PepsiCo Inc topped quarterly profit and revenue estimates as the company's strategy to offer more healthier beverages and focus on its snacks business paid off.
Sales at Frito-Lays snacks division continued to grow, rising for the second straight quarter, while its soda business in the second quarter posted its smallest sales drop in a year.
This comes months after Chief Executive Officer Indra Nooyi's decided to go "toe-to-toe" with bigger rival Coca-Cola by spending more on marketing its trademark colas. Pepsi's beverages unit that makes carbonated soft drinks has been struggling to reverse a four-quarter decline in sales as consumer taste shifts to low-calorie and low-sugar alternatives.
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To stem the slide, the company has been boosting its portfolio of healthier options to sodas by offering products such as Bubly, a flavored sparkling water and Gatorade Zero, a sugar-free sportsdrink.
"The majority of our businesses performed very well, particularly our international divisions propelled by continued growth in developing and emerging markets," Nooyi said in a statement.
"Our North America Beverages sector posted sequential net revenue and operating profit performance improvement."
Sales in its North America beverage unit fell about 1% to $5.19 billion in the quarter, but narrowly beat market expectations.
"We've been encouraged by PEP's early success with Bubly," Wells Fargo analyst Bonnie Herzog wrote in a pre-earnings note, adding that Bubly now commands a 4.4% share in sparkling water despite only being on the market for a few months.
Pepsi has also been trying to overcome its sluggish beverage sales by ramping up its snacks business through a mix of new flavors, healthier preparation methods and attractive packaging.
These efforts led to a 4.3 % rise in sales at its Frito-Lay division that makes Cheetos and Doritos tortilla chips.
Net income attributable to the company fell about 14 p% to $1.82 billion, in the quarter ended June 16, mainly due to higher costs for transportation and raw materials.
Excluding items, Pepsi earned $1.61 per share, beating analysts' average estimate of $1.52 per share, according to Thomson Reuters I/B/E/S.
Net revenue rose 2.4% to $16.09 billion, edging past expectations.
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