PepsiCo expects to increase sales this year after demand for chips and sodas from housebound consumers helped the food and drinks company produce a bigger than anticipated rise in revenues in the last three months of 2020.
The shift to remote working and learning has prompted consumers to munch on snacks more regularly at home, fuelling demand for the US-based group’s line-up of snack brands including Lays, Quaker Oats and Doritos.
But the pandemic has weighed on sales of sodas and other drinks, which are more reliant on businesses such as restaurants and cinemas that have been hit hard by shutdowns and occupancy restrictions.
Despite the pressure on such out-of-home venues, PepsiCo said its global beverage business accelerated into the end of the year. The group, which makes Gatorade sports drinks, Tropicana fruit juice and its namesake fizzy beverage, reported a 5.5 per cent year-on-year increase in fourth-quarter organic sales of Pepsi sodas and other drinks in North America.
Snack revenues also continued to rise. North American sales of Frito-Lay and Quaker Foods products increased 5 per cent and 8 per cent in the quarter, respectively.
The New York-based company also produced sales growth across its international markets, led by an 8 per cent rise in Europe.
Hugh Johnston, PepsiCo’s chief financial officer, said the results reflected strong sales in convenience stores and other retailers as well as ecommerce, offsetting continued weakness in the food service industry. With consumers doing more of their food shopping online, PepsiCo’s ecommerce net revenue soared more than 90 per cent in 2020 compared with the previous year.
For 2021, PepsiCo said it was targeting a mid-single digit percentage increase in organic revenue, as well as a high-single digit increase in core earnings per share.
PepsiCo’s forecast followed an update from Coca-Cola, which said it expected a return to organic sales growth in 2021 as coronavirus vaccines are rolled out and consumer mobility improves. Coca-Cola lacks a snacking business and is more exposed than PepsiCo to sales through restaurants, bars and other businesses, which normally account for about half of its annual revenues.
PepsiCo has benefited from variety in its product catalogue, Johnston said. Consumers were eating breakfast at home more than usual due to the pandemic, which has boosted demand for hot cereal, pancake mixes and juice. In North America, the snacking frenzy helped drive Tostitos and Cheetos to double-digit annual growth in net sales.
PepsiCo’s organic sales jumped 5.7 per cent overall in the three months to December 26, accelerating from the third quarter, when they rose 4.2 per cent.
Quarterly net revenues increased 8.8 per cent to $22.5bn, outpacing consensus Wall Street analysts’ estimates of $21.8bn. Net income rose to $1.85bn from $1.77bn, or $1.47 per share in core earnings, one penny more than expected.
PepsiCo shares were up about 1 per cent in pre-market trading on Thursday.