Gains in Egypt and Turkey help PepsiCo profit

• Growth in Emea outpaces US
• New regional HQ in Riyadh
• Threat of consumer boycott fades

Revenue growth at PepsiCo Inc.’s Europe, Middle East and Africa (Emea) division outpaced all its other regional divisions in the first quarter, lifted by stronger demand in Egypt and Turkey. 

However, the US snacks and drinks company trimmed its full-year profit outlook and warned of rising global trade costs.

The maker of Pepsi, Gatorade and Lays posted 8 percent organic revenue growth in Emea in the three months to March 31, compared with a global average of 2 percent and flat to declining growth in North America, according to its company filings this week.

“We expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs,” CEO Ramon LaGuarta said during the company’s earnings call. He flagged US tariff-related pressures on the cost of ingredients and other inputs.

Stronger demand in Egypt, the most populous Arab country, and Turkey also helped power 11 percent organic revenue growth in PepsiCo’s international beverages business, supported too by gains in China, India and Brazil. 

In contrast, the company’s North America beverages unit grew by just 1 percent, compared with the same period last year. Food sales fell 2 percent, underscoring the growing importance of its international business, which now accounts for about 40 percent of total revenue or $37 billion.

“International will continue to be a growth and profit key driver for the company,” LaGuarta said.

PepsiCo’s business in Egypt and Turkey, Europe’s seventh largest economy, comes despite consumer boycotts last year that affected some Western brands in the Middle East, linked to perceived US support for Israel in the Gaza conflict. 

PepsiCo sparked ire in Egypt last year for a ‘Stay Thirsty’ ad campaign, which featured Amr Diab and Mohamed Salah. Consumers on social media called the campaign insensitive due to the situation in Gaza, which persists today.

• Pro-Palestinian cola brands to launch in Middle East
• Boycotts help send Turkey’s Coca-Cola sales down
• Dubai restaurants risk out-pricing customers on alcohol costs

While Saudi Arabia, the largest Arab economy, was not singled out in the quarterly earnings, PepsiCo is expanding in the region. 

The company has opened a new regional headquarters in Riyadh and has pledged SAR30 million ($8 million) to build a research and development center focused on localised product development. Saudi Arabia is PepsiCo’s biggest market in the region.

The company now forecasts flat core earnings in constant currency for the year, down from a previous mid-single-digit increase, and a 3 percent decline in dollar terms​​.

Shares in PepsiCo closed at $171.80 on Thursday, down 2.4 percent since the start of the year.