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

Related Topics

Stocks

   

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)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Indian Markets

Indian Markets

Nifty marks record high, tracks higher global shares.  Full Article 

Tracking Asia

Tracking Asia

Asian shares hitch a ride on Wall Street's record  Full Article 

Commodities

Commodities

Gold near two-month low; set for weekly drop on interest rate fears  Full Article 

RBI Annual Report

RBI Annual Report

RBI reiterates commitment to bring down inflation .  Full Article 

Monsoon Update

Monsoon Update

Monsoon to display lull as floods ease.  Full Article 

Regulatory Troubles

Regulatory Troubles

U.S. regulator alleges Dr Reddy's breached packaging rules  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage