China Food

Pepsi China, a little powerful

Continuing the momentum of the beginning of this year, Pepsi China, which owns many well-known brands such as Pepsi Cola, Quaker, Leshi, and Pepsi, once again handed over a growing quarterly report card under the challenge of the epidemic.

On July 12 local time in the United States, the multinational food and beverage giant announced its results for the second quarter of 2022 (the 12 weeks ended June 11, 2022). Xiaoshidai noted that although it was not disclosed separately, PepsiCo China’s growth has been “named” many times in the financial statements.

At the subsequent Wall Street Analyst performance meeting, Ramon laguarta, chairman and CEO of PepsiCo, further talked about China’s performance, performance under the epidemic, and the latest insight into consumer preferences.

Long Jiade, chairman and CEO of PepsiCo (data picture)

Next, xiaoshidai will bring you to pay attention.

Double growth

First, let’s focus on the performance of the Chinese market.

“In the second quarter of 2022, our international business achieved 15% organic revenue growth, and each of our international departments reported strong organic revenue growth.” Longjiade said that the company’s development and emerging markets achieved double-digit organic revenue growth in the quarter, including “double-digit organic revenue growth in the Chinese market”.

The Chinese market has also driven the growth of PepsiCo Asia Pacific.

According to the financial report data reviewed by xiaoshidai, in the second quarter, PepsiCo’s APAC region (including the Asia Pacific, Australia, New Zealand and China markets) had a net income of $1.115 billion (about 7.493 billion yuan), an increase of 3% year-on-year, and an operating profit of $206 million (about 1.384 billion yuan), an increase of 7% year-on-year; In addition, organic revenue increased by 13% year-on-year.

PepsiCo’s performance of regional sectors in the second quarter and the first half of 2022

“The increase in net revenue mainly reflects the growth of organic sales and effective net pricing,” PepsiCo said, “The growth of operating profit mainly reflects the growth of net income and the improvement of production efficiency, which are partially offset by the impact of 15 percentage points brought by the rise in commodity costs (mainly edible oil and potatoes) and the increase in some operating costs. The higher expenses caused by the epidemic also reduced the growth of operating profit by 5 percentage points. In addition, the impairment charges of the previous year contributed 10 percentage points to the growth of operating profit.”

In terms of sales volume, PepsiCo China’s food and beverage business segment has achieved growth. “(in the second quarter, the unit sales of convenience food in APAC region) increased by 12%, mainly reflecting China’s double-digit growth.” PepsiCo pointed out that the unit sales of beverages increased by 6%, mainly reflecting the double-digit growth in Vietnam and the Philippines, partially offset by a small decline in Thailand; In addition, China has achieved “low single digit growth”.

Let’s take a look at the global performance.

And first half performance

The latest financial report shows that in the second quarter, PepsiCo’s net income was US $20.225 billion (about 135.922 billion yuan), an increase of 5.2% year-on-year; The net profit attributable to the company was US $1.429 billion (about RMB 9.604 billion), a year-on-year decrease of 39.4%.

“Despite the continuous macroeconomic and geopolitical turmoil and the high inflation level in our market, we maintained the business momentum and were satisfied with the performance in the second quarter.” Longjiade said in the financial report, “this shows the high dedication of our employees, the strength and toughness of our category, the agile supply chain and market access system, and strong market execution.”

Looking forward to the whole year of 2022, long Jiade said that considering the performance of PepsiCo from the beginning of the year to the present, it is now expected that the annual organic revenue will increase by 10% (previously 8%), and the earnings per share on the basis of constant core currency exchange rate is expected to increase by 8%.

Share increase

As mentioned above, in the second quarter, PepsiCo China’s food growth rate was higher than that of the beverage business, which obviously reflected the impact of the epidemic. Travel restrictions had a great impact on the important outdoor consumption channels of beverages. In the first half of the year, PepsiCo China’s beverage business grew at a higher rate.

