Highlights from the Q1 Pepsico Conference call related to snacks

Note: Excerpts deal exclusively with Pepsico's savory snacks activities. If you are inte4rested in the beverage division or the performance of the concern as a whole, we recommend you to read the transcripts itself.

"Frito-Lay North America continues to perform exceptionally well. Pricing actions contributed to top line growth across all channels, while disciplined cost control resulted in 12% constant currency core operating profit growth. And elasticities continued to be better than expected. Despite pricing actions at the end of last year to cover inflation, the division held volume close to flat in the quarter and grew total retail unit sales.

In this difficult macro environment we are closely managing FLNA's consumer value equation. I'll just note here that while syndicated data shows that private label has recently gained share, it has mostly been at the expense of others. And consumers continue to prefer our products. In fact, Frito-Lay had stronger revenue and value share growth than any major consumer goods company.

As we head into Q2, our focus is to ensure that we're balancing value and volume share, and to that end we're investing to lower relative price gaps to branded competitors and private label. At the end of the first quarter we began adding 20% more product back into take-home Doritos, Cheetos, Tostitos and Fritos without raising the price, and we recently introduced a $2 value line that includes Santitas and Munchos products to offer consumers compelling everyday value.

In addition to focusing on greater value, we're introducing consumer-preferred innovation across our core brands such as Hispanic flavor variations across our trademark Lays, Doritos and Cheetos, and we've launched innovation with functional benefits like our Smartfood popcorn snack, which delivers calcium and other important nutrients in a snack women already love to consume.

Given these efforts, we anticipate a return to volume growth at Frito-Lay North America beginning in the second quarter. And as we begin to lap our pricing action from last year, we should see a more normalized spread between volume and revenue, resulting in a Frito algorithm that is more in line with historical performance levels.

So in total, Frito remains rock solid.

Our Latin American businesses did a good job in the quarter, combining pricing actions with price/pack architecture initiative, cost control, and value-added promotions to deliver double-digit top line and bottom line growth on a constant currency basis.

In Mexico, our Sabrita’s and Gamesa teams quickly adjusted weight and price/pack architecture to deliver the right value equation for consumers amidst the challenging economic environment. The teams drove the top line by running value-added promotions, like Sabrita's Money in the Bag, which has performed very well at a time when consumers are increasingly mindful of the number of pesos in pocket. The macros in Mexico were clearly challenging, but the complementary nature of our powerful Gamesa and Sabrita's businesses gives us confidence that we will continue to be successful."

"Snack volume in Europe was up slightly in the quarter despite the negative impact of fewer trading days and the combination of visual pricing and weight outs to offset commodity inflation and transaction foreign exchange. Walkers in the UK delivered strong double-digit net revenue and core operating profit growth, each on a constant currency basis. The team also drove value share across all channels on the strength of promotions like the Do Us a Flavor campaign, which asked consumers to vote on their favorite consumer generated flavor innovation. And this summer Walkers will reprise its successful Brit Trips promotion.

In Russia snacks we maintained double-digit volume momentum on the back of flavor innovation in our core Lays line and through a successful line extension of our bread snacks platform."

"AMEA snacks volume saw high single-digit growth in part due to strong innovation such as our new Twistos bread snack in the Middle East. And we have an exciting locally relevant innovation calendar across AMEA in the second quarter. In India we're introducing a baked cracker line..."