Munchies

Pepsi says its drinks and snacks go together like peanut butter and jelly

April 17, 2014
April 17, 2014

The numbers: Impressive. PepsiCo reported a first quarter profit of $1.22 billion, a healthy 13% higher than last year. Sales came in just above $12.6 billion, well above the $12.4 billion the markets were expecting. Shares are up almost 2% in pre-market trading.

The takeaway: The less soda Pepsi sells, the more of its snacks and non-carbonated drinks customers seem to buy. Carbonated soft drink sales by volume fell another 1% in North America. Like Coca-Cola this week, Pepsi partly blamed this on Mexico, where a soda tax has hiked the price of Pepsi’s carbonated offerings in the country. But chips and sports drinks seem to be making up for the soda decline, and then some—Pepsi’s snacks and non-carbonated beverage businesses grew by 5% and 3%, respectively, around the world. That trend is not a new one. Pepsi is mainly a snacks company at this point—some two-thirds of its sales come now from its still-growing food division. That certainly hasn’t been lost on activist investor Nelson Peltz, who has publicly pleaded with PepsiCo to break off the company’s snacks business.

What’s interesting: Snacks and beverages go together even better than peanut butter and jelly. At least, that’s what Pepsi’s CFO Hugh Johnson would like consumers to believe. After comparing America’s favorite sandwich combo to chips and beverages, Johnson pulled out some numbers to back it up. “Peanut butter and jelly is bought together about 20% of the time; snacks and beverages are bought together about 55% of the time,” he told CNBC.

Johnson hopes that habit will spread across the globe. “If you look at developing and emerging markets, the beverages tend to develop first, and then snacks really carry on from what was a bigger beverage business, that snacks wouldn’t otherwise benefit from,” Johnson told CNBC. Pepsi has seen wild success selling both non-carbonated drinks, which include Gatorade, and snacks, which include the Frito-Lay empire, to markets in Latin America and the Middle East, two of its fastest-growing. Perhaps that’s why the company has shifted its focus away from soda, and doubled down on potato chips and granola bars—as well as non-carbonated drinks to wash it all down.

Pepsi-sales-by-business-segment-Beverages-Foods_chartbuilder

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