PepsiCo Sales Snap Back From Pandemic -- 3rd Update
02 October 2020 - 4:29AM
Dow Jones News
By Jennifer Maloney
People are grabbing a soda at the convenience store again.
PepsiCo Inc.'s revenue grew 5.3% for the latest quarter as its
beverage business rebounded and strong demand continued amid the
pandemic for its snacks and packaged foods.
"Mobility has clearly risen," the company's finance chief, Hugh
Johnston, said in an interview. "People are getting comfortable
with how to protect themselves in the new environment and live
their lives."
The company's namesake sodas and other drinks have been hurt
during the Covid-19 pandemic by the closures of offices and
restaurants, and a decline in trips to gas stations and convenience
stores. But that changed in the third quarter: Revenue for
PepsiCo's North American beverage division climbed 6% to $5.96
billion, bouncing back from a decline of 7% in the previous
quarter.
Sales in restaurants and offices remain down by a lot, but
revenue grew in convenience stores and gas stations, Mr. Johnston
said. The company's food business, meanwhile, has benefited as
Americans cook and snack more at home. Among the products selling
well: Tostitos, pancake mix and Cheetos Mac 'N Cheese.
Constellation Brands Inc., the brewer of Corona beers for the
U.S. market, reported a 4% drop in revenue for the quarter ended
Aug. 31. The company said a production slowdown in Mexico earlier
in the pandemic hurt inventory levels and shipment volumes, but it
expected volumes to return to more normal levels in the current
quarter.
Constellation executives have said strong retail-store sales of
beer and liquor have helped offset declines from the temporary
closures or capacity limits on restaurants and bars as the virus
continues to spread in parts of the world. This week, New York City
reopened limited indoor dining, while North Carolina said it would
allow bars to open with outdoor seating starting Friday.
In PepsiCo's Frito-Lay North America division, which makes
Doritos, Lays and other snacks, sales rose 7% to $4.4 billion in
the third quarter. And sales ticked up 6% for its Quaker Foods
North America division, which makes Rice-A-Roni and Aunt Jemima
products.
The snacks-and-beverage company also is exploring an entry into
the U.S. alcohol market, after rival Coca-Cola Co. said it planned
to launch a boozy version of its Topo Chico sparkling water in a
partnership with Molson Coors Beverage Co.
PepsiCo Chief Executive Ramon Laguarta said his company is
looking at the three-tier system of alcohol sales in the U.S.,
where products must be made, distributed and sold by separate
companies.
"Given the three-tier system, it's not obvious how you capture a
lot of value," he said on a call with analysts Thursday. "First I
would say, Do we play or not? Second, very important, is who do we
play with and who do we partner to maximize the value for
PepsiCo?"
PepsiCo on Thursday issued new financial guidance for the year,
after withdrawing its 2020 guidance in April. The company now
projects organic revenue growth, which adjusts for currency effects
and strips out acquisitions, of about 4%. On that basis, revenue
rose 4.2% in the quarter, which ended Sept. 5.
"The consumer trends in mobility and behavior around
away-from-home versus in-home are stable enough" to predict how the
company will fare through the end of the year, Mr. Johnston
said.
Another major food maker, Chicago-based Conagra Brands Inc.,
said Thursday that while demand for food at home has moderated
since the spring, it will likely remain higher than normal as
consumers continue to spend more time out of public places. "They
were forced into a lockdown, but then they discovered that they
like cooking; they like watching movies together," Conagra CEO Sean
Connolly said in an interview. Conagra, which makes Healthy Choice
frozen meals, Slim Jim meat snacks and Hunt's tomatoes, said its
comparable sales rose 15% in the quarter ended Aug. 30. It expects
growth of 6% to 8% in the current quarter.
For the latest quarter, net income attributable to PepsiCo was
$2.29 billion, or $1.65 a share, up from $2.1 billion, or $1.49 a
share, a year earlier. The results were better than analysts'
forecasts and PepsiCo shares rose 0.9% in afternoon trading.
Constellation executives said they wouldn't provide financial
guidance for the rest of its fiscal year because of uncertainty
around the pandemic. The company continues to take hits from its $4
billion bet on Canadian marijuana grower Canopy Growth Corp. In its
latest quarter, the value of Constellation's investment in Canopy
declined by $48 million.
Annie Gasparro contributed to this article.
Write to Jennifer Maloney at jennifer.maloney@wsj.com
(END) Dow Jones Newswires
October 01, 2020 14:14 ET (18:14 GMT)
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