Latest / Bloomberg Intelligence / S&P's Agnese on PepsiCo: New Products Will Boost Revenue(Audio)

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S&P's Agnese on PepsiCo: New Products Will Boost Revenue(Audio) · Bloomberg Intelligence

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  Speaker 1: profit topping Wall Street estimates. The shares are higher by
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  Speaker 1: more than one and a half percent. We're gonna be
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  Speaker 1: speaking with jog Needs equity analysts for consumers staples at
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  Speaker 1: four thousand. White Wave shares surging today They are up
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  Speaker 1: now by eighteen point six percent. Done Known has agreed
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  Speaker 1: to buy White Wave Foods for about ten billion dollars,
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  Speaker 1: adding the best selling US soy milk brand Silk and
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  Speaker 1: the line of plant based foods, and doubling its size
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  Speaker 1: in that market. At Hammond Covers deals for Bloomberg News
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  Speaker 1: sort of pivots towards health and while list that we're
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  Speaker 1: seeing a lot of the big food groups they're trying
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  Speaker 1: to do. At the moment, it doesn't come cheap. There
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  Speaker 1: is a guess, Tavalian, there's not many companies that do
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  Speaker 1: sort of you know, specialize in this space in the
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  Speaker 1: way that White Waves do. And it's the company that
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  Speaker 1: has had a huge amount of sort of noise around
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  Speaker 1: it for the past couple of years. A lot of
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  Speaker 1: people have looked at it, a lot of people have
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  Speaker 1: been interested in it. So it is expensive, but it
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  Speaker 1: also does make sense that they're paying up for this
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  Speaker 1: very highly priced asset. PepsiCo shares surging after second quarter
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  Speaker 1: profit beat analysts estimates. The company also boosted its full
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  Speaker 1: year forecasts, help by rising sales of snacks and soft
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  Speaker 1: drinks in the US. PepsiCo shares up now by one
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  Speaker 1: point three percent, and it is to thirty two on
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  Speaker 1: thank you and again recapping the down SMP R law
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  Speaker 1: and NASDAK has higher SMP five hundred index now down
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  Speaker 1: nine points of two thousand ninety, a drop of four
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  Speaker 1: tenths of one percent. I'm Charlie. That's a Bloomberg Business flash.
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  Speaker 1: Busy is taking stock with Kathleen Hayes and Prim Fox
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  Speaker 1: on Bloomberg Radio. So you thought maybe sugary soft drinks
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  Speaker 1: and snack foods are on their way out in a new,
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  Speaker 1: more health conscious world, will think again. Results out from
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  Speaker 1: Pepsi beating estimates and our next guest is actually lifting
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  Speaker 1: his twelve month target on a PEPSI by four dollars
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  Speaker 1: to a hundred twenty two dollars a share. Joe Agneasy
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  Speaker 1: joins us now Equity analysts for consumer Staples at SMP
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  Speaker 1: Global Market Intelligence here in New York City, Joe, Welcome
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  Speaker 1: to the show. Good afternoon, So PEPSI what made the
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  Speaker 1: quarter so good? While they reported solid organic sales growth
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  Speaker 1: at three point three percent, this was driven by four
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  Speaker 1: percent growth at Frio Lay, which is an improvement open
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  Speaker 1: the prior year, and improving pricing at the North American
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  Speaker 1: beverages their beverage Group developing markets up seven percent. This
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  Speaker 1: is being fueled by improved portfolio of healthier options health
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  Speaker 1: and wellness as people say that packaged food companies are
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  Speaker 1: shifting towards health and wellness as a consumers desire to
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  Speaker 1: eat better. Um. These sails are being fueled by cost
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  Speaker 1: savings to the company's multi year productivity improvement initiatives, which
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  Speaker 1: we see further supporting EPs growth going forward. I wonder
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  Speaker 1: if you could tell us a little bit about some
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  Speaker 1: of the divisions. I mean, let's start off with the
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  Speaker 1: Quaker Foods operation in North America. Lower raw material cause
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  Speaker 1: productivity gains, and they cut some operations at a joint
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  Speaker 1: venture for dairy products. Yeah, so quickerly the smaller division
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  Speaker 1: of the company. Uh, what they're doing there is part
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  Speaker 1: of their overall growth strategy, which is shifting their products
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  Speaker 1: and ingredients towards healthy eating UH. In Quaker, for instance,
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  Speaker 1: they're launching stack bars, which the convenient item that consumers
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  Speaker 1: are shifting towards, helping support revenue growth in the division.
