Indra Nooyi brings in last day as PepsiCo CEO with stronger-than-expected earnings

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Indra Nooyi (Photo: http://www.pepsico.com/About/Leadership)

PepsiCo reported better-than-expected earnings Tuesday, with the company’s 16 percent boost in profits signaling a strong sendoff for chief executive Indra Nooyi on her last day in the position.

Nooyi announced in August that she would step down after 12 years at the helm of the food-and-beverage giant and will stay on as chairman until early 2019. During her tenure, Pepsi reached into snack categories offering organic, healthful alternatives to colas and chips, including Sabra hummus and Bare Foods, a maker of fruit and vegetable snacks. Nooyi’s departure also highlighted the relative lack of female leaders — and particularly women of color — at the top of major corporations.

Nooyi will be succeeded Wednesday by Ramon Laguarta, who has been Pepsi’s president since last year and has been with the company for 22 years.

Pepsi has focused on its beverage brands Gatorade, Pepsi and Mountain Dew — which helped deliver organic growth in the North American beverage business of 2.5 percent. But on an earnings call Tuesday morning, executives acknowledged that the growth came at a cost as its operating profit in the category decreased 14 percent, in part due to transportation costs.

As a further sign of its push in the beverage category, Pepsi said in August that it would buy SodaStream International for $3.2 billion. The purchase demonstrated Pepsi’s growing interest in seltzer, which has seen a surge in popularity in recent years through brands like La Croix and Polar.

Nooyi said that over the past three years, Pepsi has seen consumers increasingly push for health and wellness options, including whole grains or zero-calorie flavored waters. Even while there can be varying opinions on artificial sweetness or high-fructose corn syrup, millennials are clearly driving a trend toward healthier foods and beverages, she said, adding that prepared meal options or home delivery has also helped remove barriers to healthier products.

Core earnings per share came in at $1.59, an increase of 7 percent. The company reported third-quarter net income of $2.49 billion, a 16 percent bump from $2.14 billion the year before. The company said it expects at least 3 percent organic revenue growth for the full year.

Asked on an earnings call what she views as Pepsi’s biggest opportunities and challenges ahead, Nooyi said there was more opportunity to explore how snacks can act as mini-meals. That can include snacks paired with dips or sports beverages that can be framed as more holistic, nutritional meal options.

In her final remarks, Nooyi said that “even though I still have a lot of fuel left in my tank,” she was ready to finish out her years as chief executive. Nooyi praised the company’s achievements, ranging from investments in human rights and clean drinking water to nutritious retail options, and said that between 2006 and 2017 the company’s net revenue grew by more than 80 percent. Pepsi added a new billion dollar brand almost every other year, she said.

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