PepsiCo Delivers Solid Results for Fiscal 2009

For the year, PepsiCo International delivered double-digit gains in net revenue and core operating profit while making strategic investments in adjacent product categories and geographies and in infrastructure in key markets.

15 Feb 2010 --- PepsiCo, Inc. reported solid results for 2009 driven by healthy gains in its worldwide snacks and international beverage businesses, balanced investments in value and innovation in key markets and cost discipline across its operations. For the full year, reported EPS grew 17 percent to $3.77 and core constant currency EPS increased 6 percent. For the fourth quarter, reported EPS was $0.90.

PepsiCo Chairman and CEO, Indra Nooyi, said: “In 2009, strong execution of PepsiCo’s operational priorities enabled us to deliver healthy revenue and profit growth and generate strong cash flow, despite the macroeconomic challenges across much of the world. Our teams demonstrated their agility in balancing innovation and value, which enabled us to maintain consumer momentum while driving margin expansion. In addition, we continued to invest in R&D, infrastructure and innovation to sustain our long-term growth.”

Nooyi continued, “In 2010, we are changing the rules of the game in North America beverages through the anticipated merger with our anchor bottlers coupled with the continuing activities to refresh our core brands. We are extending our global leadership in snacks by continuing to innovate with new products and platforms, and by accelerating our growth in developing markets. We will accelerate our commitment across all our product categories to build a more balanced and healthier portfolio of enjoyable and wholesome foods and beverages – using science-based innovation to improve our existing portfolio and create new platforms. Combined with a relentless focus on financial performance and productivity, these activities will drive sustained growth in revenue, profit and cash flow.”

PepsiCo CFO, Richard Goodman said, “In 2009, our teams were disciplined in their working capital management, generating stronger than expected management operating cash flow of $5.6 billion, excluding certain items. We expect to resume repurchasing our shares upon the close of the bottling transaction and anticipate that in 2010 share repurchases together with a voluntary $600 million pension plan contribution would total about $5 billion.”

Full-Year and Quarter Operating Highlights:
-For the year, Frito-Lay North America delivered a 6% increase in net revenue and a 7% increase in core operating profit, on top of similar gains in 2008, as it maintained its position as the fastest growing U.S. consumer packaged goods company in measured channels.
-For the year, PepsiCo International delivered double-digit gains in net revenue and core operating profit while making strategic investments in adjacent product categories and geographies and in infrastructure in key markets.
-On improving top-line trends, PepsiCo Americas Beverages grew core operating profit 10 percent in the quarter.

Division Operating Summary

PepsiCo Americas Foods (PAF) grew net revenue 7 percent and core operating profit 8 percent for the full year 2009 and gained snacks share across the region. In the fourth quarter, PAF grew net revenue 4 percent and core operating profit 3 percent. Frito-Lay North America (FLNA) gained dollar share and was the fastest growing CPG Company in the U.S. in 2009 in measured channels. For the full year, volume increased 1 percent, net revenue grew 6 percent and core operating profit grew 7 percent, as FLNA effectively offset commodity inflation and investments in value initiatives with strong revenue management and productivity initiatives.

In the fourth quarter, volume was flat, reflecting the completion of the “20% More Free” promotion FLNA ran in the second and third quarters of the year. It continued to perform well in large format stores, growing dollar share on the strength of Lay’s potato chips, Cheetos, dips and variety packs. Net revenue increased 2 percent and core operating profit increased 4 percent in the quarter, with the muted growth reflecting the lapping of significant pricing actions in the year-ago period. In 2010, FLNA will drive top-line growth with strong innovations on its core platforms, targeted value initiatives, and increased emphasis on delivering more nutritious snacking options to consumers, including adding fiber to its SunChips line and whole grains to Tostitos.

Quaker Foods North America (QFNA) volume and net revenue were flat for the year, and core operating profit grew 3 percent. In the quarter, volume declined 2 percent, net revenue was down 5 percent and core operating profit declined 2 percent. Net revenue performance reflected a step-up in promotional investments, while growth in core operating profit was adversely impacted by the overlap of a flood-related insurance settlement in the year-ago quarter.

Latin America Foods (LAF) performed very well in 2009, growing net revenue 10 percent and core operating profit 13 percent despite very challenging macros in Mexico. In the fourth quarter, LAF grew net revenue 10 percent. Core operating profit growth of 3 percent reflected the overlap of an insurance settlement in the year-ago period as well as input cost inflation on sugar and potatoes in key markets. In the quarter, Sabritas held its strong value share position and Gamesa grew value share. South America posted strong gains in revenue and operating profit.

PepsiCo Americas Beverages (PAB) showed improvement during the course of 2009 against the backdrop of a challenging liquid refreshment beverage category in North America. For the full year, volume and net revenue declined 6 percent due to the challenging category while core operating profit decreased 3 percent. In the fourth quarter, volume declined 5 percent but operating profit grew by 10 percent, reflecting sequential improvement in top-line trends, a focus on profitable volume growth, heightened productivity in the North American business, and significant operating profit growth in Latin America.

The refresh of the North American beverage business gained traction in the fourth quarter as brands such as SoBe Lifewater and Gatorade gained market share. Also, important brand health metrics rose for brand Pepsi, Pepsi Max, Gatorade, Lipton Tea and Tropicana.

In 2010, differentiated value will continue to play a key role as PAB rolls out targeted innovation, such as the G Series Performance line, offering additional benefits for pre-, during and post-athletic occasions. In CSDs, the innovative “Pepsi Refresh Project” is providing millions of dollars in grants to make a positive impact in local communities. The integrated campaign drives consumers to Pepsi’s website where they can submit project ideas and vote for their favorite projects, with the winning grants ranging from $5,000 to $250,000.
PepsiCo International (PI) delivered another year of solid results in 2009 with a 17 percent increase in core operating profit on an 11 percent increase in net revenue. In the fourth quarter, PI net revenue grew 5 percent and core operating profit declined 3 percent, reflecting the impact of significant strategic infrastructure investments in our Asia/Middle East/Africa (AMEA) division.

Europe delivered strong 2009 full-year results in a particularly difficult macroeconomic environment, growing net revenue 10 percent and core operating profit 13 percent. Acquisitions contributed 8 percentage points to net revenue growth and 5 percentage points to core operating profit growth in the full year. In the quarter, net revenue grew 4 percent, reflecting 2 percentage points from acquisitions, and core operating profit increased 7 percent as the division balanced revenue growth with tight cost controls and productivity gains.
In the quarter, snacks volume declined 3 percent, reflecting pricing actions, including weight-outs, as well as continued macroeconomic challenges. Snacks volume grew in the U.K., driven by the success of Walkers “Gazillion Bag Giveaway” and the “Do Us a Flavour”campaign, which has now been rolled out to other markets in Europe. In Russia, the division continued to gain significant value share and product innovation included a new flavor of its Hrustream bread snacks as well as the launch of Lay’s Sensations.

Beverage volume was flat in the quarter, including 2 points of growth from acquisitions. Across Western Europe a combination of value and marketing programs and our differentiated Pepsi Max proposition delivered stronger volume momentum and broad based share gains. In Russia we outpaced the market with continued brand equity and value programs delivering share gains in colas, teas and energy drinks, and the Lebedyansky juice portfolio continued to deliver volume and share gains.