PepsiCo Is Growing On Its North America Business
PepsiCo‘s (NYSE:PEP) net sales through the first three quarters of the year declined 3%, despite a solid 4% organic growth, due to currency headwinds and structural impacts. But what holds true for the company is its continual reliance on the domestic market. North America (U.S. and Canada) formed just over 63% of PepsiCo’s net revenue through September, and the beverage division has also performed strong this year, accompanying the continual strong performance of the Frito-Lay North America division.
The reason for this has been the growth in the water portfolio, sports drinks, and ready-to-drink teas, to offset the decline in the carbonated soft drinks (CSD) category. Although CSDs still form a majority of PepsiCo’s drink volumes, health and wellness concerns have dragged down the volume sales in this category. To offset this decline, PepsiCo has emphasized sales of its non-carbonated portfolio, including the sports drink Gatorade, and Lipton ready-to-drink teas.
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Furthermore, PepsiCo derived 8% organic revenue growth in developing and emerging markets in the third quarter, including an 11% growth in China and Mexico, and a surprising 7% revenue growth in Russia, where the consumer is starting to rebound. Strengthening international growth is good news for PepsiCo, and backed by the solid performance of the North America Beverages division, the company could achieve its targeted adjusted EPS growth of 10% for 2016 — an estimate it raised for the second consecutive quarter following the Q3 results announcement.
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