PepsiCo boss: Frito-Lay 'just getting started’ in premium snacks

Frito-Lay NPD has focussed on premium and healthy lines

Frito-Lay is “just getting started” in the premium snacks market according to Indra Nooyi, chairman and CEO of owner PepsiCo.

She made the statement as PepsiCo reported its financial results for the second quarter yesterday (July 7), and also stated that the Frito Lay North America  division had been the business’s largest contributor to PepsiCo growth at US retail.

PepsiCo announced 3% year-on-year overall organic sales growth, led by Frito-Lay North America and its Asia, Middle East and North Africa (Amena) and Latin America divisions.

Nets sales fell 3.3% over the period and had been impact by foreign exchange translation and the deconsolidation of PepsiCo’s Venezuelan operations.

Frito-Lay sales up 3%

Frito-Lay North America sales grew 3% year on year, and were up 4% on an organic basis.

Nooyi told analysts that Frito-Lay product development was focused on healthy and premium lines, adding that the company’s Frito- Lay premium portfolio was growing four times faster than the rest of the portfolio.

She flagged up examples of recently launched products such as Simply Tostitos black bean chips, Sun Chips Veggie Harvest snacks and Smartfood Delight lower-fat popcorn.

PepsiCo Q2 2016 results snapshot

Net revenue change: -3.3%

EPS: $1.38

EPS change: +4%

Organic revenue change: +3%

There were “amazing” opportunities to grow the Frito-Lay business, she said.

'Started to step out of the core'

At Frito-lay we always say grow the core and add more – that’s what Frito Lay has been doing,” she added.

We have solidified our position in salty snacks and started to step out of the core into other savory snacks,  and will then start to take on other snacking occasions from the overall macro snacking category.”

Frito-Lay has been a mainstream business with limited premium presence, she suggested, adding that demand was growing for savory products.

Now we’ve got our act together and are playing in the premium side and are seeing growth – and we are just getting started,” said Nooyi. “We see tremendous opportunity to grow Frito-Lay on the premium side.”

Director store delivery operation

In addition to a strong brand and innovation capability, the business also had a “great pipeline” to its customers through its direct store delivery (DSD) operation, she added.

Our DSD system is a well-oiled machine and we can keep expanding the diameter of that pipeline,” she said.

PepsiCo reported 3% growth in its Quaker Foods North America business, which it said had benefited from factors including lower raw material costs and productivity gains, partially offset by the impact of higher advertising and marketing expense, and operating cost inflation.

The Quaker brand extended its snacks bars into the breakfast market with Quaker Breakfast Flats in March. Sold in boxes containing five packs of three crispy bars, they are available in three flavors - Cranberry Almond, Banana Honey Nut and Golden Raisin Cinnamon.

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Comments (1)

Job E. Roni - 13 Jul 2016 | 09:11

Timmys

The first thing Frito-Lay can do is bring back Timmys. That's what we called them here in Ohio. They were jalapeño flavored Frito snack chips with Tim McGraw's picture on the front. Now you don't have to have Tim McGraw on the front anymore, but just bring back the flavor. Jalapeño flavoring is more popular than ever right now. It's time. Make it happen.

13-Jul-2016 at 21:11 GMT

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