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PepsiCo snacks, breakfast foods get a boost during COVID-19 quarantine

Unknown-1PepsiCo, which makes Frito Lay chips and Quaker cereals, is getting a boost as more consumers eat breakfast and snack at home.

The company said its organic sales – which don’t include acquisitions – grew 7.9% in the first quarter. Shoppers bought more than usual during fewer grocery trips. They also bought more online; PepsiCo said e-commerce sales jumped 45% in the quarter.

Pepsi said its SodaStream business – which lets users make carbonated drinks at home – also saw revenue jump 20% in the January-March period.

“In most developed markets, we’ve moved beyond the preparation and prevention phase and appear to be in the later stages of confinement, in which shelter in place and social distancing have become a new way of life,” Pepsi Chairman and CEO Ramon Laguarta said in a prepared statement.

But the company is losing highly profitable sales at gas stations, movie theatres, stadiums and other venues as fewer people leave their homes. Pepsi’s North American beverage profits fell 24% in the first quarter.

Chief Financial Officer Hugh Johnston said Pepsi expects organic revenue to fall in the second quarter because of continuing restrictions. Consumers in developing markets may also have less discretionary income to spend on snacks and beverages, the company said.

Rival Coca-Cola Co. said last week that its sales volumes are down 25% in April.

Johnston said Pepsi is withdrawing its financial outlook for this year.

For the first quarter, Pepsi reported a profit of $1.34 billion, down 5% from the same period a year ago. Earnings, adjusted for non-recurring costs and restructuring costs, came to $1.07 per share.

The results surpassed Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of $1.02 per share.

The food and beverage company posted revenue of $13.88 billion in the period, also surpassing analysts’ forecasts.

Screen Shot 2019-12-06 at 10.05.07 AM

Pepsi buys snack maker BFY Brands

Screen Shot 2019-12-06 at 10.05.07 AMPepsiCo has purchased BFY Brands for an undisclosed amount.

BFY Brands, the maker of PopCorners line of snacks, will report into PepsiCo’s Frito-Lay North America division.

“BFY Brands offers distinctive products that deliver the great taste and ingredients consumers are looking for,” said Steven Williams, CEO, PepsiCo Foods North America in a press release. “Their production capabilities will support the growth of our existing, more-nutritious snack brands.”

The acquisition falls in line with Pepsi’s strategy, which in recent years has involved reducing its reliance on colas for sales. The company has instead increased its focus on guilt-free snacks with reduced levels of sodium and saturated fat.

The deal is subject to regulatory approvals.

Originally published by Canadian Grocer.


Beverage companies work to get bottles recycled, not trashed

UnknownEvery year, an estimated 100 billion plastic bottles are produced in the U.S., the bulk of which come from three of America’s biggest beverage companies: Coca-Cola, Pepsi and Keurig Dr Pepper.

The problem? Only one-third of those bottles get recycled; the rest end up in the trash.

That bleak trend has persisted for more than a decade because of spotty collection, outdated processing facilities and other issues, according to the American Beverage Association.

Now, Coca-Cola Co., PepsiCo and Keurig Dr Pepper are trying to change that by investing $100 million to improve recycling collection and processing. They also plan to come out with new packaging next year reminding consumers to recycle.

The American Beverage Association is co-ordinating the investment, which will be distributed through The Recycling Partnership, a Virginia-based non-profit that works with local governments to improve recycling rates, and Closed Loop Partners, a New York firm that invests in recycling facilities and new research. The World Wildlife Fund will track the companies’ progress.

Both The Recycling Partnership and Closed Loop Partners say the scale of the investment is unprecedented–and sorely needed. U.S. recycling is a hodge-podge, with 20,000 local governments deciding how best to provide the service. Only 53% of U.S. households have curbside recycling and 6% have no recycling options at all.

China’s decision last year to cut back drastically on the recycling it accepts from the U.S. also put a spotlight on the problem.

“The U.S. system is so desperate,” said Keefe Harrison, the CEO of The Recycling Partnership.

Katherine Lugar, president and CEO of the American Beverage Association, said that’s a source of frustration for both soda drinkers and corporations.

“Consumers in many cases like the convenience of our plastic bottles, but they are rightfully frustrated when they see a bottle on the beach or in a trash can,” Lugar said. “It’s clear that our recycling system needs big improvements, so consumers know their efforts are going to make a difference.”

