The renewed price push comes after PepsiCo reported North American sales volume of its snacks and beverages rose 2% in the first quarter from a year earlier, despite a continued downturn at its smaller Quaker foods unit, the report said.
"We're trying to thread the needle and see how much pricing we can take," Indra Nooyi, chairman and CEO, told [image-nocss] analysts in a conference call Thursday.
PepsiCo said its "price mix" for North American beverages rose about two percentage points in the first three months of 2011--about half from higher sticker prices and the rest from a shifting mix of products, package sizes and retail channels.
But management acknowledged it would notbe able to fully pass higher input costs such as plastic for bottles or corn for chips through to consumers in the United States and elsewhere. It estimated the company's global commodity costs will increase by $1.4 billion to $1.6 billion this year--or as much as 9% of its annual $18 billion commodity cost base.
"Commodity inflation will be a challenge for us and everyone else in our industry for the foreseeable future," CFO Hugh Johnson told the newspaper, adding PepsiCo can only hedge about 80% of such costs.
Consumers remain cautious amid high unemployment and signs of an economic slowdown in the United States, PepsiCo's largest single market, said the report. Gross domestic product expanded at an annual rate of 1.8% in the first quarter, slowing from 3.1% in the fourth quarter, the Journalsaid, citing the U.S. Department of Commerce.
PepsiCo said its first-quarter net profit fell to $1.14 billion, or 71 cents a share, from $1.43 billion, or 89 cents a share, in the like 2010 period. The year-earlier profit was boosted by a $958 million accounting gain. Revenue soared 27% to $11.94 billion from $9.37 billion, driven by last year's acquisition of its largest bottlers. Not including acquisitions, revenue grew 5% from a year earlier, with faster growth rates in developing markets such as Russia, Turkey and China.
After a spate of big acquisitions in recent years, Nooyi said the company will focus on organic growth, alongside smaller "tuck-in" acquisitions and joint ventures.
Adjusted core net profit for the most recent quarter, at 74 cents a share, beat Wall Street estimates by a penny.
Several PepsiCo beverage brands have been losing market share to Coca-Cola Co. in the UnitedStatesin recent years, the report said, including its flagship Pepsi-Cola, which slipped to the No. 3 soda by volume in 2010 after being overtaken by Diet Coke, according to the paper, citing Beverage Digest. Regular Coke is the longtime market leader, it added.
But PepsiCo pointed Thursday to several beverage bright spots in North America during the first quarter, including a 20% surge in volume sales of Gatorade, its sports drink. Volume of Mountain Dew, its caffeinated citrus soda, grew by a "mid-single-digit" percentage.
The company's biggest step-up in investments this year will be in its North American beverage business, Nooyi said Thursday.
But the Quaker Foods North America unit, which sells oatmeal and healthy foods, saw its revenue fall 6% in the most recent quarter. The company cited declines in ready-to-eat cereals, among other products, said the report.
PepsiCo reiterated Thursday it expects core earnings per share to grow by 7% to 8% in 2011, after ratcheting down its forecast of low double-digit profit growth in February.
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