• North American food and drinks units suffer decline in volume
  • Quaker Oats sales plunge 24% after salmonella-scare recall

PepsiCo Inc. posted stronger-than-expected sales growth thanks to robust demand in its international divisions, while volumes dropped in North America.

The owner of Mountain Dew sodas and Frito-Lay chips said that net revenue in the first quarter rose 2.7%, beating the average analyst estimate of 2.3%.

Sales in Pepsi’s international business, which represented nearly 40% of total net revenue last year, were up 9%. Emerging markets such as Mexico, Brazil and China delivered double-digit organic revenue growth, as did Australia, while sales in Britain were up by the high single digits.

After a period of the highest inflation in four decades, makers of branded consumer goods have suffered declining volumes as shoppers, especially in the US, switch to supermarket own-brands. Pepsi’s North American food and drinks divisions sold fewer goods by volume compared with a year earlier. Drinks volumes were down 5% in the region.

Chief Executive Officer Ramon Laguarta said on a call with analysts that globally the consumer is very resilient, supported by low unemployment and growing wages. But there is a weak spot in the US: “The lower-income consumer in the US is stretched, is strategizing a lot to make their budgets get to the end of the month,” he said, adding that PepsiCo is making an effort to keep those poorer Americans buying its products.

North American revenue from Quaker Foods, the oats brand, fell 24% after the company expanded a recall to include more cereals, bars and snacks due to a risk of salmonella. The company said it has restarted limited production of some of the affected products.

PepsiCo shares fell as much as 2.9% in New York trading Tuesday, the most since February. The stock was up 3.9% this year through Monday, trailing the 5.1% rise of the S&P 500 Index.

The company confirmed its 2024 outlook of organic sales growth of at least 4%, with North America lagging the rest of the business.

Compared with a year earlier, Pepsi won savory-snack market share in China, India, Brazil, Australia and Pakistan. For drinks, it picked up share in Brazil, Turkey, South Korea, Thailand, Vietnam and Pakistan.

Written by: — With assistance from Brett Pulley @Bloomberg