Pepsi 2005 Annual Report Download - page 47

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PepsiCo Beverages North America
% Change
2005 2004 2003 2005 2004
Net revenue $9,146 $8,313 $7,733 10 7
Operating profit $2,037 $1,911 $1,690 713
2005
Net revenue grew 10% and volume grew
4%. The volume increase was driven by a
16% increase in non-carbonated bever-
ages, partially offset by a 1% decline in
CSDs. Within non-carbonated beverages,
Gatorade, Trademark Aquafina, Tropicana
juice drinks, Propel and SoBe all experi-
enced double-digit growth. Above average
summer temperatures across the country,
as well as the launch of new products such
as Aquafina FlavorSplash and Gatorade
Lemonade earlier in the year, drove
Gatorade and Trademark Aquafina growth.
Tropicana Pure Premium experienced a
low single-digit decline resulting from price
increases taken in the first quarter. The
decline in CSDs reflects low single-digit
declines in Trademark Pepsi and Trademark
Mountain Dew, slightly offset by low single-
digit growth in Sierra Mist. Across the
brands, a low single-digit decline in regular
CSDs was partially offset by low single-digit
growth in diet CSDs. The additional week
in 2005 had no significant impact on vol-
ume growth as bottler volume is reported
based on a calendar month.
Net revenue also benefited from 5 per-
centage points of favorable effective net
pricing, reflecting the continued migration
from CSDs to non-carbonated beverages
and price increases taken in the first quar-
ter, primarily on concentrate and Tropicana
Pure Premium, partially offset by increased
trade spending in the current year. The
additional week in 2005 contributed
1 percentage point to net revenue growth.
Operating profit increased nearly 7%,
primarily reflecting net revenue growth.
This increase was partially offset by higher
raw material, energy, and transportation
costs, as well as increased advertising and
marketing expenses. The additional week
in 2005 contributed 1 percentage point to
operating profit growth and was fully offset
by a 1 percentage point decline related to
charges taken in the fourth quarter of
2005 to reduce costs in our operations,
principally through headcount reductions.
Smart Spot eligible products repre-
sented almost 70% of net revenue. These
products experienced double-digit revenue
growth, while the balance of the portfolio
grew in the low single-digit range.
2004
Net revenue increased 7% and volume
increased 3%. The volume increase
reflects non-carbonated beverage growth of
10% and a slight increase in CSDs. The
non-carbonated beverage growth was
fueled by double-digit growth in Gatorade,
Aquafina and Propel, as well as the intro-
duction of bottler-distributed Tropicana
juice drinks. Tropicana Pure Premium
increased slightly for the year. The carbon-
ated soft drink performance reflects a low
single-digit increase in Trademark
Mountain Dew and a slight increase in
Trademark Sierra Mist, offset by a slight
decline in Trademark Pepsi. Across the
trademarks, high single-digit diet CSD
growth was substantially offset by a low
single-digit decline in regular CSDs. The
increase in Trademark Mountain Dew
reflects growth in both Diet and regular
Mountain Dew and the limited time only
offering of Mountain Dew Pitch Black,
substantially offset by declines in both
Mountain Dew Code Red and LiveWire.
The performance of Trademark Pepsi reflects
declines in regular Pepsi, Pepsi Twist and
Pepsi Blue, mostly offset by increases in
Diet Pepsi and the introduction of Pepsi
Edge. Favorable product mix contributed
3 percentage points to net revenue
growth, primarily reflecting a migration to
non-carbonated beverages. Additionally,
concentrate and fountain price increases
taken in the first quarter contributed
1 percentage point to net revenue growth.
Operating profit increased 13% reflect-
ing the net revenue growth, partially offset
by higher selling, general and administra-
tive costs, as well as costs related to
marketplace initiatives.
Smart Spot eligible products represented
over 60% of net revenue. These products
experienced high single-digit revenue
growth, and the balance of the portfolio
had mid single-digit revenue growth.
Gatorade, Trademark
Aquafina, Tropicana juice
drinks, Propel and SoBe all
experienced double-digit
volume growth in 2005.