Here's What Is Fueling PepsiCo's Growth

In today's world, most companies span several regions and sell across the world. As Foolish colleague Morgan Housel notes, 10 years ago, less than a third of S&P 500 revenue came from overseas. Today, more than half of the S&P 500's growth comes from overseas.

And that number is growing. The truth is, investors regularly underestimate how much demand comes from abroad. More important, for large, multinational corporations that have already established a presence in their home markets, much of their future growth comes from abroad.

With that in mind, today we're looking at PepsiCo (NYS: PEP) . We'll examine not only where its sales and earnings come from, but how its sales abroad have changed over time.

Where PepsiCo's sales were five years ago
Five years ago, the United States and Canada contributed 66% of Pepsi's growth. That reliance on the Americas is especially notable when you consider Coca-Cola (NYS: KO) was only driving 29% of its sales through the North American market in 2005.

anImage

Source: S&P Capital IQ.

Where PepsiCo's sales are today
Today, the United States and Canada still provide the lion's share of PepsiCo's sales, but other markets now contribute 44% of sales. At current growth rates, international markets could be half of PepsiCo's sales within a few years.

anImage

Source: S&P Capital IQ.

The fastest growth is coming from the "All Other Countries" segment, with sales seeing high sustained yield growth rates.

Segment

5-Year Revenue Growth

United States 54%
Mexico 46%
Canada 104%
United Kingdom 4%
All Other Countries 155%
Company-Wide Total 78%

Source: S&P Capital IQ. Russia segment excluded; first reported in 2008.

Those revenue growth rates are pretty heady, though they're inflated by acquisitions like PepsiCo's purchase of its bottlers between the 2009 and 2010 fiscal years. PepsiCo has done a fantastic job growing its non-beverage lines, but like other large consumer goods companies facing the realities of size and slowing domestic markets, PepsiCo will increasingly have to look abroad to find growth.

Competitor checkup
One last point to check is how PepsiCo's footprint compares to that of some of its peers:

Company

Geography With Most Sales

Percent of Sales

PepsiCo United States 53%
Coca-Cola North America 32%
Dr Pepper Snapple Group  (NYS: DPS) United States 89%
Kraft  (NYS: KFT) United States 43%

Source: S&P Capital IQ.

While PepsiCo has been steadily growing its international sales, it has a long way to go before it reaches the same level as Coca-Cola or Kraft. However, Kraft's situations should dramatically change in the near future. The company is planning a spin-off of its lower-growth business and its segments with more emerging-market sales. That'll leave part of its business far more exposed to high-growth markets.

Keep searching
If you're looking to stay updated on PepsiCo, or any other companies listed above, make sure to add them to our watchlist service, My Watchlist. It's free, and it helps you constantly stay updated on news and analysis on your favorite companies.

At the time this article was published Eric Bleeker owns shares of no companies listed above. You can follow him on Twitter to see all of his technology and market commentary.The Motley Fool owns shares of PepsiCo and Coca-Cola. Motley Fool newsletter services have recommended buying shares of PepsiCo and Coca-Cola. Motley Fool newsletter services have recommended creating a diagonal call position in PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Portfolio Basics

What are stocks? Learn how to start investing.

View Course »

Bonds for Beginners

Learn about fixed income investments.

View Course »

Add a Comment

*0 / 3000 Character Maximum

2 Comments

Filter by:
chimneyjim

In today's world, just like yesterday's, MOST companies operate in their local area only. There are many more small businesses than large ones.

October 30 2011 at 10:55 AM Report abuse rate up rate down Reply
boardman3

The present head of PEP is a woman from India and the Far East is where much of the growth of PEP is at present.

October 25 2011 at 5:02 PM Report abuse rate up rate down Reply