Pepsi 2006 Annual Report Download - page 53

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2006
Net revenue grew 3% and volume
increased 1%. The volume increase
reflects mid-single-digit growth in
Oatmeal, high-single-digit growth in
Life cereal and low-single-digit growth
in Cap’n Crunch cereal. These increases
were partially offset by a low-single-
digit decline in Aunt Jemima syrup and
mix and a mid-single-digit decline in
Rice-A-Roni. Net revenue growth was
also driven by favorable effective net
pricing, which contributed almost 2 per-
centage points to net revenue growth,
and favorable Canadian foreign
exchange rates which contributed
almost 1 percentage point. The absence
of the prior year’s additional week
reduced both net revenue and
volume growth by approximately
2 percentage points.
Operating profit increased 3%
primarily reflecting the net revenue
growth. Increased cost of sales, primar-
ily driven by higher raw material and
energy costs, were largely offset by
lower advertising and marketing
expenses. The absence of the prior year’s
additional week reduced operating
profit growth by approximately 2 points.
Smart Spot eligible products repre-
sented approximately 55% of net
revenue and had mid-single-digit net
revenue growth. The balance of the
portfolio experienced a low-single-digit
decline. The absence of the prior year’s
additional week negatively impacted
these results.
2005
Net revenue
increased 13% and
volume increased
9%. The volume
increase reflects
double-digit
growth in Oatmeal, Aunt Jemima syrup
and mix, Rice-A-Roni and Pasta Roni, as
well as high-single-digit growth in
Cap’n Crunch cereal and mid-single-
digit growth in Life cereal. Higher
effective net pricing contributed nearly
3 percentage points of growth reflect-
ing favorable product mix, the
settlement of prior year trade spending
accruals and price increases on ready-to-
eat cereals taken in the third quarter of
2004. Favorable Canadian exchange
rates contributed nearly 1 percentage
point to net revenue growth. The addi-
tional week in 2005 contributed
approximately 2 percentage points to
both net revenue and volume growth.
Operating profit increased 13%
reflecting the net revenue growth. This
growth was partially offset by higher
advertising and marketing costs behind
programs for core brands and innova-
tion, as well as an unfavorable cost of
sales comparison primarily due to
higher energy and raw material costs in
the latter part of 2005. The additional
week in 2005 contributed approximately
2 percentage points to operating
profit growth.
Smart Spot eligible products
reprsented approximately half of net
revenue and had double-digit revenue
growth. The balance of the portfolio
also experienced double-digit
revenue growth.
Quaker Foods North America
% Change
2006 2005 2004 2006 2005
Net revenue $1,769 $1,718 $1,526 313
Operating profit $554 $537 $475 313
51
In 2006 and 2005, Smart Spot eligible products
represented over half of QFNA’s total net revenue.
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