PepsiCo to cut 8,700 jobs as part of growth strategy

The layoffs are equivalent to 3% of its global workforce of about 290,000, and are part of a plan to save $1.5bn by 2014, on top of an additional $1.5bn in savings already announced.

“As we implement our strategic priorities in 2012, we’ve had to make some tough decisions,” ​Chief Financial Officer Hugh Johnston said in a statement.

“As a result, 2012 will be a year of transition, one in which we will make the right investments to position PepsiCo properly to achieve long-term high single digit core constant currency EPS growth.”​

PepsiCo has come under pressure to shake up its strategy in recent months, especially after Pepsi fell from its second place position behind Coca-Cola to become the third most popular global soft drink, ceding its number two spot to Diet Coke – and some commentators have expressed dissatisfaction that the company has not lined up an obvious successor to CEO Indra Nooyi.

The company said job cuts were necessary as it faced a second consecutive year of historically high commodity costs and it could not expect to pass on this cost to consumers.

“In a different economic climate the company would likely offset these additional costs through increased pricing,”​ it said in a statement. “However, it does not anticipate that it can pass through all of the higher commodity costs to its consumers in 2012 given the continuing challenges that consumers are facing, particularly in the developed economies.”​

Profit gain​

PepsiCo’s job cuts and wider growth strategy came as the company announced a 4% net profit gain in the fourth quarter ended December 31, to $1.42bn, up from $1.37bn for the same period last year. It reported an 11% increase in sales during the quarter, to 20.16bn, as a result of higher prices, cost cuts and 7% higher volumes.

For the full year, net profit rose 2% to $6.46bn, and sales were up 15% to $66.5bn.

The company also said it intends to pour $500m-$600m into advertising and marketing support for its global brands in 2012, with a particular focus on North America.

PepsiCo’s archrival The Coca-Cola Company announced its own cost-cutting strategy on Wednesday, saying it plans to save $650m by 2015. Coca-Cola said it would achieve the savings through reinvesting savings it has already made in ‘brand-building initiatives’ to combat commodity inflation.