PURCHASE, NY -- PepsiCo Inc. reported that its net income dipped 4.9% in the third-quarter, citing higher costs, bigger ad spending and unfavorable currency translations. On the upside, PepisCo's soft drink brands continued to increase share in North America, suggesting some headway in its turnaround plan to gain ground on rival Coca-Cola Co.
Total revenue fell 5% to $16.65 billion, somewhat because of unfavorable currency exchange rates and the refranchising of its business in China and Mexico. That means that revenue in those countries is now recorded by PepsiCo's local partners. Analysts expected revenue of $16.96 billion.
In the Americas Beverages division, PepsiCo's organic revenue was flat, on a 3% decline in volume, the poorest performance among the company's operating units. That decline is attributed to noncarbonated drinks, which saw volume down 7%; PepsiCo stopped selling some juice drinks that were no longer profitable and it did not engage in a discounting war on packs of bottled water. Gatorade sales also hindered the division because some retailers cut back on their sports drink inventories.
PepsiCo's carbonated drinks had flat sales volume when taking into account a calendar shift, but the company said its market share improved when measured by volume and dollars. (Coca-Cola's soda brands gained market share on a volume basis, but only held the line when measured by dollars.)
In the past few years, Purchase, NY-based PepsiCo has yielded some market share to rival Coca-Cola. In early 2012, the No. 2 beverage company launched a turnaround campaign that involves cutting costs while adding at least $600 million in its advertising budget to promote its top brands. It has also introduced products like mid-calorie Pepsi Next soda to capture greater U.S. market share.
Unlike Coca-Cola, PepsiCo said it wasn't seeing any slowdown in China. PepsiCo's sales volume in China increased 9% in September after rising 3% in each of the previous two months.
Worldwide, PepsiCo's beverage sales climbed 3%.
In PepsiCo's Frito-Lay snack food division, worldwide revenue increased 6% in the third quarter. Price hikes and solid sales at c-stores and larger retailers in the third-quarter, which ended Sept. 8, helped Plano, TX-based Frito-Lay offset higher commodity costs and increased ad spending. Operating profit for Frito-Lay in the quarter was $917 million, down slightly from $918 million a year ago.
PepsiCo reported companywide profit for the quarter of $1.9 billion, or $1.21¢ a share, down from $2 billion or $1.25 a share a year ago.