PepsiCo is boosting its organic growth forecasts after reporting solid Q3 earnings and revenue, driven by snacking and sports drinks.
Net income for the quarter ending Sept. 30 grew to $2.70 billion USD from $2.22 billion USD in the same period a year ago. And the maker of Pepsi, Tropicana, Gatorade, and Doritos is reporting revenues of nearly $22 billion, topping analyst expectations.
The company is hiking its forecast for organic revenue growth for 2022 from 10% to 12%, and selling, general and administrative expenses rose 8.6% compared with the same period last year.
According to chairman and CEO Ramon Laguarta, PepsiCo is continuing to invest in its brands, as the long term bets it is making and the strategic transformation it announced last year are paying off. However, the company is also accelerating its cost management initiatives, including using smaller sizes for its variety packs.
Frito Lay North American net revenue spiked nearly 20% year-over-year, while Quaker North America grew by 15%. PepsiCo Beverages North America net revenue held steady.
The company boosted its market share in key product categories in North America, such as salty and savory snacks and sports drinks. It’s gaining share in teas, coffees too, the company says, while losing in the carbonated soft drinks segment, despite the Pepsi brand itself doing well.
In today’s earnings call, Laguarta says that consistent with last year, it’s seeing gains in 75% of its markets in convenience foods and 70% gains in the beverage market internationally, competing “well across most of our geographies.”
PepsiCo also had very good performance in sports beverages, a “priority category” for the company. Laguarta cited the recovery of the Gatorade brand, saying its brand building and commercial execution is working. He adds that it is a very strong franchise and broader than appealing to high performance athletes. Gatorade Zero has been a “great success” for the brand, bringing in lots of lapsed consumers, particular active ones.
It’s also seeing strong potential for the new Gatorade Fast Twitch in the caffeinated space. While it has let some partnerships with leagues like the NHL lapse, PepsiCo plans to team up with the NFL and go “full blast” early next year on Fast Twitch, while the main Gatorade brand also recently inked a new multi-year agreement with Canada Soccer to become the exclusive isotonic and sports nutrition partner of the national soccer teams.