According to the information reviewed by xiaoshidai, in the first half of this year (the 24 weeks ended June 11, 2022), PepsiCo APAC’s net income increased by 5.5% and its operating profit increased by 5%. The unit sales of convenience food increased by 5.5%, of which China experienced a median single digit growth. Unit sales of beverages increased by 10%, of which China experienced double-digit growth.

Considering the pressure of the epidemic on the macro economy in the first half of this year, PepsiCo China’s growth is very bright.

“Despite the impact of the containment of the epidemic, PepsiCo China still recorded another strong quarter. Can you let us know more about what is happening and why we can continue to achieve this level of growth in China?” Xiaoshidai noticed that during the Q & a session of the performance meeting, some analysts asked.

“Speaking of the Chinese market, it is obvious that the closure (caused by the epidemic) is affecting the operation of enterprises. Our team is very agile and has quickly made the right adjustments to how we continue to produce snacks or beverages. Under the extremely difficult circumstances of obtaining raw materials and providing products to consumers, we have done more or less (adapt to changes) 。 We may do better than other companies in this regard, which is the reason why we have significantly increased our share. This is why our business is growing very fast. ” Longjiade responded.

He mentioned that PepsiCo’s market share in China’s salty snacks has increased in terms of year to date performance, and it has also expanded its market share in beverages.

“If you look at the beverage business, you will see that the consumption of beverages outside the home has been impacted. Obviously, as consumers stay more at home, the past few months have had an impact on this specific channel, but not on the food business. We see that our Quaker and snack businesses continue to grow rapidly. Beverage business (growth) A little less, mainly due to the impact of outdoor channels, but the home channel consumption of beverages maintained a fairly strong performance. ” Long Jiade said.

“Sugar free is king”

Interestingly, under the influence of the epidemic, consumers’ attitudes towards “healthy” and “indulgent” food and beverages have also become one of the topics discussed at the performance meeting.

“PepsiCo has always said that it will promote the transformation of its product portfolio in the long term to reduce fat, sodium and sugar. But looking back over the past two years, it seems that many consumers were more inclined to indulge in the beginning of the epidemic, which is understandable. So I’m curious. Around the idea of health, do you see any reverse U-turn trend in consumer preferences in the product portfolio?” An analyst asked.

In this regard, long Jiade said that he spoke with data. “Your question is more about health. Sugar is obviously a dimension.” He said, “in beverages, the growth rate of sugar free is three times that of total sugar – in this way, you can understand the choices of American consumers. If you look at developed markets such as Western Europe, these (beverage) categories are also rapidly turning to sugar free. For example, in the UK, sugar free products in beverages have accounted for almost more than 80% of the market. It is clear that sugar free is king in beverages.”

In the past few years, PepsiCo has also launched many new sugar free beverages, such as Gatorade zero. “This is a huge innovation, (new product) has reached $1.5 billion in just three years, expanding the category of (sports drinks) and recruiting new consumers for the brand.” Long Jiade said.

“Therefore, I believe that sugar free is an irresistible trend in the beverage category, which is our advantage in R & D and our leading position in our business strategy with customers. Every beverage brand has a leg of ‘sugar free’ business, and it will become the focus of the brand in the foreseeable future.” He said.

Longjiade also talked about other consumption trends. For example, consumers are looking for additional functionality and are willing to pay for it; The growth rate of non fried snacks is much faster than that of fried snacks; And weight control are more popular.

“Portion control is a great idea, which reduces the resistance of consumers to consume our categories more frequently. We have seen a huge increase in small-size, multi packaged products in snacks. They (sometimes) not only make small portions, but also make the categories more diverse. We have also seen this in beverages. The portion of whole sugar products is getting smaller and smaller, such as mini cans.” He said.

“Therefore, I will continue to bet that health will be one of the consumer trends for a long time. Of course, there are many other trends, such as indulgence, functionality, social networking, etc., which are the beauty of our category. They will attract many consumers in various occasions, but I will continue to bet that health is one of the trends. This is part of our innovation strategy and the way we try to promote the development of these categories for a long time.” Long Jiade said.

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