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PepsiCo CEO: We're reducing our reliance on colas for sales

PURCHASE, N.Y. – PepsiCo CEO Indra Nooyi said Monday the company is reshaping its product lineup to better reflect the growing interest in healthy eating and noted it has reduced its reliance on colas for sales.

The maker of Frito-Lay snacks, Mountain Dew, Naked juices and Quaker Oats now gets less than 25 per cent of its global sales from soda, Nooyi said. And she said just 12 per cent of global sales comes from its namesake soda.

Representatives for PepsiCo were unable to provide how those figures have changed in recent the years.

The remarks underscore PepsiCo’s recent shift in tone as the world’s biggest soda brands have been pressured by intensifying competition and a bad image for fueling weight gain in markets such as the U.S.

With soda consumption continuing to decline domestically, PepsiCo and Coca-Cola have been trying to push up sales by weaning people off cheaper options like 2-litre bottles and toward single-serve options or snazzier mini cans and aluminum bottles that fetch more per ounce.

Another tactic is trying to give soda some hipster appeal, such as with PepsiCo’s recently introduced Caleb’s and 1893, which are positioned as “craft sodas.” The names are references to the invention of Pepsi by Caleb Bradham in 1893.

Even while trying to shore up its struggling soda business, however, Nooyi said during a call with analysts Monday that PepsiCo has been broadening its beverage portfolio to lessen the reliance on sodas for sales.

She said options like bottled water and unsweetened drinks — which PepsiCo has referred to as “good for you” options — account for 25 per cent of sales. And “guilt-free” products like diet sodas and snacks with reduced levels of sodium and saturated fat account for 45 per cent of sales.

Nooyi’s remarks came Monday after PepsiCo said its sales and profit slipped in its first quarter, weighed down by an impairment charge and unfavourable currency exchange rates.

When excluding one-time items, PepsiCo said it managed to lift sales and profit despite the challenging economic conditions around the world. That included sales increases in its flagship North American snacks and beverages units, which each benefited from pricier products.

For the period ended March 19, PepsiCo said sales declined 3 per cent to $11.86 billion, which was also shy of the $11.9 billion that analysts, according to Zacks Investment Research.

The Purchase, New York-based company earned $931 million, or 64 cents per share. A year earlier, it earned $1.22 billion, or 81 cents per share.

Stripping out an impairment charge, earnings were 89 cents per share in the latest quarter, topping the 81 cents analysts expected.

Going forward, PepsiCo anticipates 2016 adjusted earnings of $4.66 per share. Analysts polled by FactSet predict $4.70 per share.

Shares of PepsiCo rose 73 cents to $104.50 in morning trading. Its shares are up 9 per cent over the past year.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on PEP at http://www.zacks.com/ap/PEP

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