Pepsico (PEP)

Q1 2011 Earnings Call

April 28, 2011 8:00 am ET


Indra Nooyi - Chairman and Chief Executive Officer

Massimo d’Amore - Chief Executive Officer of PepsiCo Americas Beverages

Eric Foss - Chairman of Pepsi Bottling Group, Chief Executive Officer of Pepsi Bottling Group and Chief Executive Officer of Pepsi Beverages Company

Jamie Caulfield - Senior Vice President of Investor Relations

Hugh Johnston - Chief Financial Officer

John Compton - Chief Executive Officer of PepsiCo Americas Foods and Member of Liquid Refreshment Beverage Oversight Council


Dara Mohsenian - Morgan Stanley

Judy Hong - Goldman Sachs Group Inc.

Ali Dibadj - Sanford C. Bernstein & Co., Inc.

Kaumil Gajrawala - UBS Investment Bank

John Faucher - JP Morgan Chase & Co

Mark Swartzberg - Stifel, Nicolaus & Co., Inc.

Christine Farkas - BofA Merrill Lynch

William Pecoriello - Consumer Edge Research, LLC

Damian Witkowski - Gabelli & Company, Inc.

Carlos LaBoy - Crédit Suisse AG

Caroline Levy - Credit Agricole Securities (USA) Inc.

TheStreet Recommends



Compare to:
Previous Statements by PEP
» Pepsico's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» PepsiCo CEO Discusses Q3 2010 Results - Earnings Call Transcript
» PepsiCo, Inc. Q2 2010 Earnings Call Transcript

Good morning, and welcome to PepsiCo's First Quarter 2011 Earnings Conference Call. [Operator Instructions] Today's call is being recorded and will be archived at It is now my pleasure to introduce Mr. Jamie Caulfield, Senior Vice President of Investor Relations. Mr. Caulfield, you may begin.

Jamie Caulfield

Thank you, operator. With me today are Indra Nooyi, PepsiCo's Chairman and CEO; and Hugh Johnston, PepsiCo's CFO. Indra will lead off today's call with a review of our overall performance and outlook, and then Hugh will cover the financials and operating results and the financial guidance in more detail. We'll then move on to Q&A, where we'll be joined by the CEOs of each of our businesses: John Compton from PepsiCo Americas Foods; Massimo d'Amore from PepsiCo Beverages Americas; Eric Foss from Pepsi Beverages Company; Zein Abdalla from PepsiCo Europe; and Saad Abdul-Latif from PepsiCo Asia, Middle East and Africa.

During today's call, unless otherwise noted, all references to net revenue growth are on a constant currency basis, and all references to division operating profit growth and EPS growth are on a core constant currency basis. I refer you to today's earnings release for more details.

Before we begin, please take note of our cautionary statements. This conference call includes forward-looking statements based on currently available information, operating plans and projections about future events and trends.

Our actual results could differ materially from those predicted in such forward-looking statements, but we undertake no obligation to update any such statements whether as a result of new information, future events or otherwise.

Please see our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent reports on Form 10-Q and 8-K. And finally, you should refer to the Investors section of PepsiCo's website under the Investor Presentations tab to find disclosures and reconciliations of non-GAAP financial measures that may be used by management when discussing PepsiCo's financial results.

And now it's my pleasure to introduce Indra Nooyi.

Indra Nooyi

Thank you, Jamie, and good morning, everyone. We are quite pleased with our Q1 results. Top line growth was balanced and strong, and profitability was right on plan. We delivered organic volume growth of 3.5% in beverages. And excluding the foods volume, we delivered 4% in core salty-snacks.

We're especially encouraged by our growth in North America where core salty-snack volume growth at Frito-Lay was up 2.5%, and organic beverage volume growth was 2%. Internationally, we delivered volume and revenue growth in each of the geographies. International organic volume growth was 7% in core salty-snack and 5% in beverages. Global foods volume, which is included in our set of snacks volume report for external reporting, declined 4%, driven primarily by Quaker Foods North America while internationally, our foods volume grew 2%.

Despite inflationary pressures, we continue to invest in brand building in emerging markets, and we're beginning to see evidence that our recent investments are paying off.

Last year at about this time, we set out five key growth imperatives for PepsiCo that formed the backbone of our strategy, and I'd like to discuss this quarter's results in the context of these imperatives.

Our first imperative is to build and extend our macro snacks portfolio. Our reported worldwide stacks volume growth was 3%, and this included our foods volume also. An underlying core salty-snacks volume grew more than 4% on an organic basis. Growth was well balanced, with strength in both developed and emerging markets. And we grew salty-snacks volume in each of our top 10 global markets.

Innovation was strong across the board, which resulted in incrementality, even in our more developed markets like North America and the United Kingdom.

In emerging markets, we're building per capita consumption and driving frequency, and that's led to strong organic growth in these markets. For example, we grow snacks volume 18% in India, 13% in China, 26% in Russia and 32% in Turkey.

Operating margins in global snacks improved about 100 basis points, with gains in almost every division. In some countries, we saw value and niche players pulse in and out of the market and take some share. We are careful not to overreact, choosing to judiciously trade off some share to protect profit in the short term. Our goal is to balance volume and profit growth. And across the road, our businesses are doing a pretty good job in this regard.

Our second imperative is to sustainably and profitably grow our beverage business worldwide. Our global organic beverage volume growth was 3.5%. CSDs grew 2% and non-carbonated beverages grew 8%. Every division grew organic volume, with emerging and developing markets continuing to show terrific results. India was up 20%, Russia was up 13%, Turkey was up 21% and China was up 4%, lapping 19% from 2010.

Read the rest of this transcript for free on