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Higher prices help sales as PepsiCo works to transform its products

Cola maker is looking to adapt to consumer shifts toward healthier eating

Higher prices helped lift PepsiCo's sales in the first quarter, as the maker of Doritos, Gatorade and Quaker worked on transforming its lineup of products to keep up with changing tastes.

Sales for the North America Beverages and Frito-Lay North America segment both climbed 2% in the quarter, as pricing offset a decline in volume. Like other major food and beverage companies including Coca-Cola and Oreo cookie maker Mondelez, PepsiCo has said it is working on adapting its stable of brands to better reflect the trend toward options that people feel are healthier.

"Snacks are simple pleasure in life. What we're doing is making our snacks more permissible," PepsiCo CEO Indra Nooyi said during a call with analysts. That includes offering options with reduced fat or sodium, she said.

The recent passage of soda taxes in a handful of U.S. cities underscores the pressure Coca-Cola and PepsiCo in particular may be feeling to change their offerings. Earlier this year, Pepsi said sales were down 40% in Philadelphia after the city passed a tax on sweetened drinks including diet sodas made with artificial sweeteners.

When asked about the potential effect of such measures on PepsiCo, Nooyi said the company is making products with less sugar and bolstering the rest of its product portfolio to help cushion any impact.

Even as major U.S. packaged food companies face growth challenges in the crowded U.S. market, higher prices or new products that cost more can still help lift sales. On Tuesday, Coca-Cola said revenue rose 1% in North America for the first quarter, even though volume was flat. Both PepsiCo and Coca-Cola have also been slashing costs to improve their financial results.

For the period ended March 25, PepsiCo earned $1.32 billion. A year earlier the food and beverage company earned $931 million.

Revenue rose to $12.05 billion from $11.86 billion.


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