PepsiCo’s health push leads to slumping soda sales

CEO says too much shelf space was given to low-calorie options

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A shift by PepsiCo from sodas to more healthy and low-calorie drinks crimped sales in the third quarter, even with strong snack sales pushing profits up 8% compared with last year.

PepsiCo has attempted to walk in step with American tastes, which potentially means less Pepsi and Mountain Dew.

CEO Indra Nooyi acknowledged Wednesday the company gave too much shelf space to its newer, low-calorie drinks and spent too much marketing them.

The transformation at PepsiCo will continue, but the company plans to return more of its focus to the brands that drive sales, including Pepsi and Mountain Dew, and it will promote them accordingly.

Nooyi also blamed the sales slump on cooler summer weather, which hurt Gatorade the most. Revenue from beverages in North America, PepsiCo’s biggest market, fell 3%.

“Our performance did lag the industry,” said Nooyi. “No question about it.”

Snacks offset some of those declining sales on the drink side, however.

The North America Frito-Lay business rose 3% thanks to higher demand for its jalapeno-flavoured Cheetos and Ruffles chips. There is an “increasing desire for bold flavours” on which PepsiCo has been able to capitalize, Nooyi said.

The company reported net income of $2.14 billion in the 12 weeks ending Sept. 9. That compares with $1.99 billion in the same quarter a year ago.

Revenue rose 1% to $16.24 billion, short of the the $16.41 billion analysts had projected.