PepsiCo recently reported strong revenue and net income growth for its fiscal third quarter of 2022.



PepsiCo reported revenue of $21.97 billion, up 8.8% from a year earlier, according to the results. Beat market expectations of $20.84 billion.


Organic sales, which strip out foreign exchange effects, acquisitions, and divestitures, rose 16 percent year on year in the third quarter, helped by an average 17 percent increase in product selling prices.


In the third quarter, PepsiCo's net income attributable to common shareholders was $2.7 billion, up 21.5% from a year earlier. Diluted earnings per share were $1.95, compared with $1.60 a year ago.



Excluding the impact of foreign exchange, acquisitions, divestitures and other structural changes, PepsiCo's organic revenue rose 16% on a non-GAAP basis in the third quarter, above the 10% expected by analysts.



It's worth noting that PepsiCo's average pricing was up 17% in the third quarter, while organic (non-GAAP) sales were down 1% year-over-year. In the second quarter of this year, PepsiCo's average pricing rose 12%.


PepsiCo is raising prices to counter the effects of inflation



As food inflation is close to its highest level in 40 years as raw material and Labour costs rise. Food and beverage companies are raising prices to pass on cost pressures.


In response, PepsiCo Vice Chairman and Chief Financial Officer Hugh Johnston said on a post-earnings conference call that the company has tried to combat the impact of inflation through its pricing strategy.



Coca-Cola was the first to raise prices in 2021. Pepsi also started raising prices in the first quarter.



PepsiCo Chief Executive Ramon Laguarta said the company is reducing promotions and focusing on channels where consumers are relatively price-insensitive to boost unit revenue.


Sports drinks become a major source of reliance





It is worth noting that energy drinks are on a golden track to rapid growth.



The global energy drink Market was valued at $45.8 billion in 2020, according to Allied Market Research. It is projected to rise to $108.4 billion by 2031. The compound annual growth rate was 8.2%.



That continues to attract beverage giants such as Pepsi and Coke.



Sports and energy drinks are also becoming the focus of Pepsi's growth.



In the direction of energy drinks



PepsiCo has splashed out on Rockstar, its own Mountain Dew Energy brand, and Bang, which has exclusive US distribution rights.



In particular, Pepsi's Gatorade Zero zero-sugar (carb) hydrating drinks. It is a major innovation of Gatorade in recent years and ranks high in the zero-sugar sports drink market in the US. In the United States, Gatorade commands at least 85 percent of the American sports drink industry.


In August, PepsiCo announced a $550 million investment in Celsius Holdings, the parent company of Celsius, an energy drink. Having PepsiCo distribute Celsius in the United States represents a continued investment in the energy drink direction.




According to consumer industry analyst Shoggi Ezeizat, PepsiCo's snack portfolio takes on a variety of packaging specifications, providing the company with some marginal cushion and overall resilience against inflationary pressures. The company's various packaging products have also done well with consumers of different income groups.