PepsiCo Ups Q2 Profits, Soft Drinks Price War Anticipated

14 July 2005

Global soft drinks giant PepsiCo reported a healthy 13% earnings rise for the second quarter ending June 11 on the back of a strong performance from its international business, particularly in the Middle East and China.

The increase also owes much to the sale of shares in Pepsi Bottling Group, which boosted Pepsi's pretax gain by $35 million (€28.8m; £19.8m).

Despite a slide in US soda sales, with Pepsi's soda business suffering a 4% Q2 volume fall, overall net income at the food and drinks company rose year-on-year to $1.19 billion from $1.06bn, while revenue was up by 8.9% to $7.7bn.

With arch rival Coca-Cola's Q2 results due imminently, analysts predict a price war between the two titans. Under the baton of ceo Neville Isdell, Coke this year hiked its global innovation and marketing budget by $400m, and plans price discounts, coupons and the introduction of new diet drinks such as Coke Zero.

Pepsi has its own battle strategies in place, according to chairman/ceo Steve Reinemund, including an increase in adspend and promotion. Vowing to shake off the effects of recent price increases by bottlers, Reinemund hinted at forthcoming tactical coupons and special offers.

Data sourced from: Wall Street Journal Online; additional content by WARC staff