PepsiCo is extending its “productivity plan” – announced in 2019 and designed to lead to US$1bn in annual savings – through to the end of 2026.
Two years ago, the Lay’s and Quaker owner set out a range of measures in manufacturing, distribution and information systems to “simplify” its processes and organisation.
In 2019, the measures led to more than $1bn in what PepsiCo called “productivity savings”. PepsiCo said in that year’s annual report the plan was to “deliver this amount annually through 2023”.
Yesterday (13 July), alongside the publication of the company’s first-half financial results, the US giant said it would look to continue the programme for another three years.
“The expansion of the programme reflects further initiatives to leverage new technology and business models to further simplify, harmonise and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; and simplify our organization and optimise our manufacturing and supply chain footprint,” PepsiCo said in a statement. “As a result, we are extending our target to deliver at least $1bn in annual productivity savings through 2026.”
Just Food has asked for further details for what the continued push in savings could mean for jobs and for PepsiCo’s manufacturing network.
Speaking to analysts after PepsiCo published its second-quarter results, CFO Hugh Johnston said: “Part of what we’re trying to do is shape the company for the future. And in doing so, we’re obviously taking cost out in certain places and then we’re investing in certain places, like digitalising the supply chain and making our interactions with customers and consumers much more efficient than they were in the past.”
In the 24 weeks to 12 June, PepsiCo’s net revenue rose 14.1% to $34.04bn, or by 8% on an organic basis.
Organic sales from Frito-Lay North America were up 4%, with volumes rising 0.5%.
Quaker Foods North America saw its sales drop 7% on an organic basis. Volumes were down 12%.
PepsiCo’s half-year operating income increased 28% to $5.44bn. On an underlying basis, it was up 15%.
Reported group net income was $4.01bn, compared to $2.98bn a year earlier.
“Given the strength of our results, we now expect our full-year organic revenue to increase 6% and core constant currency earnings per share to increase 11%,” chairman and CEO Ramon Laguarta said.
PepsiCo had previously forecast “mid-single-digit growth” for annual organic revenue and “high-single-digit growth” for core, constant-currency EPS.