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PepsiCo Announces Plans to Cut 3,300 Jobs



October 21, 2008 – Comments (0) | RELATED TICKERS: KO , PEP

Sorry this is a week old, but I just got this in my inbox today:

PepsiCo Announces Plans to Cut 3,300 Jobs

PepsiCo reported a tough third quarter Tuesday and announced plans to save the company a projected $1.2 billion over three years by eliminating 3,300 jobs. [Link] The cuts amount to a little less than two percent of PepsiCo’s global workforce and will, according to a press release, come across all segments of the business – with 40 percent relating to the closure of six plants. Which six plants, the release said, will be announced by the end of the year.

The cuts will affect both U.S. and international positions, though PepsiCo did not respond to questions about what portion would fall in the U.S., or how many jobs would be cut from PepsiCo’s snack-food subsidiary, Frito-Lay.

These plans follow Pepsi’s announcement last week that it will significantly redesign and rebrand some of its core carbonated soft drinks, which have been in decline. Chief Executive Officer Indra Nooyi said she thought the initiatives would stop the decline in good economic times, but expects them to slow the slide in today’s economic turmoil.

In Tuesday’s earnings report, Pepsi again cited a shaky economy and the falling value of the dollar as contributors to the company’s financial woes. UBS Analyst Kaumil Gajrawala noted that the economic environment mostly affected Pepsi’s beverage business, and projected that Coca-Cola would likely also suffer. Deutsche Bank Analyst Marc Greenberg said, despite the bad news, the cuts reflect well on the ability of Pepsi Brass to eliminate costs amid a difficult economic environment.

But, how's Coke doing?

Coca-Cola Posts Resillient Third Quarter Results

Coca-Cola appears to have weathered the current economic climate better than its chief rival, according to its third-quarter earnings report released Wednesday. [Link]

The world’s largest beverage manufacturer reported global volume, revenue and market share growth – though the picture at home was slightly less rosy.

North American case volume and net revenues fell two percent versus the same period last year, while operating income dipped by twelve percent as concentrate sales slumped. Coke’s earnings release blamed that on the difficult American economic environment, but even at domestically, the company had a few bright spots.

Coke Zero’s volume increased by 30 percent, and the company credited its ubiquitous Olympics marketing campaign for holding its total domestic volume decline to two percent.

Morgan Stanley Analyst Bill Pecoriello said the report demonstrated that Coca-Cola could sustain “solid operating results in more challenging economic times,” and that the company’s stock is poised to outperform its peers’.

That stands in sharp contrast to PepsiCo, which yesterday reported a tough quarter, a tough outlook and a plan to cut 3,300 jobs world-wide. Their report induced UBS Analyst Kaumil Gajrawala to project that Coca-Cola would likely also suffer.


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