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Sports drinks lead PepsiCo sales rise

By Chris Mercer , 30-Sep-2005

Energy drinks push their way to the front of PepsiCo's portfolio as the Gatorade brand drives forward third quarter sales alongside more growth from diet and non-carbonated drinks, leaving fizzy cola festering on the shelf.

Strong double digit growth from Pepsi's Gatorade sports drink led the firm to an eight per cent volume rise across its North American beverages division.

Fitness water drink Propel, it too under the Gatorade brand, also posted double digit growth, as did bottled water brand Aquafina. The group was also boosted by a resurgent Tropicana brand, which managed to reverse declines earlier this year.

 

The results will be music to the ears of market researchers who have long predicted that juice, water and energy drinks are set to lead mature soft drinks markets forward as more and more consumers search for healthier lifestyles.

 

The performance from Gatorade, aimed at all sporty types from professional athletes to Sunday morning joggers, shows how energy and sports drinks are emerging alongside the strong growth already seen by juice and bottled water.

 

The same trend is appearing across other western markets too. Sales of energy drinks in the UK are expected to pass the £1bn barrier this year, accounting for £1 in every £5 spent by Britons on soft drinks, according to a report by Mintel.

 

Gatorade claims to replace minerals lost when doing exercise and rehydrate the body faster than water, juice and soda - something that PepsiCo admitted helped sales during a spate of good weather in the US during the third quarter.

 

Flavour innovation has also been significant, with Pepsi recently launching Gatorade Lemonade and Aquafina Flavorsplash.

 

A major challenge for branded sports and energy drinks could be private label, something that has already eaten into the juice sector. The problem has been particularly acute in the UK and Germany, where private label juices account for nearly 50 per cent of the not-from-concentrate juice market.

 

There was more doom and gloom for Pepsi's traditional fizzy cola. The brand suffered low single-digit declines and the carbonated drinks range as a whole showed no improvement, suggesting fizzy sodas as we knew them may now be in terminal decline.

 

Diet fizzy sodas fared better, growing to offset declines and keep the troubled carbonated portfolio flat.

 

PepsiCo's net sales rose by $2bn in the first nine months of its fiscal 2005 to $22.46bn (£12.7bn, €18.7bn).

 

Elsewhere the firm continued to benefit from healthy snacks ranges, including Quaker Chewy Granola bars and rice cakes as well as Rice-A-Roni and Life cereal. Emerging markets in Russia and China as well as the Middle East and South America also recorded strong growth in both snacks and beverages.

 

PepsiCo's net profits dropped from $3.2bn to $2.97bn, due to significantly higher income tax charges borne out of the group's repatriation of $7.5bn, so as to comply with the new American Jobs Creation Act.