Sports drink faces intense competition
a 16 per cent rise in fourth-quarter profits, but shares fell on
concerns that archrival Coca-Cola Co. is muscling in on the
company's popular Gatorade sports drink brand.
Soft-drink and snack-food giant PepsiCo Inc. on Wednesday reported a 16 per cent rise in fourth-quarter profits, but shares fell on concerns that archrival Coca-Cola Co. is muscling in on the company's popular Gatorade sports drink brand.
PepsiCo said first-quarter sales growth at its Gatorade and Tropicana North America unit could be soft and that the Gatorade line faced "intense competitive pressure".
Gatorade, seen as the crown jewel when PepsiCo acquired cereal maker Quaker Oats Co. last August, has faced increased pressure from Coke's revamped Powerade brand, and has not yet provided the boost to revenues analysts had expected.
"They paid a big price for Quaker,'' said UBS Warburg analyst Caroline Levy. "We had hoped it would accelerate revenue growth, and maybe it still will, but that was just not the case in the fourth quarter.''
Revenues at Gatorade/Tropicana North America slipped 2 per cent, though operating profit rose 6 per cent. While PepsiCo it is confident about full-year prospects for the unit, the first quarter may reflect soft top-line growth, it said.
Shares of PepsiCo fell 3.6 per cent to $48.97 (€56.4) in late trade on the New York Stock Exchange, after rising to a 52-week high of $51.09 on Tuesday.
Across the major sales outlets - food stores, drugstores, mass merchandisers and convenience stores - Gatorade lost 2.5 market share points in 2001, while Powerade gained 2.5 share points, according to industry newsletter Beverage Digest.
"Without a doubt, Coke chipped away a little bit last year, and I have no doubt PepsiCo's going to try to put a stop to that this year,'' Beverage Digest editor John Sicher said.
Though 10 years from now Gatorade will still dominate the sports drink category, "the only issue is how much of a further inroad will Powerade be able to make,'' he said.
PepsiCo said the integration of Quaker is "solidly on track," and expects to realise synergies in 2002 at the high end of its previously announced range of $140 million to $175 million.
