PepsiCo sticks by beverages despite struggles

PepsiCo plans to hang onto its struggling North American drinks unit, with hopes that the introduction of naturally sweetened, lower-calorie sodas will help revive sales.
The company has been under pressure to spin off the business and focus on its stronger Frito-Lay snack unit, most notably by activist investor Nelson Peltz of Trian Fund Management.
The calls for a split come as PepsiCo's drinks, which include Mountain Dew, Tropicana and Aquafina, have lost ground to bigger rival Coca-Cola Co in recent years. US soda consumption in general has also been on the decline, with people worried about the calories in regular soda and the artificial sweeteners in diet sodas.

But PepsiCo today said that it concluded after an "exhaustive" review involving "bankers and consultants" that its current combined snacks and drinks structure would "maximise shareholder value."
"That decision has been made for a good period of time going forward," Chief Financial Officer Hugh Johnston said in a call with reporters.
The strength in snacks and weakness in drinks played out again in the company's fourth quarter, with Frito-Lay delivering volume growth of 3 per cent in North America.

Volume for carbonated soft drinks, by contrast, fell in the "mid-single digits" despite stepped-up marketing. Non-carbonated drinks, which include Gatorade and Aquafina, increased in the "low-single digits."

Still, CEO Indra Nooyi stressed that PepsiCo's drinks and snacks are complementary to each other. She also downplayed the company's exposure to colas, noting that they make up less than 25 per cent of North American beverages.
Still, Nooyi also noted that PepsiCo plans to test new natural sweeteners in carbonated drinks this year that could help improve results.
Dr Pepper Snapple Group Inc also said this week that it plans to test naturally sweetened lower-calorie sodas this year, given the growing concerns customers have about the artificial sweeteners used in diet sodas. Coca-Cola, which introduced a similar concept in Argentina last year, reports next week.

PepsiCo also announced a five-year, USD 5 billion cost-cutting program that will include factory closures and investments in automated manufacturing.
For the period ended December 28, the company earned USD 1.74 billion, or USD 1.12 per share. That compares with USD 1.66 billion, or USD 1.06 per share, a year ago.