PepsiCo, the company behind such brands as 7Up, its namesake soda Pepsi, Mountain Dew, Aquafina bottled water, among others reported a 2% revenue growth for the full year 2018 to $64.6bn. Fourth quarter sales was flat at $19.5bn as the previous year.
Full year net income rose to $12.55bn, from $4.9bn in the previous year, while fourth quarter net income showed a profit of $6.85bn compared to a loss of -$710m in the same period in the previous year due to a one-time $2.5bn tax charge related to the new U.S. tax law.
The U.S.-based soft drinks maker said its results reflected higher operating cost, including increased transportation costs, higher commodity prices, advertising and marketing expenses as well as negative foreign exchange translations and refranchising cost of some of its bottling operations overseas.
While its Frito-Lay North America snack business registered a 4% growth in the fourth quarter and 3.5% growth for the full year, the company’s flagship North America Beverages unit recorded marginal growth of 1% for the full year.
The company’s other business segments such as the Latin America and Europe Sub-Saharan Africa businesses both posted positive 2% and 4% growth respectively, while the Quaker Foods North America and the Asia, Middle East & North Africa Businesses both recorded negative growths of -1.5% and -2% growth respectively.
Despite the meager growth, the company detailed plans to ramp up investments in marketing, innovation and manufacturing capacity.
“As we thought about 2019 and thought about our future — particularly with the change in the CEO — the conclusion we came to was we can sustainably grow the business faster than we have been,” said Hugh Johnston, chief financial officer.
Some of the new initiatives from the company include Gatorade Zero, a low-calorie alternative to its sport drink, and Mountain Dew Game Fuel, an energy drink for computer gamers. Mr Johnston said it plans this year to “ramp up” sales of Bubly, its flavoured sparkling water.
The Company said it expects to generate productivity savings of at least $1 billion annually through 2023, an extension of the Company’s previous target of $1 billion annual savings through the end of 2019. The aim is to become “leaner, more agile and less bureaucratic”.
“Savings from our productivity programs will be substantially reinvested,” said Mr Ramon Laguarta, CEO of PepsiCola.
“Our overarching goal is to accelerate the rate of top line growth.”
Looking forward to 2019, the company said expects full-year organic revenue growth of 4%. It anticipates a jump in its effective tax rate to 21% from 18.8% in 2018 and total cash returns to shareholders to be approximately $8 billion.
