PepsiCo's profit rises on snack sales, price hikes

Published on NewsOK Modified: April 17, 2014 at 6:12 pm •  Published: April 17, 2014
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NEW YORK (AP) — PepsiCo reported a stronger-than-expected quarterly profit as the company sold more snacks around the world and hiked prices, including on its drinks.

The company, which also makes Frito-Lay, Gatorade, Mountain Dew and Tropicana, said global snack volume rose 2 percent in the period. Global beverage volume was unchanged from a year ago, including in its closely watched North American drinks unit.

Coca-Cola also reported flat volume in the North America market earlier this week. Both companies have been offsetting ongoing declines in their flagship soda businesses by relying more heavily on other beverages, such as sports drinks, juices and bottled waters.

Even though beverage volume was flat in North America, PepsiCo managed to push up revenue by raising prices as well as introducing more expensive drinks such as Mountain Dew Kickstart, which is marketed as an energy drink of sorts for younger men.

In a phone interview, Chief Financial Officer Hugh Johnston noted that a can of Kickstart costs $1.99, versus $3.50 for a 12-pack of Mountain Dew. He said that stepped-up marketing has strengthened the company's brands, which has allowed PepsiCo to raise prices. For the year, he said the company planned to raise prices between 2 percent and 3 percent in both snacks and drinks.

"As we make the brands stronger, consumers are willing to accept that," he said.

Finding ways to charge customers more has been critical for Coca-Cola and PepsiCo, which are trying to make up for declines in soda volume. Both companies, for instance, have rolled out "mini-cans" of soda that they say fit with people's desire to control portion sizes. But the smaller sizes are also more profitable for the companies.

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