Pepsi China grows against the trend in the 2020 epidemic!

There is one more food and beverage giant on the list of food and beverage giants that can still achieve growth despite the impact of the epidemic: PepsiCo.

A few days ago, when Chinese consumers are celebrating the Year of the Ox, PepsiCo announced its results for the fourth quarter and full year of 2020.

According to the financial report read by Snacks, in the fourth quarter, the company's organic revenue growth was 5.
7%, and the organic revenue growth for the whole year of 2020 was 4.
3%.

"We ended the past year with a strong performance.

In the fourth quarter, our global beverage business accelerated growth, while our global snacks and food business remained resilient.
" PepsiCo Chairman and CEO Ramon Laguarta said The financial report said, "Our results show that in the face of severe epidemic challenges, our highly dedicated employees, diversified investment portfolio, flexible supply chain and market access system, and strong market execution are full of strength.
And toughness.
"

Xiaoshidai noticed that at the subsequent performance meeting held by Wall Street analysts, Longjiade and PepsiCo’s chief financial officer Hugh F.

Johnston and other company executives mentioned China’s growth performance and talked about this year’s investment priorities, Cost management plan, as well as long-term growth ideas for the product portfolio.

Let's take a look together.

High single-digit growth in China

High single-digit growth in China

"2020 is an unprecedented year.

Due to the complexity caused by the ongoing new crown epidemic, global uncertainty and macroeconomic turbulence have been triggered.
" At the beginning of the conference, Long Jiade said that despite these complexities, it still has a strong interest in Pepsi.
The company's business performance is "very satisfied".

He pointed out that PepsiCo’s organic revenue growth accelerated in the fourth quarter, reaching 5.

7%, and it achieved a 4.
3% organic revenue growth throughout the year.
For most of 2020, the company's global snacks and food businesses have maintained resilience, while its global beverage business has significantly improved in terms of organic revenue growth in the fourth quarter.

PepsiCo's products in the Chinese market

Let's focus on Pepsi's performance in the Chinese market.

According to the performance data of Snack Foods, in 2020, PepsiCo's net income in the Asia-Pacific region (APAC) increased by 18%, mainly reflecting the 10% impact of the acquisition of Baicaowei, organic sales growth, and pricing factors.

In addition, in the fourth quarter, the organic revenue of the "Asia Pacific, Australia and New Zealand and China regions" business segment increased by 5%, operating profit increased by 7%, food/snacks sales increased by 4%, and beverage sales increased by 5%.

For the full year of 2020, organic revenue increased by 8%, operating profit increased by 24%, food/snacks sales increased by 7%, and beverage sales increased by 1%.

2020 full-year results of the business segment of "Asia Pacific, Australia, New Zealand and China"

"(In the fourth quarter,) we continue to face the huge impact of the disparity related to the epidemic in many markets, as well as the uneven economic recovery.

Despite these challenges, the organic revenue growth of our international business accelerated in the fourth quarter.
To 6%.
” Longjiade said at the meeting that the international developed markets and developing and emerging markets have achieved mid-single-digit growth, which promoted the acceleration of organic income growth in the fourth quarter.

Xiaoshidai noticed that Long Jiade mentioned that China's organic income growth was "high single-digit growth.

"

Look at the categories again.

"Despite the continued closure and restriction measures related to the epidemic, our international beverage business continued to accelerate growth in the fourth quarter and achieved a 7% organic revenue growth.
Our international snack food business remained resilient throughout the year and was in the fourth quarter.
Achieved a 5% organic revenue growth in the quarter.
" Longjiade said.

Xiaoshidai noticed that according to his disclosure, in the Chinese market, PepsiCo won market share in snacks and beverages last year.

PepsiCo Chairman and CEO Ramon Laguarta celebrates Chinese New Year on overseas social media

"Faster, stronger, better"

"Faster, stronger, better"

It is worth noting that for PepsiCo's previous strategy of "faster, stronger, better", Longjiade recently put forward the priorities for implementing the strategy in 2021, including increasing e-commerce channels.

In terms of "faster", he said that PepsiCo will increase market share by prioritizing the following areas:

• PepsiCo’s top 20 snack market and some opportunities in the beverage market;

• Expanding the layout and speeding up its actions in e-commerce channels.
In 2020, PepsiCo’s net income in e-commerce channels will increase by more than 90%;

• Expand the "Beyond the Bottle" strategy and plan to provide consumers with more choices and innovative products through PepsiCo's SodaStream platform;

• Invest more resources to focus on more meaningful innovations in high-growth sub-categories, such as nutritional snacks, low-calorie or zero-calorie beverages, and sugar-sweetened beverages for PepsiCo’s large and small and emerging brands.

In terms of "stronger", Long Jiade said that PepsiCo will continue to reform its cost structure, capabilities and culture.
This includes:

• Reconsider and adjust the budget scale by further analyzing the cost basis and encouraging its businesses to adopt more zero-based budgeting methods to strengthen the overall cost management plan;

• Expand PepsiCo's global business service platform functions, which will be able to provide better insights and provide support for the business at a lower cost;

• The ability to accelerate digital transformation within the organization, focusing on consumer-centric analysis that can provide beneficial market insights;

• Invest in personnel and talent development strategies to cultivate the next generation of leaders of PepsiCo.

