PepsiCo's 1Q profit rises on international growth

PURCHASE, N.Y. -- Strong sales of PepsiCo Inc.'s snacks and drinks in developing markets helped its first-quarter profit rise 26 percent, beating analyst estimates.

Locally, Pepsi has operations in Schaumburg.

Frito-Lay North America snacks sales rose slightly, while sales of snacks and beverages posted double-digit gains in India and China, Pepsi said Thursday. Beverage sales volume was soft in the U.S. and Europe as shoppers reduce spending and switch to juices and teas.

The company said it made more investments in key markets like China in the quarter and plans to increase its spending on infrastructure and research and development in the second quarter.

Companies like PepsiCo are pursuing people in emerging markets to add sales as they face stagnant markets in North America and Europe. These companies hope that as people make more money in Brazil, India and China, they'll want to spend it on their products. Analysts say these countries represent strong opportunities for growth because people there simply don't eat as many of these snacks like Doritos or drink soft drinks like Pepsi.

For the first three months of the year, PepsiCo earned $1.43 billion, or 89 cents per share.

Analysts expected earnings of 75 cents a share, according to Thomson Reuters.

Revenue climbed 13 percent to $9.37 billion, while the volume of products sold rose 1 percent.

Profit in the company's North American beverages improved partly because of the company's purchase of its bottlers in the quarter. PepsiCo, based in Purchase, N.Y., bought its bottlers Pepsi Bottling Group and PepsiAmericas in a deal valued at $7.8 billion.

The goal of the deal is to control distribution, which is key for drink makers because it means less time to put drinks on shelves to keep up with changing shopper tastes. It also means the companies can reap millions in savings.

Rival Coca-Cola Co. said within days of PepsiCo's deal closing that it would buy the North American operations of its largest bottler, Coca-Cola Enterprises.

Pepsi said volume slipped 4 percent for its North American beverages in the quarter, but revenue rose by 32 percent and profits by nearly that much because of the acquisitions and focusing on selling more profitable products.