Fueled by the resurgence of on-premise accounts and increased consumer mobility, PepsiCo net revenue surged 20.5% to $19.2 billion in Q2 2021, beating already-optimistic analyst expectations.
According to an earnings report released today, organic revenue growth increased 12.8% in the quarter, up from 7.4% last year. Operating profits were $3.1 billion, up from $2.85 billion year-over-year and diluted earnings per share (EPS) rose to $1.72, up from $1.53. Broken down by division, PepsiCo Beverages North America (PBNA) reported $6.1 billion in net revenue (+24%) and $809 million in operating profit, while Frito-Lay North America reported $4.5 billion in revenue (+7%) and $1.3 billion in profit. Quaker Foods North America fell 13% to $575 million in revenue and $128 million in profit.
The company increased its full year outlook projections to a 6% increase in organic revenue and an 11% increase in core EPS.
Internationally, organic revenues for beverages grew 22% while snacks were up 11%. Mexico, Russia, Brazil, Turkey, Egypt, India, Germany, France, Spain, and South Africa all saw organic revenue rise double digits.
“Our results give us confidence that the investments behind our Faster, Stronger and Better framework are working – as we invest in our brands, supply chain and go-to market systems, manufacturing capacity, capabilities and culture, and our society by integrating purpose into everything we do,” said CEO Ramon Laguarta in a press release. “Moving forward, we remain focused on winning in the marketplace and building competitive advantages that will position us well as consumer habits and preferences evolve over time.”
According to pre-prepared remarks, Frito-Lay results were driven by market share gains in the salty snacks category, including from leading brands such as Lays, Doritos, Cheetos and Ruffles, while smaller brands like PopCorners, Sun Chips and Miss Vickie’s reported “very strong revenue growth.”
Sales for PBNA were driven by CSDs, RTD tea and juice drinks, the report states. The beverage division experienced a significant boost from growing demand from restaurants, with foodservice sales doubling in the quarter, as well as double-digit net revenue increases in convenience and gas. Brands including Pepsi, MTN Dew, Bubly and Starbucks all saw double-digit net revenue growth in Q2.
Vice chairman and CFO Hugh Johnston said that much of PepsiCo’s market share gains came at the expense of Coca-Cola, telling CNBC today that the company was taking share from “the biggest competitor down in Atlanta.”
Speaking to analysts and investors during a Q&A call, Laguarta said PepsiCo is currently working to innovate and revamp the Rockstar Energy brand and continues to focus on establishing “strong foundations.” Having faced declining sales for years at the time of its acquisition by PepsiCo last spring, Laguarta said the company is now reformulating multiple Rockstar products and plans to focus on scaling sugar free SKUs.
“I think our brand positioning is quite good,” Laguarta said. “We’ve found a niche that wasn’t there, it’s clearly differentiated from Red Bull and Monster, and it’s a unique position we plan to insist on…. It’s going to be a multi-year [project], we’re very focused on the domestic business here in the U.S. but also the international teams are very focused on that priority and we will execute on a multi-quarter, multi-year business. We’re very positive on what we’re seeing.”
Laguarta added that the company is “very happy with the initial execution” and consumer reaction to MTN Dew Rise, a morning energy drink released this spring in partnership with NBA star LeBron James, while its distribution partnership with Bang is “going well.”
PepsiCo is also expanding on its 2019 corporate restructuring plan that is expected to deliver “at least $1 billion in annual productivity savings by 2026.” The updated plan includes “further initiatives to leverage new technology and business models to simplify, harmonize and automate processes” as well as optimizing the company’s manufacturing and supply chain footprint.
No further details were offered on Pepsi’s trademark application last month for beer and hard seltzer offerings under the Rockstar brand. During the company’s Q3 2020 earnings call in October, Laguarta said the company was weighing its options before venturing into the beverage alcohol category.