PepsiCo's beverage biz bounces back as new CEO takes over from Indra Nooyi

Indra Nooyi is stepping aside amid signs of a turnaround in PepsiCo Inc.’s drinks business.
 

The company’s struggling North American beverage unit returned to growth in the third quarter, helping the company beat earnings estimates as the longtime chief executive officer hands the reins to deputy Ramon Laguarta on Wednesday. The maker of Mountain Dew and Tostitos also got a boost from its Frito-Lay unit, the salty-snack powerhouse that has buoyed the company amid a drop in soda consumption.

Core earnings per share were $1.59, topping the consensus estimate from analysts. Revenue of $16.5 billion also outpaced expectations. However, Pepsi warned that full-year core earnings per share would be $5.65, down from its prior expectation of $5.70, citing currency headwinds. The company’s shares were little changed in light premarket trading Tuesday, having fallen 7.7 percent this year through the close of trading on Monday.

Amid its recent slump, Nooyi has vowed to fix the beverage unit. The key business has been a sore spot for Pepsi as consumers increasingly turn away from sugary drinks. In addition to pursuing cost cuts to boost profit, Nooyi has diversified the company’s portfolio, adding healthier options to adapt to changing preferences.

In the quarter, Pepsi’s key drinks business got a boost from core brands including Pepsi, Mountain Dew and Gatorade. The company said that increased marketing spending this year amid intense competition with longtime rival with Coca-Cola Co. had started to pay off with higher sales. Still, profit slipped 14 percent in the quarter as the unit continued to be battered by higher commodity costs.

Nooyi, who announced in August that she would step down as CEO, ends a 12-year run at the helm of the food and beverage giant. She’ll remain chairman until early 2019. Born in India, she was PepsiCo’s first woman CEO and also its first foreign-born CEO.

In one of her final acts as CEO, Nooyi agreed to buy fizzy-drinks dispenser SodaStream International Ltd. for $3.2 billion, giving a company synonymous with sugary sodas a way into the homes of more health-conscious consumers.

Laguarta, who is from Barcelona, will take over a company that generates more than half of its revenue from food. Plano, Texas-based Frito-Lay dominates the chip aisle, with old favorites like Ruffles and Doritos. Salty snack foods have maintained their popularity, even as tastes change in other areas.

Sugary beverages, on the other hand, have clearly lost momentum. Shoppers are pursuing healthier drinks, sending overall soda consumption to its lowest level in more than 30 years.