P&L

PepsiCo is trying to prove that it still makes sense to sell soda

The numbers: Good. PepsiCo posted net income for the third quarter of $2 billion, up 5% from the same period a year ago. Sales rose 2% to $17.2 billion.

The takeaway: PepsiCo benefits from the breadth of its brands, which include Doritos, Quaker Oats and Lay’s. In recent quarters, packaged foods have proved to be between three and six times as profitable for PepsiCo in the Americas as the company’s soda business, which remains flat. PepsiCo also is seeing growth overseas, especially in Asia, which in the latest quarter contributed 10% of sales.

What’s interesting: While management may not agree, PepsiCo seems fortunate to have an activist investor eyeballing its income statement. Over the past year Nelson Peltz has been pushing PepsiCo to spin off snacks from the company’s slower-growing drinks dynasty. In July, the California State Teachers’ Retirement System, one of the country’s biggest pension funds, endorsed Peltz’s campaign. Though PepsiCo has rebuffed the proposal, the scrutiny challenges management to make the case for sticking to its diverse portfolio of businesses, including both soda and snacks. In other words, if PepsiCo wants to hang onto its namesake soda business, it had better produce profits.

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