Despite unprecedented headwinds from the COVID-19 pandemic, PepsiCo showed “resilient” growth in its full year 2020 and Q4 earnings report this week. The company reported organic revenue growth of 4.3% for the full year and 5.7% in the fourth quarter. Net revenue for the year was up 4.8% and increased 8.8% in the quarter.
“We ended the year on a strong note with our global beverage business having accelerated while our global snacks and food business remained resilient in the fourth quarter,” chairman and CEO Ramon Laguarta said in release. “Our results were indicative of the strength and resilience of our highly dedicated employees, diversified portfolio, agile supply chain and go-to-market systems and strong marketplace execution even in the face of difficult COVID-19 challenges.”
Pepsi Beverages North America reported 5.5% organic revenue growth for the full year. Operating profit for the division was up 19% year-over-year, stemming from net revenue growth, productivity savings, lower advertising and marketing costs and “a 6-percentage-point impact of lower commodity costs,” according to the company. The growth was partially offset by increases in operating costs and impact from the COVID-19 pandemic.
According to the company, brand such as bubly and Starbucks reported double digit growth for the full year, while Gatorade improved “high-single digits.” Gatorade Zero surpassed $1 billion in estimated retail sales last year, while bubly, Pepsi Zero Sugar and Mountain Dew Zero Sugar cumulatively earned more than $750 in retail sales.
Additionally, brands such as Lipton, MTN Dew and Tropicana also reported growth.
Organic revenue in North America improved 5%, driven by at-home consumption, while international revenue jumped 6%. Frito-Lay North America grew organic revenue by 6% for the full year and by 5% in Q4. Quaker Foods North America was up 11% for the year and 8% in the final quarter.
Laguarta also highlighted PepsiCo’s “Faster, Stronger, and Better” mission, which seeks to improve and streamline the conglomerate’s business across all channels. Among the program’s initiatives for 2021 are expanding ecommerce opportunities (ecommerce sales grew 90% in 2020), continuing innovations on SodaStream in order to meet the rise in at-home consumption and further innovations in healthy snacks and low-or-zero calorie beverages.
Speaking to analysts and investors during a call yesterday, Laguarta noted that among its beverage portfolio the company sees strong opportunity to grow Gatorade through new, better-for-you and functional innovations.
“As we think about the future of Gatorade, we couldn’t be more excited about what we see, obviously, moving into other spaces like … natural,” Laguarta said. “Where we see the biggest opportunity for Gatorade is in creating more of a personalized solution for athletes, and kind of amateur athletes like most of us, and creating a much more engaged relationship where we become advisors of the athletes of their hydration needs of all their nutrition needs.”
Though he did not discuss ongoing litigation, Laguarta also commented on the decision by VPX Sports to discontinue its Bang distribution partnership with PepsiCo. During the call’s Q&A, he reiterated the conglomerate’s intent to remain the exclusive distributor of Bang through October 24, 2023 — despite VPX’s attempts to end the partnership immediately — but noted that the brand is not a key part of PepsiCo’s energy strategy.
“We’re going to do our best to make that brand well distributed in the marketplace, but the core of our energy strategy was never Bang. It’s a distribution cherry on top,” Laguarta said.
Instead, he said Rockstar is PepsiCo’s “first pillar.” The recently acquired brand is beginning to integrate its supply chain into PepsiCo’s operations, he added, and the company will continue to invest in Rockstar as it attempts to turn around declining sales numbers. Laguarta said Rockstar is currently working on “improving the formula” as well as “building different propositions for multiple spaces” within mainstream energy.
Additionally, Laguarta teased upcoming innovation from MTN Dew, which will continue to expand its presence in the energy category through new product lines, as well as opportunities for brands “in the sports area.”
“I think we can have a multiple set of solutions and brands that drive consumer solutions in a space that is obviously growing and has a lot of consumer pools,” Laguarta said. “So, it’s important for us, as we said, both from the growth point of view and the margin expansion point of view, and we feel good about the steps we’re taking brick by brick to build a solid foundation for us to play in energy over many years.”