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As a whole, Purchase, N.Y.-based PepsiCo Inc. reported net revenue for the first quarter of 2013, ending March 23, at nearly $12.6 billion, which is a 1 percent increase from the first quarter of 2012. Its beverage offerings increased 3 percent in volume during the time frame, with 1 percent organic growth.
However, its PepsiCo Americas Beverages (PAB) division declined 1 percent compared with the first quarter of 2012, with $4.4 billion in sales for the first quarter of 2013. In Latin America, beverage volume increased 1 percent, but in North America, non-carbonated beverage volume declined 1 percent, and carbonated soft drink volume declined mid-single digits.
In Europe, reported net revenue grew 5 percent in the quarter, including a 1-percentage-point favorable impact from foreign exchange translation. In Asia, the Middle East and Africa, however, reported net revenue declined 14 percent, reflecting a 27-percentage-point negative impact from structural changes, principally the refranchising of bottling operations in China, and an unfavorable 2-percentage-point impact from foreign exchange translation. Nevertheless, organic revenue grew 15 percent in the quarter, with 10 percent organic volume growth in beverages.
"We're greatly encouraged by the strong start to 2013,” said Chairman and Chief Executive Officer Indra Nooyi in a statement. “We delivered solid organic revenue growth and double-digit core [earnings per share (EPS)] growth in the first quarter, driven by our balanced food and beverage product and global geographic portfolio. Our investments in creating this portfolio are paying off and our brand and innovation strategies are driving sustainable top-line growth.
"We are driving increased marketplace execution and making higher investments in marketing and innovation to drive future growth,” she continued. “In the first quarter, our advertising and marketing expense increased by 11 percent, while our core operating margin increased 80 basis points.”
Consistent with its previous guidance for 2013, the company expects 7 percent core constant currency EPS growth versus its fiscal 2012 core EPS of $4.10. Based on the current foreign exchange market consensus, the company expects that foreign exchange translation will have an unfavorable impact of approximately 1 percentage point on the company's full-year core EPS performance in 2013. Excluding the impact of structural changes and foreign exchange translation, organic revenue is expected to grow mid-single digits, consistent with the company's long-term targets. The impact of structural changes, principally beverage refranchises, are expected to reduce organic revenue growth by approximately 1 percentage point for the full year.
For 2013, the company expects low-single-digit commodity inflation and productivity savings of approximately $900 million.
“For the full year 2013, we expect to deliver approximately $900 million in productivity savings as part of our three-year, $3 billion productivity program, which will fund future growth investments and further enhance our operating margins,” Nooyi said in a statement. “And, we've already begun to identify the next tranche of productivity savings to extend beyond our current program.”
The company also expects advertising and marketing expenses to increase at or above the rate of net revenue growth.
"We are squarely on track to deliver on our financial commitments for 2013, and remain committed to acting with urgency and intensity to create long-term value for our shareholders," Nooyi said in a statement.