The Pepsi Advantage

Wide-moat

Annual revenue was driven by the Frito-Lay North America (25% of total sales) and North American Beverages (34%) segments, with balanced contribution to organic revenue growth from volume and price/mix. These segments also were able to offset increased investments in advertising and marketing (by our estimates, above 6.5% of sales this year, versus 6% on average over the last five years) with productivity improvements and lower raw material costs, allowing for high-single-digit increases in core operating profit. Pepsi also continues to launch new, and often healthier, products in these segments to better align with changing consumer preferences. This has allowed net revenue from new products (those introduced within the last three years) to average over $5 billion (nearly 8% of 2016 revenue) since 2013, whereas we estimate that trademark Pepsi-Cola only contributes $7.5 billion (12%) of revenue.

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