At Nearly Half Of PepsiCo’s Stock Value, Frito-Lay Continues To Deliver

PepsiCo (NYSE:PEP) reported that the annual retail sales of its global “Banner Sun” potato chip portfolio within the Frito-Lay division have surpassed $10 billion. The news highlights just how important the Frito-Lay division has become for the company over the years. Frito-Lay continues to remain the No. 1 potato chip brand globally. ^[1]

In other events, SunChips, the company’s line of multigrain snacks division, introduced SunChips 6 Grain Medley snacks. ^[2] PepsiCo competes with leading food & beverage companies around the world including Kraft Foods (NYSE:KFT), Coca-Cola Co (NYSE:KO) and Dr Pepper Snapple (NYSE:DPS).

We maintain a price estimate of $71, which is about 10% above the current market price.

See our complete analysis of PepsiCo

PepsiCo’s global investments are paying off as 60% of “Banner Sun” sales were generated outside North America with top 10 markets being: United States, United Kingdom, Russia, Canada, Spain, Australia, China, Mexico, Netherlands and India. Frito-Lay’s market share in the international snacks market has been creeping up helped by acquisitions, new product launches and expansions into emerging markets. We expect Frito-Lay’s market share to rise gradually from 37.8% in 2011 to 38.1% by the end of Trefis forecast period.

Frito-Lay Portfolio Expanded

Frito-Lay extended its SunChip brand by introducing 6 Grain Medley in 2 flavors: Parmesan & Herb and Creamy Roasted Garlic. Keeping in mind the changing consumer lifestyles, the product is cooked in sunflower oil and corn oil, both of which are high in good fats (such as polyunsaturated and monounsaturated fats), lower in saturated fats and contain no trans fat. Moreover, the snacks are made with all-natural ingredients and contain no artificial flavors or preservatives.

Although the North American snacks market size is growing at slow pace, it is still an important market for snacks manufacturers because to its sheer magnitude of size and because the products that are successfully launched here can be extended to international markets.

With world getting more connected and America’s cultural influence on the rest of the world still dominant, the products that do well here often have a strong demand in other countries even before their launch. Investors often overlook Frito-Lay and mistake flagging cola sales as a sign of company not doing well since they treat PepsiCo as a soft drink company. Read our recent article, PepsiCo is More than a Cola Company, Worth $71.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. PepsiCo Potato Chip Brands Surpass $10 Billion in Global Retail Sales, Marketwatch.com, March 14, 2012 [↩]
2. PepsiCo’s Frito-Lay, US, launches 6 Grain Medley snacks in two flavours, FnBnews.com, March 28, 2012 [↩]