PepsiCo India back in the black after seven years 

Beverage and snacks maker PepsiCo India made a profit in 2017-18 after a gap of seven years on the back of cost-efficiency measures, higher capacity utilisation and focus on high-margin products.

PepsiCo India reported a net profit of Rs 190 crore in 2017-18 compared with a loss of Rs 148 crore a year earlier, it said in the latest filings with the Registrar of Companies. The maker of Pepsi and Mountain Dew soda and Lay’s chips previously reported a profit in 2010-11, the filings showed.

Turnover declined 7% to Rs 5,983 crore in 2017-18. Net sales are not comparable because turnover in the previous financial year was calculated net of the goods and services tax since July last year. Earlier, it was gross of excise duty. The company said it exited the fourth quarter of 2017-18 with double-digit growth momentum.

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“Focus on profitable channels, packs and innovation, cost management and productivity to offset inflation, local agriculture programmes and procurement for citrus and corn, and maximising capacity utilisation were factors that brought balanced growth,” PepsiCo India chief financial officer Rajdeep Datta Gupta told ET.

Advertising and promotion expenses climbed 15.7% over the previous financial year. The company said it launched 80 products and variants, including flavours, packaging formats and pack sizes, between 2015 and 2018. It said Lay’s, Kurkure, Quaker and Doritos were the key growth drivers, with ‘encouraging results’ for its new high-margin products Pepsi Black and energy drink Sting and its carbonated portfolio gaining momentum. The India unit of the Purchase, New York-based company said in 2016 that it was taking a three-year reset to transform its portfolio for sustainable and profitable growth.

“Higher capacity utilisation is helping leverage cost lines. Strong cost-management is offsetting the inflation that we are seeing,” Gupta said.

The company said it has rationalised its portfolio across channels for operational productivity and reinvested in marketing expenses.

PepsiCo has a tie-up with RJ Corp group company Varun Beverages to distribute its Tropicana juices, Gatorade sports drinks and Quaker Oats. Varun Beverages acquired PepsiCo’s bottling operations in north and east India in November 2014, a move aimed at optimising costs and accelerating operational and supplychain efficiencies, besides downsizing its asset-heavy operations.

PepsiCo had reported global sales that exceeded analyst expectations for April-June 2018, fuelled by its salty snacks, which have consistently offset slowing soft drinks sales.

PepsiCo and arch rival Coca-Coca have been countering declining sales of their core soda portfolio with ‘healthier’ drinks such as tea, juices and juice drinks and flavoured water.

PepsiCo India also lost close to a dozen mid-to-senior level executives over the past six months. Industry officials citing data by market researcher Nielsen said Coca-Cola did better, with higher combined shares averaging 50%-plus.

Hindustan Coca-Cola Beverages, which makes and distributes Coca-Cola beverages, reported revenue of Rs 9,472 crore in FY17.

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