PepsiCo, Inc. reported volume, revenue and profit growth for the fourth quarter and full year of 2010 driven by gains across its worldwide snacks and beverage businesses, and from the acquisitions of its anchor bottlers earlier in the year. Full-year reported earnings per share increased 4 percent to $3.91, core earnings per share increased 12 percent to $4.13 and core constant currency earnings per share grew 12 percent. For the quarter, reported EPS declined 6 percent to $0.85, core EPS grew 17 percent to $1.05, and core constant currency EPS grew 19 percent.
"We are pleased with PepsiCo's performance in the fourth quarter and for the full year. The underlying performance of our businesses remained solid despite a challenging macroeconomic environment," said PepsiCo Chairman and CEO Indra Nooyi in a prepared statement. "We posted broad-based worldwide gains in both snacks and beverages, our businesses deftly balanced a delicate price-value consumer equation, and we aggressively managed costs and productivity to deliver top-tier financial results."
Nooyi continued, "Importantly, we are entering 2011 an even-stronger, more-capable organization: "Our core global snacks and beverage businesses benefit from strong brands, world-class go-to-market systems, and innovative and differentiated products and we strengthened these advantages in 2010 through targeted investments; we acquired and successfully integrated our two anchor bottlers, creating more-efficient and effective beverage businesses in our key North American market and in Europe; we acquired Wimm-Bill-Dann, Russia's preeminent food and beverage company, adding to our terrific competitive position in Russia and Eastern Europe, while also providing a strong foothold in the attractive dairy category; and we established our Global Nutrition Group to accelerate innovation and growth in our large and well-positioned nutrition businesses.
"We are encouraged by the momentum of our businesses as we enter 2011, and are mindful of three realities:
- A weak consumer landscape given the poor macroeconomic picture, especially the high level of unemployment in key developed markets;
- High levels of cost inflation for the coming year, driven by broad and pronounced commodity inflation; and
- A potentially difficult competitive pricing environment, particularly in beverages.
"Our earnings outlook reflects our considered perspective on the marketplace and the macroeconomic picture, and we are confident we have the operating capability, portfolio strength and financial flexibility to effectively compete in this environment."
PepsiCo Chief Financial Officer Hugh Johnston said, "In addition to our strong fundamental operating performance in 2010, our businesses also generated strong cash flow. The company generated $6.9 billion of management operating cash flow, excluding certain items, representing a 23 percent increase over 2009."
"We delivered more than $150 million in synergies from the bottler acquisitions in 2010, above our target for the year. The strong pace of synergy realization and the identification of additional synergies have led us to increase our expectation for total synergies through 2012 to more than $550 million."
Frito-Lay North America (FLNA) increased its dollar share leadership position in measured channels in salty snacks for the full year and grew operating profit 8 percent for the full year, its strongest profit growth performance in a decade. Profit growth in the quarter and for the full year benefited from lower input costs and from strong productivity gains and cost control.
Volume grew slightly in the fourth quarter and units grew 1 percent. Volume growth continued to be impacted by cycling the "20% More Free" promotion from 2009. Lay's performance led growth, with strong consumer response to the activation of Lay's All Natural Ingredients, and continued strong double-digit growth in Sabra dips and spreads.
For the full year, volume declined 1 percent, with unit growth up more than 1 percent. Volume growth was adversely impacted by cycling the "20% More Free" promotion. Net revenue growth for the quarter and full year reflected the impacts of volume performance and effective net pricing.
Quaker Foods North America (QFNA) performance for the quarter and full year reflected declines in the hot cereals and ready-to-eat cereals categories, and a competitive pricing environment. QFNA invested in improving its quality and in innovation launched in the second half of 2010 that will continue to receive marketing support in 2011.
PepsiCo Americas Beverages (PAB), in a highly competitive environment, North America volume (excluding the impact of incremental volume from the agreement with Dr Pepper Snapple Group) grew 1 percent in the quarter behind strong performance of the company's advantaged non-carbonated beverage portfolio. The fourth quarter of 2010 marks the company's fifth consecutive quarter of sequential improvement in organic volume performance in North America. PAB widened its liquid refreshment beverage volume share advantage versus its primary competitor in the U.S. in measured channels for the quarter and the full year.
Volume, revenue and operating profit growth for the quarter and full year benefited from the impact of the anchor bottler acquisitions.