Causes for Concern for PepsiCo in Overseas Markets

Sarang Ahuja’s latest post:pepsico-logo-annual-report-2011

In today’s new age of health and fitness, it is not surprise to see the drop in sales for PepsiCo during its third quarter sales. New York Times believes that the weakness of the international economy and the strength of the dollar had a significant factor for PepsiCo’s reported losses. While there has been a significant drop in the numbers, the company is still incredibly optimistic due to its new cost effective changes within its products and operations.

During the year, the company, like many others, has had to change the accounting method it uses for overseas operations. This overall adjustment aided PepsiCo in erasing $1.4 billion from its bottom line. However, even with these changes sales at the giant food and drink conglomerate has dropped 5% to $16.3 billion, in the quarter that ended September 5th. Furthermore, earnings fell to $533 million in comparison with the $2 billion they had during the same period last year.

As much as the international economy has impacted sales, the company has also attributed these changes to the strength of the dollar, which makes sales internationally look weaker than they are.

Regardless, the Chief Executive of PepsiCo, Indra Nooyi is still confident in their performance for the third quarter of 2015. Nooyi believes that the revenue has grown despite the weakness in the international markets.

When looking at North America, not including Latin America, PepsiCo has benefited greatly from strong sales. While sugary soda continues to struggle to win over consumers, other brands such as Gatorade, the sport’s brand for PepsiCo, has done incredibly well throughout the year. Furthermore, PepsiCo executives have projected strong numbers for the new Mountain Dew product, Kickstart, a less caffeinated twit on the popular drink that incorporates fruit juice to appeal to health and fitness.

To add on to changes, PepsiCo has made various consumer changes to effectively balance the numbers. During the year, PepsiCo has quietly raised prices on products, including reducing the size of bags of chips it sells without lowering the price. It has also cut more than $1 billion in cost out of its operations so far this year.

If PepsiCo continues its plan for effective operation cost and health and fitness branding, we can start begin to see more positive changes in the future. As for now, PepsiCo will have to continue strategizing for its next quarter of sales.

from Sarang Ahuja


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