The beverage giant PepsiCo (PEP) came out with its first quarter 2014 earnings thrashing profit expectations. PepsiCo, which runs banners of savory snacks like Fritolay, Tropicana and Dorito chips, earns its revenue from both the snack as well as beverage sector. The company saw a boom in its snack sales. Even its not-so-happening North American soda business reported better-than-expected numbers, which sent the shares zooming over 2%. But before getting into the quarter takeaways, a brief look into some essential figures is required.
The Number Talk
When the revenue of the first quarter was calculated, PepsiCo surprised people with some pleasant numbers. The income rose 13%, bringing smiles to the company shareholders. The company registered net income of a whopping $1.22 billion, or 79 cents a share, compared to last year’s $1.08 billion. It took stockholders and analysts completely by surprise, who had not expected such improvement in the company’s performance. The total revenue collected was $12.62 billion, beating Street expectations of around $12.43 billion.
The booming revenue of has made shares rise up thus attracting many commuters to invest, hoping a great deal of promise. Several industry analysts predict that the shares of this company might bring phenomenal response in the year to come.
The Sizzling Snack Business
The major part of the revenue was collected from the snacks sector. The fizzy drink did not gain much sale in the United States. PepsiCo received positive response from Russia, India and Brazil, where the emerging economies helped in bringing superb growth in the beverage sector.
Some of the company’s stockholders have been pressuring the board to split up the snack and beverage sector as the beverage sector has been struggling in several countries, making the shareholders suffer setbacks sometimes. But the company’s board is not at all in favor of a split up.
Beverage Business Losing Fizz
With the era of healthy food and healthy drinks the demand for the fizzy beverages has gone down drastically especially in North America and Latin America. Archrival Coca Cola (KO) posted $10.53 billion in revenue, a drop of 4% compared to last year figure. This was on account of declining carbonated drink consumption. PepsiCo managed to survive only because of its snacks which sold out so well that the company recorded a rise in revenue. The sweet carbonated drinks are being replaced by healthy fruit juices which is essential for health conscious people.
PepsiCo is a successful brand, there’s no doubt about this. But changing habits of people and their new approach to life is adversely impacting the consumption of all soft drinks unlike it was a decade ago, thus in turn setting up an alarm for the soft drink manufacturers. PepsiCo managed to top the revenue charts of the year 2014 only because of its snack sector which did fantastic business in the first quarter of the year.
To grab up more income in the beverage sector the board will have to come up with a healthier drink options. It’s imperative for the company to bring about such changes to get a head start to earn better revenue in the beverage sector.