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PepsiCo unveils big ecommerce bet

PepsiCo2PepsiCo has created a 200-person business unit tasked with developing online growth in the face of Amazon’s emerging presence in the supermarket industry.

PepsiCo chief financial officer Hugh Johnston has said the  unit has left the FMCG giant on pace to hit $1 billion in annualised ecommerce sales this year, Bloomberg reports.

“That business is just really growing like crazy,”Johnston, who also serves on Microsoft Corp.’s board, said in an interview.

“We run it more like a tech company than we do a consumer-products company, and it’s a real star of the portfolio for us right now.”

$1 billion in revenue would double PepsiCo’s ecommerce revenues from last year, but would still represent a small slice of its total $63 billion annual revenue.

The group is reportedly focused on preparing PepsiCo’s products for online sellers such as Amazon as well as traditional brick-and-mortar grocers looking to develop their own online presence.

The division was founded two-years ago, but PepsiCo has previously kept its existence under-wraps.

PepsiCo CEO Indra Nooyi said in an interview last month that the industry should be worried about Amazon’s move into grocery, but that it should ultimately embrace the disruption as an opportunity.

“When a disruptor comes in, don’t look at it as, ‘here’s someone who’s going to kill your business’, think of how they’re going to aid your business,” she said.

Meanwhile, weaker demand for Gatorade has constrained North American beverage sales for PepsiCo in the third quarter, while increasing material costs and unfavourable exchange rates have hampered growth in Asia, leading to a revision in its full-year organic revenue growth forecast.

The world’s second-largest FMCG company unveiled a 1.3 per cent increase in net revenue growth for the third quarter, bringing year-to-date growth to 1.7 per cent.

PepsiCo’s North American beverages business, its largest unit, decreased by 3.4 per cent to $5.3 billion after volume declined six per cent during the quarter, its first decline in two-years. Its Asia, Middle East and North Africa unit suffered from a 13 per cent decline in operating profit growth, with a 5 per cent increase in food or snack volumes being offset by a 1 per cent decline in beverages.

“Overall, our businesses performed well in the third quarter in what continues to be a challenging environment,” Nooyi said.

“Each of our operating sectors delivered results in line with or ahead of our expectations, with the exception of North America Beverages (NAB) where revenues declined following two consecutive years of very strong third-quarter growth. Despite the challenges in our NAB business, the PepsiCo portfolio overall generated revenue, operating profit and earnings per share growth. Although we have moderated our full-year organic revenue growth outlook, we are now on track to exceed the full-year earnings per share target we set at the beginning of the year.”

The company also admitted to several marketing mishaps, including a decision to allocate too much marketing spend and shelf-space to its low-calorie growth brands at the expense of core brands such as Mountain Dew and Pepsi.

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