Weak beverage volumes
PepsiCo’s (PEP) beverage volumes, particularly in its North America Beverages segment, have been a matter of concern for the soda behemoth. In the first six months of fiscal 2018, the segment’s overall volumes fell 2% year-over-year due to lower soda beverage volumes.
Could volumes improve?
As shown in the above graph, the North America Beverages segment’s carbonated soft drink volumes declined further in the fiscal second quarter. Volumes fell 4% in the fiscal first quarter and 4.5% in the fiscal second quarter. In contrast, rival Coca-Cola’s (KO) sparkling soft drink volumes rose 2%, driven by its trademark Coca-Cola brand.
PepsiCo’s persistent weakness in its North America business reflects consumers’ growing dislike for sugary soda. The bottled water, ready-to-drink tea and coffee, and functional beverage categories seem to have better growth prospects.
PepsiCo is trying to improve its carbonated soft drink volumes through marketing investments, especially in its trademark Pepsi brand. Pepsi Zero Sugar’s and Diet Pepsi’s performance has improved, and the company’s innovation is expected to improve North America Beverages volumes. Earlier this year, PepsiCo launched bubly, a sparkling water brand in eight flavors, with no sweeteners or calories. The company has also launched Gatorade Zero to attract consumers to the sports drink category. We’ll discuss PepsiCo’s earnings expectations in the next part of this series.