People are grabbing a soda at the convenience store again.
PepsiCo Inc.’s revenue grew 5.3% for the latest quarter as
its beverage business rebounded and strong demand continued amid the pandemic
for its snacks and packaged foods.
“Mobility has clearly risen,” the company’s finance chief,
Hugh Johnston, said in an interview. “People are getting comfortable with how
to protect themselves in the new environment and live their lives.”
The company’s namesake sodas and other drinks have been hurt
during the Covid-19 pandemic by the closures of offices and restaurants, and a
decline in trips to gas stations and convenience stores. But that changed in
the third quarter: Revenue for PepsiCo’s North American beverage division
climbed 6% to $5.96 billion, bouncing back from a decline of 7% in the previous
quarter.
Sales in restaurants and offices remain down by a lot, but
revenue grew in convenience stores and gas stations, Mr. Johnston said. The
company’s food business, meanwhile, has benefited as Americans cook and snack
more at home. Among the products selling well: Tostitos, pancake mix and
Cheetos Mac ’N Cheese.
Constellation Brands Inc., STZ.B -0.90% the brewer of Corona
beers for the U.S. market, reported a 4% drop in revenue for the quarter ended
Aug. 31. The company said a production slowdown in Mexico earlier in the
pandemic hurt inventory levels and shipment volumes, but it expected volumes to
return to more normal levels in the current quarter.
Constellation executives have said strong retail-store sales
of beer and liquor have helped offset declines from the temporary closures or
capacity limits on restaurants and bars as the virus continues to spread in
parts of the world. This week, New York City reopened limited indoor dining,
while North Carolina said it would allow bars to open with outdoor seating
starting Friday.
In PepsiCo’s Frito-Lay North America division, which makes
Doritos, Lays and other snacks, sales rose 7% to $4.4 billion in the third
quarter. And sales ticked up 6% for its Quaker Foods North America division,
which makes Rice-A-Roni and Aunt Jemima products.
The snacks-and-beverage company also is exploring an entry
into the U.S. alcohol market, after rival Coca-Cola Co. said it planned to
launch a boozy version of its Topo Chico sparkling water in a partnership with
Molson Coors Beverage Co.
PepsiCo Chief Executive Ramon Laguarta said his company is
looking at the three-tier system of alcohol sales in the U.S., where products
must be made, distributed and sold by separate companies.
“Given the three-tier system, it’s not obvious how you
capture a lot of value,” he said on a call with analysts Thursday. “First I
would say, Do we play or not? Second, very important, is who do we play with
and who do we partner to maximize the value for PepsiCo?”
PepsiCo on Thursday issued new financial guidance for the
year, after withdrawing its 2020 guidance in April. The company now projects
organic revenue growth, which adjusts for currency effects and strips out
acquisitions, of about 4%. On that basis, revenue rose 4.2% in the quarter,
which ended Sept. 5.
“The consumer trends in mobility and behavior around
away-from-home versus in-home are stable enough” to predict how the company
will fare through the end of the year, Mr. Johnston said.
Another major food maker, Chicago-based Conagra Brands Inc.,
CAG +0.03% said Thursday that while demand for food at home has moderated since
the spring, it will likely remain higher than normal as consumers continue to
spend more time out of public places. “They were forced into a lockdown, but
then they discovered that they like cooking; they like watching movies
together,” Conagra CEO Sean Connolly said in an interview. Conagra, which makes
Healthy Choice frozen meals, Slim Jim meat snacks and Hunt’s tomatoes, said its
comparable sales rose 15% in the quarter ended Aug. 30. It expects growth of 6%
to 8% in the current quarter.
For the latest quarter, net income attributable to PepsiCo
was $2.29 billion, or $1.65 a share, up from $2.1 billion, or $1.49 a share, a
year earlier. The results were better than analysts’ forecasts and PepsiCo
shares rose 0.9% in afternoon trading.
Constellation executives said they wouldn’t provide
financial guidance for the rest of its fiscal year because of uncertainty
around the pandemic. The company continues to take hits from its $4 billion bet
on Canadian marijuana grower Canopy Growth Corp. In its latest quarter, the
value of Constellation’s investment in Canopy declined by $48 million.
—Annie Gasparro contributed to this article.
Write to Jennifer Maloney at jennifer.maloney@wsj.com.
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