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Large Format Store Struggles
John Faucher – JPMorgan: You talked about the convenience store business doing better generally, which would imply, I guess, at the large format store business is probably struggling a little bit. So can you talk a little bit about some of the challenges there? Is it just fundamentally a consumer spending issue or what color can you give us on the large format store business?
A Closer Look: PespsiCo Earnings Cheat Sheet>>
Indra K. Nooyi – Chairman and CEO: John, I’m going to toss this over to Brian Cornell and then maybe Al Carey. So Brian do you want to take it from here?
Brian Cornell – CEO, PepsiCo Americas Foods: Yeah, John, I think as you’ve seen, there has been considerable weakness in the core grocery channel, but that’s being offset by growth in other channels Foodservice, C-store and certainly Club. So as we look in our business, we’re managing through those channel mixes and making sure we’re making profitable investments to grow our business and sustained the volume in those channels.
Indra K. Nooyi – Chairman and CEO: Al, did you want to add anything?
Albert P. Carey – CEO, PepsiCo Americas Beverages: I’ll just add one thing. I just mentioned earlier, the discounting for holidays that’s disproportionate amount of the business and we need to spread the value throughout the month rather than just during those holiday peak periods, and I think we’re doing some work on that right now that I have optimism for in the future.
Hugh F. Johnston – EVP and CFO: John this is Hugh. The only thing I would add to that is one of the things it’s important to us in large format is that we have consistency in our pricing across the channels and that’s been a real point of emphasis for us. So to the degree that that has something of an impact on volumes, particularly in areas like bottled water where we’re not electing to go chase that type of volume, we don’t view that as detrimental to the performance of the business nor do we do it as value creating by chasing those things. So from our standpoint, we’re trying to maintain consistent levels of pricing discipline across large format channels.
Consistent Convenience and Gas Performance
Dara Mohsenian – Morgan Stanley: I was hoping for more color on trends in the Gas and Convenience channel post-quarter ends over the last month or so here in the U.S., have you seen any type of slowdown or is the momentum continuing there? What are your thoughts around the sustainability of some of the year-to-date strength just given we saw weather boost first half results?
Brian Cornell – CEO, PepsiCo Americas Foods: This is Brian Cornell. We’re seeing very consistent performance trends in both the Convenience and Gas channels. Their traffic trends remained strong. They’re seeing broad growth across regions, but very, very consistent traffic and revenue gains. So it is a channel performing very consistently across the country with strong traffic and revenue gains.
Indra K. Nooyi – Chairman and CEO: We have not seen a slow down…
John Compton – President, PepsiCo: We have not seen any signs of slowdown in the C&G channel.
Albert P. Carey – CEO, PepsiCo Americas Beverages: To answer that say that some time ago the convenience business (losing) fair amount of their volumes (indiscernible) and they have done pretty good job of offering foodservice, but I think it has picked up their business, so our trends are very solid in the convenience business.
Indra K. Nooyi – Chairman and CEO: Go ahead John.
John Compton – President, PepsiCo: The other thing that the teams are doing is there are more coordinated effort across Power of One snacks and beverages and I think particularly in the convenience and gas channels that’s a benefit to PepsiCo.
Indra K. Nooyi – Chairman and CEO: What is it, we have 115 top-selling SKUs in C-stores.
John Compton – President, PepsiCo: Yes, 115 top-selling SKUs and this Hugh and Indra both mentioned in their comments, I mean we are far in a way the largest contributor of growth, so it seems (C-store) channel.
Albert P. Carey – CEO, PepsiCo Americas Beverages: Our Mountain Dew and Gatorade business is very strong in the small format.
John Compton – President, PepsiCo: I think we have innovation and good execution of the DLT system. we are able to drive growth in this channel. Traffic still seems to be okay Dara.
Dara Mohsenian – Morgan Stanley: Then Al, the Deustche Bank offerings you seem to be more focused on using mix to drive CSD pricing longer term than we have heard from the Pepsi in the past. So is that an increased areas of focus and can you discuss how much tangible incremental benefit we could expect from that focus over the next few years? Then also you mentioned managing the highs and lows from a pricing standpoint in terms of everyday versus holiday pricing more over time and mentioned again here today, it sounds great in theory but it is often hard to execute day to day. So in your mind is that also a significant opportunity or something which takes a long time to play out?
Albert P. Carey – CEO, PepsiCo Americas Beverages: Well, I think two areas that will help us improve in the future and this is balancing out the value across the month in the large format and we’re working on that, but it’s tricky. It will take us a little bit of time to get there, and the second thing is to offer flexible package opportunities in that channel as well, which we’re putting capacity and capability in our system right now, so that in 2013 you’ll see us offer more flex packaging different packages that will be variety packs and those kind of things in the marketplace.
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