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updated: 10/17/2012 8:53 AM

PepsiCo's profit dips amid turnaround push

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  • PepsiCo Inc. says its net income dipped 5 percent in the third quarter, as the food and beverage maker continued to pour more money into marketing to bolster its flagship brands.

      PepsiCo Inc. says its net income dipped 5 percent in the third quarter, as the food and beverage maker continued to pour more money into marketing to bolster its flagship brands.
    Bloomberg News

 
Associated Press

NEW YORK -- PepsiCo Inc. says its net income dipped 5 percent in the third quarter, as the food and beverage maker continued to pour more money into marketing to bolster its flagship brands.

The Purchase, N.Y.-based company, which makes Tropicana juice, Frito-Lay snacks and Quaker Oats, stood by its guidance for the year, however, and profit came in above Wall Street expectations.

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Global sales volume of snacks rose 6 percent, while sales volume for beverages rose 3 percent.

As part of a turnaround push that began this year, PepsiCo is working to raise the stature of its key brands, such as its namesake cola and Gatorade sports drink. The company is betting that this will help cultivate customer loyalty and make the products more resilient to competition and price hikes.

When excluding the impact of unfavorable currency exchange rates and other structural changes, the company said its revenue rose by 5 percent in the quarter. The increase reflected a 1 percent jump in sales volume and 4 percent bump in pricing.

The company's core operating profit declined 8 percent, reflecting higher costs for ingredients, increased advertising and marketing and higher pension expenses.

For the period ended Sept. 8, PepsiCo says it earned $1.9 billion, or $1.21 per share. That's compared with $2 billion, or $1.25 per share, a year ago. Earnings from core operations were $1.20 per share, better than the $1.16 per share analysts expected.

Total revenue fell 5 percent to $16.65 billion, partly because of unfavorable currency exchange rates and the refranchising of its business in China and Mexico. That means that revenue in those countries is now recorded by PepsiCo's local partners.

Analysts expected revenue of $16.96 billion.

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