PepsiCo raises profit forecast as soda demand jumps, plans price increases

[BENGALURU] PepsiCo will increase the prices of its products this year, the company said on Tuesday after it raised its full-year earnings forecast on surging demand for its sodas from pandemic-weary people flocking to restaurants and theatres.

A host of factors, including disruptions in global supply chains and rising demand, has pushed up raw-material prices, forcing packaged food companies such as PepsiCo and rival Coca-Cola to pass on costs to consumers.

The inflationary trend was underscored by the latest set of data, which showed US consumer prices rose by the most in 13 years in June.

PepsiCo's move to raise prices, likely after Labour Day, will also be used to offset higher advertising and marketing costs, which rose 30 per cent in the quarter as the company looked to take advantage of a reopening US economy, chief financial officer Hugh Johnston told Reuters.

Net revenue from beverage sales to schools, restaurants, stadiums and other such businesses in North America doubled in the second quarter.

"Performance in the food service channels was very sudden after three quarters of negative growth," Mr Johnston said.

"It opened up very rapidly and there was a lot of desire for people to get out as they got vaccinated."

Overall net revenue rose 20.5 per cent to US$19.22 billion in the quarter ended June 12, above expectations of US$17.96 billion, according to Refinitiv IBES data.

Excluding items, PepsiCo earned US$1.72 per share, above estimates of US$1.53 per shares.

The company expects fiscal 2021 core earnings per share to increase 11 per cent, compared with prior forecast of a high-single-digit increase.

PepsiCo said it would also expand an automation programme to its manufacturing plants, warehouses and service centres, resulting in expected pre-tax charges of about US$3.15 billion.

Mr Johnston said potential job losses due to automation will be more than offset by employment growth in other parts of the company.

Pepsico shares rose about 2.5 per cent to hit a record high in early trading.

REUTERS

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes