uploads/2019/04/Pep-segment-1.png

What’s behind PepsiCo’s Strong Organic Revenue Growth in Q1?

By

Updated

Impressive organic growth

PepsiCo’s (PEP) revenue increased 2.6% to $12.88 billion in the first quarter of 2019, which ended on March 23. The company’s organic revenue growth (excludes the impact of currency fluctuations and structural items) of 5.2% impressed investors and was the strongest quarterly organic growth in over three years.

Except for the Quaker Foods North America segment, all of PepsiCo’s segments delivered higher organic revenue in the first quarter. The segment’s revenue declined 1.2% on a reported basis to $594 million and fell 1.0% on an organic basis in the first quarter. Lower volumes and an unfavorable mix adversely impacted the performance of the Quaker Foods North America segment.

Article continues below advertisement

PepsiCo’s Frito-Lay North America segment continued its strong run in the first quarter and registered 6.0% organic revenue growth. The reported revenue of the Frito-Lay North America division grew 5.5% to $3.8 billion. Higher pricing and volume growth in Doritos, Ruffles, and variety packs drove the revenue growth.

PepsiCo Beverages North America, the company’s largest segment, generated revenue of $4.5 billion, reflecting growth of 2.2%. The segment’s organic revenue growth was 2.5%. PepsiCo Beverages North America’s revenue growth was a result of higher net pricing, partially offset by a 2% decline in volumes caused by a 4% fall in soda beverage volumes.

Performance outside North America

The Latin America segment’s revenue increased 1.4% to $1.2 billion on a reported basis, as higher pricing and growth in beverage volumes was offset by lower volumes of snacks and an eight-percentage-point unfavorable impact of currency headwinds. Ignoring the impact of foreign currency fluctuations and structural changes, the segment’s organic revenue growth was 10%.

The Europe Sub-Saharan Africa segment’s revenue increased 1.5% to $1.7 billion, reflecting higher pricing and the favorable impact of the SodaStream acquisition, partially offset by 12 percentage points of negative impact from currency fluctuations. The segment’s snack volumes grew slightly, but beverage volumes increased by an impressive 28%, reflecting the impact of the SodaStream acquisition and strong growth in Nigeria. The segment’s organic revenue growth was 8%.

Revenue of the Asia, Middle East, and North Africa segments declined 0.6% on a reported basis to $1.0 billion as higher volumes and increased pricing were offset by unfavorable currency movements and the impact of refranchising of the beverage business in Thailand. The segment delivered impressive revenue growth of 10%.

PepsiCo doesn’t expect the impressive organic growth rate in the first quarter to continue in the remainder of the year. PepsiCo continues to forecast organic revenue growth of 4% for the full-year 2019.

Advertisement

More From Market Realist