Hugh Johnston, PepsiCo, Inc. (PEP)’s CFO: Innovation Is Key To Growth

Hugh Johnston, Chief Financial Officer of PepsiCo, Inc. (NYSE:PEP), feels good about Russia and believes the consumers are very cautious at the moment. Johnston also believes that innovation has played a key role in the company’s good performance and steady growth. During a recent intervention with Maria Bartiromo on FOX Business Network, Hugh Johnston has discussed Nelson Peltz’s suggestion to break up the company, how the recent events in Eastern Europe have affected their business in Russia and how the company managed to surpass market expectations for the 2014 second quarter.

PepsiCo, Inc. (NYSE:PEP)

“… one of the things we have done is we’ve driven productivity and invested that productivity back in our brands and we’ve invested it in innovation and that’s what’s enabled us to perform as well as we have,” said Johnston.

The company has registered a 3.6% revenue growth during the 2014 second quarter, beating analyst expectations. PepsiCo, Inc. (NYSE:PEP)’s revenue in the emerging markets has grown 8%, signaling a strong position of the company in those countries. Business in Europe grew 5%, while Asia, Middle East and Africa business increased by 7%. The company has also been successfully improving productivity, which allowed it “to drive 65 basis points of operating margin improvement.” Johnston also states that PepsiCo is satisfied with the strengthening of all its brands across the globe, which he also attributes to the company’s innovation efforts.

When asked to comment on the Nelson Peltz’s proposal to break up the company, Hugh Johnston insisted everybody would be better off if the portfolio stayed intact. He cites the company’s 9% Earnings Per Share (EPS) growth in 2013 and more than 9% EPS growth in the first 6 months of 2014. He thus claims PepsiCo, Inc. (NYSE:PEP) is performing “awfully well” and that “this portfolio truly is better together.” Johnston also argues that, should the company be taken apart, the business would register an increase in costs, which would hinder revenue growth.

“… you’d add a lot of costs back into the business where we should be looking to take costs out of the business”, commented Johnston.

Hugh Johnston uses their business strategy in the emerging markets to back up his claim. He argues that international expansion is firstly driven by the company’s beverage branch, which paves the way for the snack business to be built later on.

Johnston plays down the impact of the current crisis in Ukraine on PepsiCo, Inc. (NYSE:PEP)’s business in Russia, stating that the company is present in more than 200 countries and that they often have to deal with tense geopolitical situations. During the previous quarter, the company has registered mid-single digit revenue growth in Russia and does not expect the situation to change dramatically.

consumers still need to eat and still need to drink even in the midst of challenging geopolitical times. We do see the business continue to perform well”, added Johnston.

He admits that the recent currency fluctuations have become an issue for the company, but is confident they can price their way through that.

You can watch the full interview below:


Disclsoure: none.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!