PepsiCo, Inc. reported growth in volume, net revenue, operating profit and earnings per share for the third quarter of 2011 driven by top-line gains across its worldwide snacks and beverage businesses and from the acquisition of Wimm-Bill-Dann (WBD), the leading dairy and juice company in Russia.
"We're focused on growing our business by providing consumers around the globe with great tasting products they love at a good value, and we believe this quarter's performance is a good indication that our efforts are working," said PepsiCo Chairman and CEO Indra Nooyi in a prepared statement. "We had strong revenue growth across our product portfolio and across our key geographic markets. We were able to achieve pricing to partially offset commodity cost inflation and at the same time stimulate consumer demand for our products. The result in the quarter was well-balanced top-line and bottom-line growth."
Worldwide snacks volume increased 8 percent reflecting broad-based gains in the snacks portfolio and the impact of the WBD acquisition. Excluding the impact of the WBD acquisition, snacks volume grew 3 percent. Worldwide beverage volume increased 4 percent, including a 3-percentage-point impact from the WBD acquisition. Volume performance was led by growth in emerging markets, where organic volume increased 8 percent in snacks and 3 percent in beverages.
Reported net revenue increased 13 percent reflecting the benefits of volume growth, effective net pricing and favorable foreign exchange. Reported net revenue grew 33 percent in emerging markets. Excluding the WBD acquisition, net revenue grew 9 percent worldwide and 18 percent in emerging markets.
Total operating profit increased 4 percent on a reported basis, reflecting higher corporate unallocated costs in 2011 that were driven by a postretirement gain in the prior year. Total division operating profit increased 7 percent. Reported net income increased 4 percent and reported EPS increased 5 percent to $1.25.
Core division operating profit increased 6 percent, reflecting the benefits of net revenue gains, synergies from the anchor bottler acquisitions, productivity, favorable foreign exchange and the impact of the WBD acquisition, somewhat offset by inflation in commodity and other operating costs. Core EPS of $1.31 increased 7 percent, driven by operating profit growth and a lower year-over-year core income tax rate.
Frito Lay North America (FLNA) volume increased 1 percent and net revenue grew 4 percent in the quarter driven by strong growth in club, convenience, dollar and drug channels. Lay's, Doritos, Cheetos and Ruffles posted strong revenue growth driven by innovation and price realization as the division executed its planned pricing actions in the quarter. Operating margins expanded in the quarter reflecting the benefits of net revenue growth and productivity.
Latin America Foods volume grew 3.5 percent in the quarter reflecting solid gains in the division's largest markets, Mexico and Brazil, and strong growth in a number of key markets across Central and South America. Growth was driven by a strong innovation agenda, successful brand promotions, consumer value initiatives and marketplace execution. Strong price realization led to double-digit revenue and operating profit growth, although operating profit growth was impacted by higher commodity inflation.
Quaker Foods North America (QFNA) reported strong effective net pricing that led to net revenue growth and operating profit growth. Both gross margins and operating margins expanded in the quarter, reflecting strong effective net pricing and solid cost controls offsetting commodity inflation.
PepsiCo Americas Beverages (PAB) volume increased slightly and net revenue increased 3 percent reflecting incremental pricing actions taken in the quarter across much of the portfolio. Mid-single-digit volume growth in non-carbonated beverages offset declines in CSDs. Non-carbonated beverage volume growth in North America was led by a 9 percent increase in Gatorade which was overlapping a 15 percent increase in the prior year. Within the U.S., the company's volume share of the liquid refreshment beverage category grew slightly in the quarter. Latin America Beverages delivered solid volume growth in the quarter driven primarily by strength in Mexico, Central America and Brazil.
Operating profit declined as a result of increased commodity and other operating costs in the quarter which offset the benefits of net pricing, productivity and synergies from the anchor bottler acquisitions.