With Sales Flat, Pepsi Cuts 3,300 Jobs

Soft Drink Giant Closing Six Plants To Save $350-400 Million Next Year

(AP)  PepsiCo announced plans on Tuesday to cut 3,300 jobs and close six plants as it deals with lagging U.S. drinks sales and a surging dollar, which will hurt profits from its rapidly growing international business.

The announcement came as the global snacks and drinks maker reported a 9.5 percent drop in third-quarter profit that missed Wall Street expectations. It also offered a downbeat profit outlook.

The job cuts amount to roughly 1.8 percent of PepsiCo's global work force of about 185,000 employees. The cuts will affect managerial and factory jobs both in and outside the U.S. Most will be eliminated in the coming months, Chief Financial Officer Richard Goodman said.

The nation's second-largest drink maker - which also owns the Frito-Lay, Tropicana and Quaker brands - said the cuts would generate pretax savings of more than $1.2 billion over the next three years. It plans to save $350 million to $400 million in 2009.

"While we can't control the macro economic situation, we can enhance PepsiCo's operating agility to respond to the changing environment," Chief Executive Indra Nooyi said in a statement.

In the third quarter, the company had net income of $1.58 billion, or 99 cents a share, compared with $1.74 billion, or $1.06 per share, a year ago. Revenue grew to $11.2 billion in the most recent period from $10.17 billion a year ago.

Excluding one-time costs, the company earned $1.06 per share, but that still fell short of what Wall Street had expected.

Analysts surveyed by Thomson Reuters, who typically exclude items from estimates, expected earnings of $1.08 per share on revenue of $11.2 billion.

Purchase, N.Y.-based PepsiCo Inc. also noted that the recent surge in the U.S. dollar will hurt fourth-quarter profit. At current rates, the incremental impact would be about 4 cents to 5 cents per share.

As a result, the company now expects to report 2008 earnings per share of $3.67 to $3.68, compared with prior guidance of $3.72. Analysts expected $3.74 per share for the full year.

"Pepsi missed consensus operating earnings, lowered full year guidance and didn't provide an '09 outlook at this point," Morgan Stanley analyst Bill Pecoriello said in a note to investors. He said the negative results would likely drag down the share prices of other multinational consumer products companies.

PepsiCo shares fell $4.57, or 7.4 percent, to $57.20 in midmorning trading Tuesday.

PepsiCo announced Friday that it would renew its focus on carbonated soft drinks with a marketing campaign to be launched after New Year's. That would be a reversal of its strategy to move away from soda and toward more expensive alternatives, such as sparkling juice, energy drinks and ready-to-drink teas.

Goodman, the CFO, said the company had been planning the campaign over the last several months as a response to the consistent declines in sales volume in the U.S.

"We're looking at re-engaging consumers, keeping the ones we have and making sure we're getting additional consumers into the fold," Goodman said, adding that a lot of carbonated soft drinks "are very affordable."

Revenue at the company's PepsiAmericas Beverages unit, which sells drinks in the U.S. and Latin America, was flat with a 2.5 percent decline in the volume of drinks sold.

[u-r-right]

Bring back sugar instead of high fructose corn syrup and the old, thick returnable glass bottles and I''ll start drinking it again, no problem.

The returnable glass bottles would be perfect to boost recycling effort.

[f091964]

come alive

[BeyondGreen]

Who can afford it indeed.Who can afford anything.Between the high cost of gas and food there is little left over for luxuries. A diet Pepsi Addict myself....sad for people to lose their jobs over our sorry economy. American''s are losing jobs and homes at an alarming rate. I wonder when we will wake up and smell the coffee and work toward becoming an energy independent country. It is amazing how far reaching into our economy the high cost of fuel, production, shipping and ultimately the cost is passed on to us. I am reading a newly released book by Jeff Wilson called the Manhattan Project of 2009. It should be a required read for all members of our government.
www.themanhattanprojectof2009.com

[element51]

Just what does Pepsi expect? Our incomes have gone down, basic food items have gone up, gas has gone up, everything is more expenseve and what did they do? They raised their prices. When you have to cut your spending lots of folks will drink Kool-Aid and give up the Pepsi. Or iced tea or even plain old water. Maybe if they had not raised their prices we would all still buying their product.

[mcv57]

Pepsi soda is a unhealthy, luxury that I can do without. Hershey will be axed next on my diet list.

Perhaps this recession will get most of these fat women to realize how unheathy and nasty they look!

[dan_shields-2009]

I support Pepsi all the way. Ive been a customer of theirs for 12 years. Sad they have to cut jobs but who isnt now-a-days?

November 6, 2003, Dave DeCecco, a spokesman at the Pepsi-Cola North America division of Pepsi-Cola in Purchase, N.Y., confirmed reports of the decision this week in Adage.com and Adweek. ''''We''re having a really successful year,'''' Mr. DeCecco said, ''''and want to bring some of that momentum to brand Pepsi.''

Only eight months earlier, the U.S. launched its invasion of Iraq, with the people waiting with open arms and singing kumbaya, which figurative translates as "mission accomplished." What a difference 5 years of war and a trillion dollars makes! Do you realize that our grandchildren may not even know what a Pepsi was? Oh well, it''s all for a good cause. It is, isn''t it?

[rosesnpearls]

Ha, Ha, funny headline. "Flat" - my family has always said that pepsi is just Flat Coke or generic soda because it tastes sweet like coke that has gone flat.