PepsiCo Q2 Results: India Business Reports High Single-Digit Organic Revenue Growth

PepsiCo Inc. has reported a "high single-digit" increase in organic revenue in the Indian market for the quarter ended June.

The company's net revenue from the Africa, Middle East, and South Asia division, which includes India, dipped by 7.7% to $1.56 billion as compared with the previous year, according to the company's earnings statement released on Thursday.

In terms of organic growth, which is evaluated by excluding the impact of acquisitions and divestitures, the AMESA region witnessed 18% year-on-year growth during the second quarter.

The primary driver of growth was an increase in prices, as the volume of its beverage business dropped 3% and that of its convenient food business fell 6%.

"Every segment of the consumer is making adjustments," Ramon Laguarta, chairman and chief executive officer of PepsiCo, told analysts on the conference call.

"Our developing and emerging markets demonstrated resilience," PepsiCo said in a prepared statement, highlighting the high single-digit organic revenue growth achieved by India and China.

Despite this, the company's snacks segment in India saw a "mid-single-digit decline" in the second quarter, with "low-single-digit growth" in the beverages segment.

Beverage sales were impacted by unseasonal rainfall in several parts of the country and a milder summer, which affected demand for summer-specific products such as cold drinks. Data from Bizom showed a 27.6% decline year-on-year in beverage sales for the April-June quarter.

Another factor contributing to a slump in sales was decreased consumer spending on discretionary products, which may have affected PepsiCo's snack portfolio. Sales of confectionery products saw a 7.6% drop in the June quarter, according to data from the retail intelligence firm tracking 75 lakh mom-and-pop stores.

Analysts at Nuvama Institutional Equities expect moderate volume growth of 1% from Varun Beverages Ltd., PepsiCo's principal bottler in India, in light of the unseasonal rains. The brokerage has factored in the 15% volume share for PepsiCo's energy drink, Sting, sustaining in Q1.

"Ex-Sting, volumes are expected to decline marginally," it said.

However, PepsiCo—the maker of Lay's chips and Tropicana juices—said it had gained market share in the local savoury snacks and beverage segment in the past six months.

"We are very pleased with our performance for the second quarter, as our business momentum remains strong," said Laguarta.