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  Speaker 1: But as I said, the Quakes Food division is a
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  Speaker 1: little bit smaller. The division Freedom Law is the largest
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  Speaker 1: division for the company. Gener is about a toll profits
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  Speaker 1: and against are They're adding natural dents, UH, eliminating artificial
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  Speaker 1: colors and flavors, launching new products which we expect to
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  Speaker 1: help drive help books in the second half of the year.
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  Speaker 1: Could you just give us a sense though, so on
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  Speaker 1: the margin, it seems to me they're adding some products
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  Speaker 1: that are helping UM, but they sell products around the world.
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  Speaker 1: If you look at if you just kind of divide
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  Speaker 1: this into truly like healthier less sugar products versus everything else.
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  Speaker 1: Are they still getting by far and away the bulk
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  Speaker 1: of their profit from kind of the sugary drinks and
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  Speaker 1: the snacky snack foods. Well, the beverage shells are about
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  Speaker 1: half of total sales. A little bit more of the
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  Speaker 1: profits UH the weekend if everybody wants to focus on,
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  Speaker 1: is in the carbonated soft drink, which continues to decline
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  Speaker 1: along with the diet beverages, but within beverages itself, they're
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  Speaker 1: shifting towards non carbonated drinks, which are doing extremely well.
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  Speaker 1: They've got brands such as Gatorade and Tropicana what's are
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  Speaker 1: growing strongly. Outside of the beverage division, they do focus
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  Speaker 1: on salty and savory snacks, which is performing extremely well. Um,
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  Speaker 1: they're they're focusing passage sizes are larger package, family and
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  Speaker 1: party size packages, and they're shifting the ingredients to give
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  Speaker 1: options to consumers who prefer to eat health here. So
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  Speaker 1: they're launching lower fat products, reduced calorie products in such
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  Speaker 1: of those that that that fit to consumer trends. Can
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  Speaker 1: you tell us a little bit about some of these
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  Speaker 1: new products as I'm looking at what's called the craft
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  Speaker 1: Cola brand eighteen ninety three, how does that fit in
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  Speaker 1: with the idea that they're going to bring back diet
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  Speaker 1: pepsi that's made with aspartane. That's less than a year
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  Speaker 1: after they've changed the sweetener for diet pepsi. But what
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  Speaker 1: the doing is there's a sagentation of the market, so
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  Speaker 1: UH as many different consumer groups that they are speaking
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  Speaker 1: different uh the different desires for Cola the Pepsi eighteen
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  Speaker 1: ninety three is a premium product, something of sleek can
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  Speaker 1: made with real sugar. The diet soda with the affactan
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  Speaker 1: that you mentioned UH is going to be they get
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  Speaker 1: pulled of them shelves. They've got a back last consumers
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  Speaker 1: who were very loyal to the product, and so they've
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  Speaker 1: recognize that they've made a mistaken pulling that product and
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  Speaker 1: they're not gonna added back. UM, giving consumers options and
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  Speaker 1: choices across the beverage category, the better meat demands of
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  Speaker 1: the consumers today. Acquisitions, UM, they have their flesh with
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  Speaker 1: cash they're looking to spend. Yeah, I think there they
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  Speaker 1: are inferent spanser. I would be surprised that they need
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  Speaker 1: a significant, large acquisition. They mentioned to then the call
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  Speaker 1: that a tuck tucking acquisitions will be the most likely
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  Speaker 1: way they go UM, and again, I would think that
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  Speaker 1: would focus on healthier organic type items. That's that's hitting
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  Speaker 1: TV snack category into assaulting savory type snack typors and
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  Speaker 1: not submission acquisitions like other UH players make within the
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  Speaker 1: packaged food stack. You're not like the the acquisition today
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  Speaker 1: announced by dan On for a white Wave estimated value
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  Speaker 1: about ten billion dollars. Thank you very much. Joe and
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  Speaker 1: Y c. He is equity analyst consumers Staples for S
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  Speaker 1: and P Global Market Intelligence, who can follow them on
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  Speaker 1: Twitter at sp Capital. I Q you're listening to taking Stock?
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  Speaker 1: I'm PIM Fox my co host Kathleen Hayes. Right now
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  Speaker 1: the shares of PepsiCo. They are up more than one
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  Speaker 1: and a quarter percent, trading at a hundred seven dollars
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