Europe depresses Pepsi Bottling Group sales

By Guy Montague-Jones

- Last updated on GMT

Related tags Pepsico

The Pepsi Bottling Group (PBG), which is being bought out by PepsiCo, has published flat full year sales figures as volumes declined sharply in Europe and Mexico.

Reported sales for the year ending 26 December were $13,219m as increased prices helped revenue to rise 1 per cent on a currency neutral basis. Meanwhile, worldwide physical case volumes fell 3 per cent in 2009, with US and Canada slipping 2 per cent, Mexico down 4 per cent and Europe dropping 8 per cent.

Volume concern

Morning Star analyst Philip Gorham said continued declines in volume are a concern for PBG, especially given that in the fourth quarter the 2008 comparison was weak.

On a more positive note, PBG said it had exceeded its expectations on cost cutting having saved achieved cost savings and productivity improvements worth about $350m.

This helped the bottling company achieve improvements in both operating income and net profit. For the full year, operating income grew 61 per cent to $1,048m while net income rose from $162m in 2008 to $612m last year.

Eric Foss, PBG chairman and CEO, said the company had maintaining a “relentless focus on operational excellence”​ in 2009 and succeeded in enhancing its brand and geographic portfolio.

Only last week, PBG announced its intention to buy the Pepsi-Cola Bottling Co. of Yuba City, a Pepsi-Cola franchised bottler based in northern California. This was the sixth in a series of deals that PBG has announced since the beginning of 2008 to expand its US footprint.

PepsiCo buyout

PBG itself will soon be incorporated into a bigger company as the bottler, along PepsiAmericas, is being acquired by PepsiCo for $7.8bn. The deal is expected to go through early this year.

Gorham from Morning Star said: “We anticipate more prosperous times ahead for the consolidated entity.

“We expect Pepsi’s direct relationships with retailers to give the firm the flexibility to adapt to changing consumer tastes, and we forecast the combined entity to save around $200 million per year from the elimination of duplicate overhead.”

Related topics Processing & packaging PepsiCo

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