PepsiCo's Biggest Opportunity
PepsiCo has satisfied consumers' bellies for more than a century. But recently, the company has left shareholders craving more. With its increased competition and loss of market share, many investors wonder if this global snack food and beverage giant is simply fizzling out. Are more bland results ahead for PepsiCo?
Below is an excerpt from our brand-new premium research report that highlights PepsiCo's biggest opportunities. It's just a taste of one section, but we hope you find it useful.
Last year, PepsiCo derived approximately 58% of its $66 billion in revenues from North America. This geographic segment made up an overwhelming 71% of operating profit. Currently, roughly half of global snack-food sales occur in the U.S., where PepsiCo's Frito-Lay is the dominant market share leader.
Here's a snapshot of PepsiCo's authority in the U.S. salty-snack market.
Percent Retail Sales
Procter & Gamble
Clearly the U.S. snack leader, PepsiCo is four times larger than closest rival Kraft Foods, eight times larger than Kellogg, and 19 times larger than General Mills.
Regardless of PepsiCo's dominance in the U.S., the domestic snack food market has been flat. However, there's still plenty of room for growth overseas. In developing nations China, Brazil, and Russia, combined snack food sales grew 15% in 2010 and 11% in 2011 to $17 billion. That's still only half the size of the U.S. market, but it's growing significantly: The global snack food market is expected to grow 7% per year through 2015. For PepsiCo, international business, namely in developing and emerging markets, is the key growth driver for the coming years.
Percent of PepsiCo's Net Revenues in 2011
Percent Changes in Net Revenues From 2010
Frito-Lay North America
Quaker Foods North America
PepsiCo Americas Beverages
Latin America Foods
In 2011, overseas divisions Latin America, Europe, and Asia/Middle East/Africa saw revenues grow 13%, 41%, and 17%, respectively. Of course, some of this top-line growth was a result of acquisitions, which included both a Russian food and beverage company and a Brazilian cookie and biscuit business. Specifically, growth drivers for the Latin American market are Brazil and Mexico, which each added double-digit growth in both the snack foods and beverage markets in 2010 and 2011. Both beverage and snack volumes grew in Europe, aided by increased sales in Turkey and Russia. Meanwhile, snacks are growing faster than beverages in India, China, and the Middle East. Expect continued aggressive future investments in emerging-market nations from PepsiCo and its salty-snack and beverage rivals.
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The article PepsiCo's Biggest Opportunity originally appeared on Fool.com.Fool contributor Nicole Seghetti owns shares of General Mills, PepsiCo, and The Procter & Gamble Company. The Motley Fool owns shares of PepsiCo. Motley Fool newsletter services recommend PepsiCo and The Procter & Gamble Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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