PEP PepsiCo Inc

By Jennifer Maloney and Austen Hufford 

PepsiCo Inc. said its push into healthier foods and drinks helped lift revenue at a time that global demand for traditional sodas has slowed.

Chief Executive Indra Nooyi said the maker of Frito Lay snacks, Gatorade and its namesake cola expects global economic challenges to continue this year but "we are making considerable progress" in diversifying the company's portfolio.

Products that the company calls "guilt-free" accounted for 45% of net revenue in 2016. Those products include diet sodas as well as snacks with low levels of sodium and saturated fat. The company's namesake cola accounted for 12% of net revenue in 2016.

PepsiCo's beverage volumes increased 1% during the fourth quarter, beating rival Coca-Cola Co., whose volumes world-wide fell 1% in the same period.

Hugh Johnston, the company's finance chief, said in an interview that to drive more growth "we're going to continue doing what we've been doing, which is we'll want to innovate, particularly in the area of lower sugar. We'll continue to invest behind interesting brands."

Mr. Johnston pointed to the company's recent launch of premium bottled-water brand LIFEWTR, intended to compete with Coke's fast-growing smartwater brand. Mr. Johnston said research and development spending was up about 45% since 2011 and advertising and marketing was up 1.6% over the same period.

On an organic basis -- which takes out currency fluctuations, acquisitions and an extra week of sales due to timing -- revenue rose 3.7% in the quarter. Volumes rose across the company's units but the strong dollar hurt foreign results and caused the price paid for raw goods abroad to be higher. The Purchase, N.Y., company generates a large chunk of its sales abroad with everyday staples like soda, potato chips and juice.

Despite the currency headwinds, the company posted organic growth of 9% in Latin America with a 4% increase in snack volumes offsetting a 3% decline in beverage volumes. The company posted 5% organic growth each in its Europe-Sub Saharan Africa unit and its Asia, Middle East and North Africa division.

In North America, its Frito-Lay group posted 3% organic growth as its Beverages unit posted 2% growth. Quaker Foods was flat.

In all, Snack organic volumes rose 3% as beverage volumes increased 1%.

PepsiCo said it expects 2017 earnings per share to be $5.09 with organic revenue growth of at least 3%. Analysts polled by Thomson Reuters had expected earnings per share of $5.16 for the year.

In all for its fourth quarter, profit fell to $1.4 billion, or 97 cents a share, from $1.72 billion, or $1.17 a share, a year earlier due to interest expenses and a income-tax provision. On an adjusted basis, earnings per share were $1.20, or 4 cents above analyst expectations.

Revenue rose 5% to $19.52 billion. Analysts had been looking for $19.51 billion.

Write to Jennifer Maloney at jennifer.maloney@wsj.com and Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

February 15, 2017 09:18 ET (14:18 GMT)

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