Soft Drinks Harder Sell in Developed Economies

Posted July 21st, 2011 at 10:35 am (UTC-5)
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The world's top soft drink makers are finding it increasingly difficult to sell soda to consumers in developed countries.

U.S.-based PepsiCo – the maker of Pepsi Cola and Mountain Dew – said Thursday sales of its carbonated beverages in North America have slipped over the past three months. The company said slowing soda sales appear to be part of a trend that has hurt its North American drinks division over the past year.

PepsiCo Chief Executive Indra Nooyi blamed the uneven economic recovery in the United States and other developed markets, saying the consumers in those areas continue to be “stressed.”

The results mirror those of PepsiCo's rival, U.S.-based Coca Cola, which also reported slower U.S. soda sales this week. Coca Cola Chief Executive Muhtar Kent said middle class consumers in developed countries remain confused and fragile due to the shaky economic recovery.

In contrast, both companies say consumers in emerging economies are drinking up their products at a faster and faster pace.

PepsiCo said Thursday revenue from beverage sales to Asia, the Middle East, Africa and Latin American jumped about 18 percent in the May through June period, compared to a year ago. Sales of snack food – like potato chips – also saw double digit growth in emerging economies.

PepsiCo said its strong performance in developing markets drove overall profits, boosting second quarter net income by $1.9 billion.

Coca Cola said its strongest sales came in Asia, where second quarter revenue jumped 21 percent over the same time last year. Revenue from Africa, Latin America and Europe also saw double-digit growth.

Coca Cola said emerging markets pushed its second quarter profits up by 18 percent, to $2.8 billion.

Despite the strong showing in emerging economies, both soft drink makers expressed caution about rising commodity prices.

The two companies both say they plan to raise prices to make up for higher costs for ingredients and packaging materials, like aluminum for cans.