Higher prices, healthier snacks drive PepsiCo profit beat

By Sruthi Ramakrishnan

(Reuters) - PepsiCo Inc's (NYSE: PEP) second-quarter profit topped estimates, as the company sold more higher-margin healthier foods such as baked chips and raised prices on its drinks in North America.

Revenue from the company's North American Frito-Lay business, under which it sells snacks such as Lay's chips, rose 3 percent in the quarter ended June 17. Sales volumes rose 1 percent and net pricing climbed 3 percent.

Demand for snacks was boosted by the launch of premium products such as Lay's Poppables - chips that have relatively less sugar content. Poppables cost more as well: a 5-ounce pack sells for $2.48 on Walmart.com versus a 10-ounce pack of Lay's Classic chips that sells for $2.50.

PepsiCo isn't the only company promoting foods perceived as healthier than its traditional products.

Rival Coca-Cola Co (NYSE: KO) and other companies such as Nestle SA and General Mills Inc (NYSE: GIS) have cut sugar content in their snacks and drinks to cater to consumers who are shunning unhealthy foods and are willing to pay more for healthier options.

PepsiCo shares, however, fell nearly 1 percent to $113.19, in sync with broader market.

The company said on Tuesday that North America beverage sales rose 2 percent in the quarter. While volume sales were flat, net pricing rose 1 percent.

PepsiCo and Coke have for the past few years focused on selling smaller soda servings such as 7.5 ounce cans in developed markets to cope with falling demand for bigger-sized bottles.

The smaller servings can cost more than twice as much per ounce.

PepsiCo earned $1.44 per share, excluding one-time items and a 6 cents per share gain on an asset sale, beating the average analyst estimate of $1.40, according to Thomson Reuters I/B/E/S.

Revenue rose 2.1 percent to $15.71 billion, beating the $15.60 billion expected by analysts.

The company raised its adjusted profit forecast for 2017 to $5.13 per share from $5.09, citing lower impact from unfavorable foreign exchange.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Martina D'Couto and Sayantani Ghosh)

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