Closed Loop will invest in things like robot sorters, which make recycling centres more efficient and profitable. Through matching grants, municipal funds and private investors, the fund says it can triple the beverage companies’ investment to around $400 million.

Right now, only around 6% of U.S. bottles are made from recycled plastic, according to The Recycling Partnership.

Coke has pledged that half its bottles will be made from recycled materials by 2030. Pepsi wants 33% of its beverage bottles to be made from recycled material by 2025; Keurig Dr Pepper wants them in 30% of its packaging by 2025.

Reaching those targets will be difficult. Wood Mackenzie, a consulting firm for the oil and gas industry, estimates plastic bottle collection rates would have to rise 38% by 2025 and 78% by 2030 to meet them.

Soda companies have made recycling promises before. In the early 1990s, Pepsi promised to phase out virgin plastic in its bottles by 1994. It never happened. In 2007, Coke invested $60 million in a bottle recycling plant. The plant closed in 2014.

The companies have also vehemently fought bottle deposit programs, which have increased recycling rates in the 10 states that have them. The programs require consumers to pay extra for drinks and get the deposit back when they return the bottles to the store.

Lugar said her association wants to help develop policies to get more recyclables back, but thinks current bottle laws burden the consumer.

Some environmental groups say the companies should move beyond plastic altogether and adopt new delivery systems, like machines that refill reusable containers.

“Putting the onus on people to just recycle more, rather than the companies reducing their throwaway plastic, is cowardly,” said Graham Forbes, the global plastic projects leader for Greenpeace USA. “If these companies were serious about addressing the plastic pollution crisis, they would stop making so much plastic and shift toward systems of reuse.”

The three beverage companies are looking at new ways to sell drinks. Coke is testing Dasani water refill stations on college campuses. Pepsi bought SodaStream last year so consumers can make fizzy drinks with home machines. Keurig Dr Pepper has partnered with LifeFuels, the maker of a smart water bottle.

Energy segment stirring up c-store beverage category

Energy Drinks Generic_Sm_041219The latest look into the cold vault by Wells Fargo Securities LLC is finding a shakeup may be coming to the energy segment.

The first quarter Beverage Buzz survey noted retailer concern about disruption among energy drinks as a result of new products.

“The disruption taking place in the energy category is clearly top-of-mind for our retailers as new entrants such as Bang [Energy Drink] continue to disrupt established players such as Monster Beverage Corp. at an alarming rate,” said Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities.

“As such, we’re increasingly cautious on Monster and concerned that the core energy category is being upended by an onslaught of ‘healthier’ competition,” she said, adding Monster’s pricing is not sticking and a  small minority of retailers suggested the beverage company’s prices could come back down in 2019.

Beverage Buzz surveys beverage retailers representing approximately 20,000 convenience stores.

According to Herzog, 90 percent of retailers either carry Bang or plan to carry it. As she noted, “Bang has evolved from a looming threat to a very real threat.”

In addition, many retailers are increasingly wondering if Monster’s own entry into the burgeoning fitness energy category with Reign “is too little too late,” she added.

Furthermore, while it’s still very early days, some retailers indicated that the early response from consumers to Reign has been underwhelming, Herzog said.

In addition to buzz around the energy segment, other the key survey takeaways, according to Herzog, included:

  • Overall total beverage sales were up a solid 4 percent in the first quarter, ahead of the 2.9 percent in the fourth quarter of 2018.
  • Promotions were elevated in the first quarter, up 2.5 percent year over year and ahead of the 0.5 percent year over year in the previous quarter.
  • Retailers’ outlook for 2019 is more muted with sales likely to be up “a somewhat reticent” 3.2 percent year over year. This is compared to the 3.7 percent in the prior survey.
  •  Retailers’ outlook for the total energy category has moderated, up only 6 percent in 2019 vs. prior expectations of 7.8 percent.

Looking at specific beverage companies, the survey found retailers’ commentary for The Coca-Cola Co. was generally positive, with some exceptions, Herzog said.

However, retailers were “decidedly more cautious” on Keurig Dr Pepper and are still concerned that PepsiCo Inc. is struggling to gain traction despite stepped-up investment spend, she added.

The outlook for Constellation Brands remains strong, with retailers still expecting increases in both sales and shelf space in 2019.