PEPSICO, THE US drinks and snacks company, said it would shed 8,700 jobs worldwide to cut costs as it ramps up investment in its core cola and crisps brands, which investors claimed have been neglected in favour of its healthier products.
Indra Nooyi, chief executive, said the moves represented a once-in-a-decade “major reset” for the business. After more than a year of tough criticism that she was too focused on “good for you” products such as juice and oatmeal, Ms Nooyi expressed a firm commitment to brands like Pepsi, Mountain Dew and Doritos.
“Any time you make a mistake, it’s a mea culpa – the buck stops with me,” Ms Nooyi said, acknowledging that personnel changes could have been made earlier and that the company could have reaped more benefits from the acquisition of its bottlers.
The job cuts represent about 3 per cent of PepsiCo’s global workforce and are part of an effort to reduce costs by $1.5 billion in the next three years.
The long-awaited announcement came as the company reported strong fourth-quarter earnings and said it would invest $500-$600 million in marketing and advertising this year, with a special focus on the flat US beverage business that has been losing market share to Coca-Cola.
Ms Nooyi said that after a six-month internal analysis of the company, she rejected the idea of splitting it into separate snacks and drinks businesses, which some analysts have advocated.
PepsiCo described the investment as a “back to basics” approach, though Ms Nooyi said that if the North America beverage business did not show improvement after 18 months, “structural” changes such as divestments or joint ventures were possible.
The new investment, along with charges related to the lay-offs, are expected to cut earnings this year by about 5 per cent.
That decline, along with the realisation that there is no quick fix for PepsiCo, disappointed investors and the company’s shares fell by about 4 per cent to $64.10 in midday trading.
– (Copyright The Financial Times Limited 2012)
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/VR3765MFOBH2NMV2QNICYDF67M.png)