PepsiCo's billion-dollar baloney

The food company may be trying to divert investors' attention ahead of earnings.

By Jonathan Berr Jan 26, 2012 4:18PM
If PepsiCo (PEP) can't dazzle investors with brilliant results, it seems the company is trying to baffle them with baloney.

The Purchase, N.Y., beverage giant announced Thursday that three of its brands -- Diet Mountain Dew, Brisk and Starbucks bottled beverages -- have each surpassed $1 billion in annual retail sales. There is less to this claim than meets the eye.

For one thing, PepsiCo didn't disclose how much these brands are adding to its bottom line. The company, of course, sells its products to convenience stores, grocers and chains like Wal-Mart (WMT) on a wholesale basis. The retailers probably add about a 100% mark-up to PepsiCo's sodas and snacks. In the case of some of these products, the picture is even muddier.

For instance, Brisk ready-to-drink ice tea is sold under the Pepsi Lipton Tea Partnership, a joint venture between PepsiCo and Unilever (UN). Starbucks bottled beverages are sold under a similar partnership with the coffee giant. The profit contributions of those products are probably modest at best. PepsiCo, which is in Wall Street's dog house, would have announced good news if had any.

These days, PepsiCo is losing the cola wars in the stock market to Coca-Cola (KO), gaining about 1% over the past year as its rival gained 9%. Pepsi reportedly is considering a slew of options to boost its stock price, including splitting the company's snack and beverage divisions. CEO Indra Nooyi is fighting these moves, according to a November 2011 report in the New York Post. The paper recently reported that Nooyi is considering other drastic measures, including laying off 4,000 workers, salary freezes and ending 401(k) matches.

PepsiCo reports earnings Feb. 9. Investors will be hoping for good news and not press release puffery like what was announced Thursday.

Jonathan Berr owns shares of Coca-Cola.

9Comments
Jan 26, 2012 6:41PM
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@endfed Now see that worries me globally usually means out of the USA! We need jobs here.

Jan 26, 2012 8:35PM
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Hmmmmm... layoff 4k workers.... freeze salaries... end 401(k) matches.   AND, outsource another 50,000 jobs with her relatives in India, just like her first official act as CEO.  That oughta save a BUNDLE!  Thank the gods I don't drink Pepsi!  But, alas, I DO enjoy Taco Bell (if they still own it).
Jan 26, 2012 5:53PM
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The Coca-Cola exec said Wednesday in an interview that the company will create 100,000 jobs globally over the next 10 years.
Jan 26, 2012 7:30PM
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@Antikoolaid Gets the facts straight: Nooyia is a woman, she is from India and she is a democrat. She is a huge supporter of Obama which is probably why Pepsi is going in the wrong direction, just like America!!!!
Jan 26, 2012 7:46PM
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pepsiman5, thanx for clearing that up.  I sold my stock in pepsi when I heard her go off on some politacal rant.  still drink diet pepsi though 

 

 

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I used to be a brand loyalist, until the real games started, and the consumer was the one that lost. I now buy what is on sale, and even choose powdered drinks and store brands. There are times I just drink water. Companies have all got to start doing things truly good for the people who buy their products, or they will lose all.

Jan 26, 2012 8:38PM
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So, Pepsi's pretty flat right now.....looking for a little fizz, are we? Perhaps it's the latest bubble....Ok, you're right. That's enough.
Jan 26, 2012 8:49PM
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antikoolaid, Pepsi man is correct The CEO is a woman. As far as her layoff ideas and eliminating the 401K match. That is a Republican strategy not Democrat. My father worked for the Company for over 30 years. When they split off Yum he sold his Pepsi stock because he saw that there were a lot more choices in the beverage industry than just soda anymore. The beverage industry is still operating under 1980 prices because it is a cut throat business. They to cut the head off of the snake an get an American back in control!
Jan 26, 2012 6:46PM
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"Nooyia is considering other drastic measures.. layoffs, salary freezes.. ending 401k."

 

Oh, another RepuliCON who promotes tax breaks for the wealthy to create jobs.  Lets see now.

 

Layoffs.  Yup.  Creates a couple extra jobs at the unemployment office to handle the influx of claims.

 

Salary Freezes.  Everyone except HIS.

 

Ending 401K matches.  He could care less.  He has a 9-figure golden parachute.

 

Oh, and when the bottom line improves.  A big fat bonus check for the big fat PIG at Pepsi.

 

 

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