PepsiCo to cut 8,700 jobs, invest in brands

Thu Feb 9, 2012 7:39pm IST

1 of 2. Cases of Pepsi are displayed for sale in Carlsbad, California February 7, 2012. PepsiCo Inc. will report their earnings February 9.

Credit: Reuters/Mike Blake/Files

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REUTERS - PepsiCo Inc (PEP.N) expects to cut 8,700 jobs as part of a plan to save an extra $1.5 billion over the next three years, as it invests more money in marketing and advertising its brands.

Its shares fell 2.1 percent to $65.30 in premarket trading from Wednesday's close of $66.74 on the New York Stock exchange.

PepsiCo, maker of Sierra Mist soda, Tropicana juice and Gatorade sports drinks, also reported a better-than-expected fourth-quarter profit and forecast a 5 percent decline in 2012 earnings.

The moves come as CEO Indra Nooyi tries to reinvigorate Pepsi's U.S. beverage business, which has lost market share to archrival Coca-Cola Co (KO.N). Nooyi has been criticized for taking her eye off the core business of sodas and salty snacks like Fritos and Doritos chips to expand into healthier options such as hummus and drinkable oatmeal.

She defended her choices at a meeting with investors on Thursday. "It's an 'and' game, not an 'or' game," Nooyi told investors.

The marketing investment will be focused on 12 brands, including Pepsi-Cola, Lay's, Gatorade, Tropicana, 7-UP and Doritos.

The 2012 earnings forecast, coupled with an expected hit from currency rates, would mean a bigger step back in earnings from 2011 than expected, Jim Tierney, chief investment officer at W.P. Stewart, said. "But this will take time and we have three to four quarters before we know if it is working."

"The positive is they are doing something. More ad spending is a positive and costs cuts are encouraging," he said.

The company said it would increase advertising and marketing spending by $500 million to $600 million.

For 2013, PepsiCo expects earnings to grow at a high single-digit rate.

The job cuts, which represent about 3 percent of PepsiCo's payroll, will occur in 30 countries, PepsiCo said.

The $1.5 billion in extra savings is in addition to $1.5 billion it already planned to save over that period.

PepsiCo also said that Massimo D'Amore, president of its Global Beverages Group, would retire at the end of February.

The company reported a fourth-quarter profit of $1.42 billion, or 89 cents per share, up from $1.37 billion, or 85 cents per share, a year earlier.

Excluding items, PepsiCo earned $1.15 per share, topping analysts' average estimate of $1.13 per share, according to Thomson Reuters I/B/E/S. Revenue rose 11 percent to $20.2 billion.

(Reporting by Martinne Geller in New York; Editing by Dave Zimmerman and Maureen Bavdek)

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