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PepsiCo's health kick pays off

Items like Hummus, cold-press juices fueling U.S. growth

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Bloomberg

PepsiCo’s push into healthier fare is invigorating sales.

Products such as Sabra hummus and guacamole, Naked cold-press juices and Lipton Pure Leaf tea bolstered results last quarter, Chief Financial Officer Hugh Johnston said. That helped the company beat profit estimates last quarter and raise its forecast for the year.

The health kick is part of a makeover for a company that made its fortune from sugary sodas and salty chips. Purchase, N.Y.-based PepsiCo says shoppers are looking for new options — and don’t mind shelling out more to get them.

“When you launch new and innovative products — more of which are healthier than anything else — consumers are willing to pay a premium,” Johnston said in an interview. “That’s what’s enabling us to drive the growth.”

Excluding some items, earnings were $1.40 a share in the third quarter, which ended Sept. 3, the company said Thursday. Analysts had estimated $1.32, on average. PepsiCo expects profit of $4.78 a share this year, compared with a previous forecast for $4.71.

While revenue fell 1.9 percent last quarter, the company’s sales of $16 billion still topped the $15.8 billion estimated by analysts. And excluding currency effects, revenue would have grown 4.2 percent.

The Frito-Lay division led the way, with revenue climbing 3.4 percent to $3.68 billion. Sales in the North America Beverages unit, PepsiCo’s largest business, rose 2.9 percent to $5.52 billion, helped by Mountain Dew’s Kickstart energy drink. Revenue fell in all of PepsiCo’s other units, except for the Asia, Middle East and North Africa division, where it gained less than 1 percent.

Frito-Lay and North America Beverages also turned in the strongest profit performances of the company’s divisions. Operating profit in the snacks division rose 5.8 percent to $1.15 billion, while earnings in the drinks business increased 5.1 percent to $904 million.

PepsiCo owns Quaker Food and Beverages, which operates the Quaker Oats plant in downtown Cedar Rapids.

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