Refreshing Profits at Pepsi, Shares Attractive

The North America Beverages segment posted 2.5% organic growth during the quarter, with volumes up 1% (admittedly, on a 6% decline in the year prior) and price/mix strengthening (up 2%, versus a roughly 1% increase over the last several quarters). We attribute this improvement to strengthened innovation and execution in both the firm's core brand portfolio (including trademark Pepsi, Gatorade, and Mountain Dew) as well as the success of more recently launched offerings, like Bubly and LIFEWTR. We expect 1% to 2% annual improvements in price/mix longer term as consumers shift to noncarbonated (2% industrywide compound volume growth over the last five years, versus a 1% decline for carbonated soft drinks) and more premium beverages.

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