PepsiCo: Brand investment is driving topline growth
PepsiCo expects to see 6% revenue growth in 2023, despite the “volatile” macroeconomic market.
PepsiCo has said brand investment will remain crucial to driving consumer demand in the current economic environment as it looks to “build on the momentum” it created last year.
While the business, which owns brands including Pepsi, Walkers and Doritos, didn’t put a figure on how much it plans to invest in 2023, it did confirm it increased marketing and advertising spend by “strong double digits” in 2022.
“We are looking to continue to put investments back into the business, because we think that is what’s driving the top line and consumers are clearly responding positively to it,” chief financial officer Hugh Johnston told investors on a call today (9 February) as the company reported its full year results.
PepsiCo saw net revenues grow by 8.7% to $86.39bn (£71.1bn) in 2022, while its core operating profit increased 7% to $11.51bn (£9.5bn) for the year.
It singled out the UK, along with others like the US, Brazil and India, as markets where PepsiCo maintained or gained market share. This contributed to the UK delivering “double-digit revenue growth” over the period, despite the market entering recession by the end of the year.
CEO Ramon Laguarta said that thanks the investment the business has made he is confident that whatever the wider consumer environment brings PepsiCo’s brands will continue to be “a preferred choice for a lot of consumers”.
The business’s priorities for the year ahead include investing in its Pep+ “roadmap” to enable it to become the global leader in the beverages and convenience food market.
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Unsurprisingly, the company predicts the macroeconomic environment will be “volatile” in 2023, but believes it “can build on the momentum and strength delivered in 2022” to deliver 6% organic revenue growth for the fiscal year.
PepsiCo is expecting recession to hit some of its other key developed markets this year, including in the US. But despite economic uncertainty in many of its markets it plans to increase productivity in 2023 and remains committed to investing in its brands and go-to-market strategy, it said.
Delivering through strong brands
Looking specifically at the Pepsi brand, the business said it is “growing well”, and laid out the progress it is making on the Pepsi Max line in particular.
“Zero sugar is clearly a segment of the beverage category that is growing much faster than full sugar all over the world,” Laguarta said, meaning that Pepsi Max will be at the “centre” of the brand’s strategy going forward.
Pepsi Max is known as Pepsi Zero Sugar in markets outside of Europe. The business has reformulated the product in the US to bring it closer to the recipe of the Western Europe Pepsi Max. It is also investing in marketing, including the Super Bowl to boost the no sugar product.
Pepsi Zero Sugar grew 26% in the fourth quarter of 2022, the business reports.
Crisp subsidiary Frito-Lay, which runs brands like Lay’s and Doritos, is currently “the jewel of PepsiCo”, Laguarta said. Revenues for the business unit increased by 17% year over year in 2022, and it had a 27% operating margin.
The business has put a lot of investment behind the Frito-Lay business, but it continues to “respond better every year” to this investment, he said.
He praised the team at the business for succeeding in putting its brands of all sizes forward to consumers in engaging ways.