PEPSICO SAYS INCOME FOR PAST YEAR UP

CEO Says Quaker Acqusition Will Reap Benefits

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BOSTON (AdAge.com) -- PepsiCo today announced its earnings for the fourth quarter and for fiscal 2001, saying global economic problems did not severely hamper the snack, beverage and cereal giant.

Net income for the year rose 5% to $2.7 billion on net sales of $26.9 billion. Worldwide snacks rose 6% and worldwide beverages up 9%. Snacks, PepsiCo's largest business, hit sales of $14.5 billion; worldwide beverages, its No. 2 category, sold $10.4 billion, followed by Quaker, which had less than 1% growth, to $2 billion.

Chairman-CEO Steve Reinemund said the integration of Quaker Oats Co. had gone well and would lead to further increased profits and revenue.

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On the snack

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CHANGES AT PEPSICO FOLLOW QUAKER OATS ACQUISITION
front, Frito-Lay volume grew 3% for the year, pushed by innovations such as Lay's Bistro chips and strong ads and in-store promotions. This year, Frito plans to increase volume upward of 8% on Frito-Lay's Go snacks and Quaker launches such as Chewy Dipps.

Pepsi-Cola Co. will relaunch Diet Pepsi in March or April to tap into an aging population. Mr. Reinemund seemed optimistic that Pepsi's carbonated soft drinks -- a relatively stagnant category -- would grow as a result of new products and build on successful launches last year of Mountain Dew Code Red and the Amp energy drink.

The company said it would ramp up Gatorade's marketing spend and launch a version geared to Hispanics. Called Extremo, the sports drink will come in mango, citrus and tropical flavors. Its Propel vitamin-enhanced fitness water will roll nationally this year as well.

Troubles with Tropicana
One problem for the company was Tropicana. Sales grew just 1% last year, with fourth quarter results having slid 6%. The chilled-juice category, where Tropicana is strong, is down largely due to price increases.

PepsiCo's vice chairman, Robert Morrison, who is Quaker Oats Co.'s chairman, president and CEO, admitted that Tropicana had been hampered by a failure to innovate, its slow integration into the Quaker sales force and weak media support.

The brand received just $6.6 million dollars in first 10 months of last year, compared with $34 million in 2000, according to Taylor Nelson Sofres' CMR.

Separately, PepsiCo said Susan Wellington, president of U.S. beverages at Quaker North America, is taking a leave of absence March 1 for personal reasons. Charles Maniscalco will replace her as president of U.S. beverages in the Gatorade division. He had been president of Quaker's snack business since 1998. His replacement has not been named.

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