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PepsiCo profits plunge on poor sales

The woes of PepsiCo were underscored yesterday when the company revealed that profits plunged 85 per cent in the fourth quarter of last year due to its struggling restaurant division and poor results in international drink sales.

The dismal news further depressed the shares of PepsiCo, which for months have been eclipsed by the continued rise of its arch-rival, Coca-Cola. In morning trading in New York yesterday, PepsiCo shares were down 75 cents at $33.375.

The company, based in Purchase, New York, reported that net income for the last three months of 1996 fell to $28m (pounds 17.3m), or 3c a share, compared with $181m in 1995. It said that for all of 1996, profits slipped by 28 per cent to $1.15bn.

The difficulties were traced in part to sluggish trade at two of PepsiCo's fast-food chains, Pizza Hut and Taco Bell. The news sours last month's announcement by PepsiCo that it planned to spin off its restaurant division which also includes Kentucky Fried Chicken.

The company was also hurt in the fourth quarter by disappointing international sales in its core beverage division, which includes its flagship Pepsi Cola drink. Outside the US, beverage sales were off by 9 per cent in the last quarter and by 2 per cent for the year as a whole. The campaign early last year to boost Pepsi sales through an extravagant changeover from red, white and blue cans to an all-blue colour scheme apparently made little impact.

PepsiCo suffered particularly badly in Latin America. Its worst experience was in Venezuela, where its long-time bottling partner switched overnight to Coca-Cola.

The decline gives a further edge to Coca-Cola, which is already beating Pepsi hands down in the cola wars in almost every part of the world. In the US, however, the race is a little closer. Indeed, Pepsi Cola North America thrived last year, with sales growing by 4 per cent and profits by 14 per cent.

PepsiCo was also helped by North American sales of its Frito-Lay snacks brands. Overall sales for the group in North America grew by 5 per cent to $30.26bn.