In terms of "better", Longjiade mentioned a series of measures and goals, including efforts to expand the product categories with less sugar, less salt, and less saturated fat.

Pepsi Sugar Free Lime Flavor

Snack generation has introduced that Pepsi China is also continuing to promote the "three reductions" of all its beverages and snack foods, namely reducing salt, sugar, and fat.
For example, it has launched a low-sugar version of Mirinda and a reduced-sugar version of Hedy and Zero.
Soda Water Ivey and so on.

Where will the money be spent this year?

Where will the money be spent this year?

Xiaoshidai noticed that Johnston later added at the meeting that PepsiCo will continue to invest in the priorities of the "faster, stronger, and better" strategy.
These investments will cover the company's supply chain and market access.
It also includes an accelerated digitalization plan and a sustainable development agenda.

Johnston also pointed out that the priorities for capital expenditure this year will include the following three aspects.
The first is the investment that drives growth, including investments in factories, production lines, warehouses, and market access systems throughout the business.

"Most of these growth investments will focus on enhancing our global snack business presence and capabilities in developed markets, as well as in developing and emerging markets, to meet future demand.
The rest will focus on key markets To strengthen and modernize our beverage business to enhance our competitiveness and execution capabilities.
" Johnston said.

Obviously, the Chinese market is undoubtedly one of the key markets for investment.
Xiaoshidai introduced that in December last year, PepsiCo announced the progress of its latest investment in the Chinese market.
PepsiCo's Guangdong production base held a groundbreaking ceremony in Foshan.
The plant has a total investment of 500 million yuan and is expected to be officially put into operation in September 2022.
After completion, the annual production capacity will reach 25,000 tons.

"This is PepsiCo’s first food factory in South China.
" WERN-YUEN TAN, CEO of PepsiCo’s Asia Pacific region, once told Xiaoshidai that this time it will build a new plant in South China and will be able to use the area.
Advantages to improve the efficiency of Pepsi's supply chain.

Back to the performance meeting.
Johnston pointed out that, secondly, there are investments to improve future productivity, such as process automation and digitization in the entire value chain, and the modernization of IT systems.
Finally, invest in better serving the community and promote sustainable development.

At the same time, Xiaoshidai noticed that in terms of cost management, Johnston put forward the following plans at the meeting: 1) optimizing advertising and marketing expenditures; 2) simplifying product portfolio; 3) expanding PepsiCo’s global business service platform, To maximize labor efficiency.

Future growth

Future growth

At present, the epidemic has not disrupted PepsiCo's long-term growth goals.

Looking forward to 2021, Longjiade said at the meeting that PepsiCo expects that organic revenue and earnings per share growth calculated at a fixed exchange rate are consistent with long-term goals, which are mid-single-digit and high-single-digit growth respectively.

The company expects that changes in consumer behavior driven by the epidemic will continue to differ between different markets and channels around the world.
At the same time, it is expected that vaccination efforts will accelerate.
By the second half of this year, consumers will resume certain pre-epidemic behaviors.
The flow trend will gradually improve.

In addition, PepsiCo expects that certain changes in behavior related to the epidemic will continue, such as higher usage and penetration of online tools, more telecommuting, and home penetration of large trusted brands will continue to grow.

"Therefore, we expect PepsiCo's global snacks and food business to maintain resilience this year, and our global beverage business will develop further based on the recent momentum.
" He said.

New Quaker "Five Black" cereals launched by PepsiCo last year

Xiaoshidai noticed that in the subsequent Q&A session, Longjiade was asked about the latest plans for the development of its brands.

He said that in the global LRB market (liquid refreshment beverages), PepsiCo accounted for less than 10%, and the category has a scale of approximately US$600 billion, which is growing at a rate of 4%-5%.

"The situation in the overall snack food market is similar.
This huge category has a scale of about 500 billion and 600 billion globally, and our share is less than 10%.
" He said, so in terms of creating long-term value, the growth is obviously Ranked first.

"Obviously, when we consider growth, our core brand has a lot of growth.
Whether it is to increase penetration or increase consumption frequency, our large core brands have many opportunities.
Therefore, we think this Pillars (ie, core big brands) are crucial.
" He said, and PepsiCo has already made good investments in core brands.

For example, he cited Pepsi's North American beverage business.
The company has promoted the growth of Pepsi, Mountain Dew and Gatorade, as well as other emerging or healthy categories such as coffee, tea and bubbles.
The growth of water.

"This is (our) growth model.
" He said.

The same is true for the snack business.
"The large core categories we have are positioned in interesting social spaces.
At the same time, we are building more brand collections for consumption scenarios that we currently have less penetration in the morning or other days, such as Off the Eaten Path, Smartfoods and some recent acquisitions.
Brand, such as Bare, etc.
" he said.

Long Jiade said that this is Pepsi's long-term growth principle, a growth that strikes a good balance between its core business and those niche brands, which can grow into a big brand in the future or ten years later.

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