down by declines in the Pepsi and Mountain Dew brands.

Soft drinks and snack food producer PepsiCo saw its net income grow 13% to US$777m for the first quarter, with earnings per share for the period up 17% to US$0.45.


The company was boosted by a reduction in costs relating to the Quaker merger. But carbonated soft drink volume in the key North America region fell 2%, dragged down by declines in the Pepsi and Mountain Dew brands.


Chairman and CEO Steve Reinemund said: “We’re very pleased with our earnings growth this quarter. All of our divisions contributed to that growth. We faced a tough global macro-economic environment and a difficult comparison with last year’s 16% earnings per share growth in the first quarter. We’re off to a good start on the year with healthy businesses and lots of exciting new products and marketing programs to drive our growth over the balance of the year.”


Total servings of Pepsi products sold worldwide increased 3% in the quarter of, with servings of snacks worldwide and worldwide servings of beverages both growing 3%.


Total volume for PepsiCo Beverages North America for the first quarter of 2003 increased approximately half a percent, lapping strong 5% growth in the first quarter of 2002. The growth was all organic and reflected 8% volume growth in non-carbonated beverages (non-carbs), offset by carbonated soft drink (CSD) volume, which declined by 2%.


“The first-quarter 8% increase in PBNA’s non-carb portfolio was driven by continued double-digit growth in Aquafina water; continued double-digit growth in Gatorade, reflecting strong growth in Gatorade isotonics and the continued success of Propel Fitness Water; mid single-digit growth in chilled juices, led by Tropicana Pure Premium, which saw a sequential improvement in volume even as Tropicana continued to successfully execute its strategy to close the price gap between every day and promoted prices,” the company said.


However the fall in CSD volume was driven by declines in the Pepsi and Mountain Dew trademarks. PepsiCo said the quarter was being compared against strong 4% growth in the first quarter of 2002.


However CSD volume was positively impacted by Sierra Mist, which increased distribution to over 90% of the US, and had strong growth even in markets where it was previously distributed. There was also growth in diet CSDs, led by Diet Pepsi.
 
Going forward, Pepsi said its drinks division had a strong marketing calendar planned for the second quarter, with news in both carbonated and non-carbonated beverages, including the introduction of Mountain Dew LiveWire and The “Pepsi Play for a Billion” promotion.

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