Author: He Danlin (original)
In the Chinese market, PepsiCo, which owns many well-known brands such as PepsiCo, Quaker, Lay's, Gatorade, etc., is "eating up" more market share.
Yesterday evening, the multinational food and beverage giant released its results for the second quarter of 2024, with net revenue of $22.5 billion for the period, achieving organic growth of 1.9%. Xiaoshidai noticed that when PepsiCo praised those markets that have maintained or increased its share this year, whether it is the food or beverage business, China is "on the list" in its earnings report.
Ramon Laguarta, Chairman and CEO, PepsiCo
In a subsequent earnings session with Wall Street analysts, PepsiCo's Chairman and CEO Ramon Laguarta shared his latest insights on Chinese consumers and the company's continued presence in China, including investing in new factories, expanding its distribution network, and localizing product innovation.
Below, Xiaoshidai will take you to pay attention to it.
China performance
Let's focus on the Chinese market first.
"In a challenging macro environment, we seized the opportunity and delivered growth in the second quarter." Today, PepsiCo's Greater China CEO and Chief Growth Officer for Asia Pacific, Changan Xie revealed in an internal letter that in the second quarter, the company's food and beverage businesses both achieved net revenue growth.
"In the food sector, this is due to our continuous distribution expansion and strategic channel layout, which deeply integrates more consumption scenarios and successfully innovates a series of products such as Quaker oatmeal." PepsiCo China pointed out that in the second quarter, the company's market share of savory food and cereal products both increased.
Chang'an Xie, CEO of PepsiCo Greater China and Chief Growth Officer of Asia Pacific
In terms of beverages, the company pointed out that the growth in net revenue was due to the fact that it worked with its bottling partners to seize every opportunity of the moment, and insisted on improving the brand experience, expanding the category scene, and strengthening the channel strategy.
Xiaoshidai noted that PepsiCo executives mentioned in their speeches released before the earnings call yesterday that so far in 2024, "we maintain or grow our savory snack market share in China, India, Brazil, Australia and Pakistan; In beverages, our share in Australia, Korea, China, Thailand, Pakistan, Egypt, Viet Nam, Saudi Arabia, United Kingdom and Brazil remained or increased. ”
Although the Chinese market results were not separately disclosed, according to the results released by PepsiCo, in the first half of this year (the last 24 weeks ending June 15, 2024), PepsiCo's net revenue in Asia Pacific was $2,167 million, up 2% year-over-year, primarily reflecting organic volume growth and effective net pricing, partially offset by a 4 percentage point negative currency impact.
CEO Interpretation
At the results meeting, PepsiCo's chairman and CEO Long Jiade also talked about the company's latest progress in the Chinese market.
He believes that the rational consumption trend of Chinese consumers continues, "We see that Chinese consumers are very cautious in spending, they tend to save more, which has an impact on many product categories." Long Jiade pointed out that PepsiCo has good resilience due to the relatively popular unit price of packaged food and beverages, and PepsiCo has also continued to gain market share growth in it.
Lay's Imperial Meal Potato Chips
"We have a good advantage in our business in China, especially in the food sector. We will continue to invest in China. PepsiCo's global CEO said.
Quaker Qingchang no rice porridge series successfully out of the circle
In the second quarter, PepsiCo's investment projects in China made a "big move". Xiaoshidai introduced that in June this year, Pepsi Food's Shaanxi production base with a total investment of 1.3 billion yuan officially broke ground. This is PepsiCo's first manufacturing site in Northwest China and the fifth major investment PepsiCo has made in China in the past five years.
According to the plan, PepsiCo Foods' Shaanxi production base will be built in accordance with the "net zero emission" standard, and is expected to enter the trial operation stage in September 2025, with a production capacity of about 25,000 tons to meet the growing consumer demand in the seven northwest provinces.
In addition to increasing investment and construction in China, PepsiCo is also actively expanding its distribution network.
"Through distribution expansion, our penetration rate continues to increase, which also means that more consumers have the opportunity to choose our brand and integrate our products into more scenarios. These are very positive (long-term growth bases). As a result, the company has positive growth momentum despite the cautious attitude of Chinese consumers, Long said.
At the same time, Longjiade believes that localized product innovation also plays an important role. "I think we have a competitive portfolio there. We have a very strong R&D center in China to provide Chinese consumers with 'East for East' localized products. He noted.
Lay's joins hands with Din Tai Fung to explore more new scenes of food mixing
"Faster, Stronger, Better"
"Despite the increasingly challenging external environment, we have achieved above-market performance and achieved a number of important organizational milestones." Today, in an employee letter that Xiaoshidai saw, Xie Changan said.
The female head said that in the second quarter, PepsiCo China took decisive and bold actions to promote the business to develop "faster". The company has also become "better" under the PepsiCo Initiative, including the launch of a "biogas to green gas" project at its Wuhan plant.
In terms of capability iteration, the company is becoming "stronger". PepsiCo, for example, continues to accelerate its end-to-end digital transformation, enabling broader and deeper applications across agriculture, supply chain, consumer conversion, and sales execution.
In the letter, Xie pointed out that China's consumer market is undergoing a "structural adjustment" – more cautious consumption, clear market demand, increasingly fierce competition, accelerated expansion of discount channels, and the rise of cross-category alternatives, etc., constitute a lot of growth pressure. In the face of many challenges ahead, she stressed that this also breeds "unlimited opportunities".
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Global growth guidance
Finally, let's take a look at PepsiCo's global performance.
In the second quarter, PepsiCo's global business achieved net revenue growth, strong gross and operating margin growth, double-digit earnings per share growth, and remained agile despite the high year-over-year base of net revenue growth, the sluggish performance of North American foods, and the impact of Quaker's recall of certain products in North America, Longgard said.
"In the second quarter, we achieved organic growth of 1.9 percent, resulting in a two-year compound organic growth rate of 7.3 percent in the second quarter. Core constant currency EPS was up 10%, compared to a two-year compound growth rate of 12% in the second quarter. He said.
Looking ahead to the full year 2024, PepsiCo said it now expects organic revenue growth of approximately 4% (previously set at at least 4%) and is confident of achieving full-year 2024 earnings per share growth of at least 8% at a core constant currency rate.
"In the second half of the year, we will further enhance and accelerate our productivity initiatives and make disciplined business investments in the market to stimulate growth. These investments will focus on a select portion of our North American food portfolio to precisely shape the best value proposition for it, while expanding our advertising and marketing programs and enabling more precise market execution. Long Jiade said.
Xiaoshidai noted that international business, including the Chinese market, is seen as a growth engine for PepsiCo. "Overall, our international business is growing very fast, approaching $40 billion, with margins above the group average." Long Jiade said at the meeting.
In the second quarter, PepsiCo's international business grew organically by 5.5% – the 13th consecutive quarter of at least mid-single-digit organic revenue growth, according to the earnings report. "We believe we have many years of room for growth in our international business, both in beverages and in food." Long Jiade said.