Pepsico Sees Big Revenue Potential In Emerging Markets

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Over the past five years,Pepsico ( PEP ) has basically tripled its sales in emerging and developing markets. No surprise, then, that the company continues to target both areas for growth.

Earlier this month, the company announced a big expansion in India. It plans to spend $5.5 billion by 2020 to build its presence in the fast-growing market. The money will be spent on new products, agriculture programs, selling infrastructure and manufacturing capabilities.

Developing and emerging markets have significant growth potential for Pepsico thanks to an expanding middle class, which is fueling demand for convenience food and beverages.

In addition to India, Pepsico is expanding in other emerging countries such as China, Brazil and Africa as well as developing markets including Russia and Mexico

Pepsico is lot more than just a soda company. Good thing, too, because its North American soda business continues to struggle as consumers shift away from high-calorie drinks.

In October, Pepsico reported third-quarter earnings of $1.24 a share, up 3% from a year ago. Sales rose 2% to $16.9 billion. Its snacks business offset weakness in the U.S. soda market. CEO Indra Nooyi said carbonated beverages now make up about 40% of its North American drinks business, down from more than 50% a decade ago.

Analysts remain encouraged by a strong brand portfolio, geographic diversity, high return on equity and cash flow.

Its 22 brands generate more than $1 billion each in annual retail sales. Major brands include Pepsi-Cola, Frito-Lay, Gatorade, Tropicana and Quaker.

In July, activist shareholder Nelson Peltz said Pepsico should buyMondelez International ( MDLZ ) and spin off its soft-drink business.

Earlier this month, Pepsico paid a quarterly dividend of 57 cents a share. It currently yields 2.7%.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: MDLZ , PEP

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