4/15/2005

PepsiCo’s earnings fizz in first quarter

PepsiCo is the second largest soft drink company and owner of Frito-Lay. Their earnings for the first quarter of 2005 increased an astonishing 7 percent from $6.13 billion a year ago to $6.59 billion. This increase is attributed to a favorable tax change and strong international growth. Is it fair that a very small amount of companies are allowed to make such a large amount of money from an industry that is so wide reaching?

6 comments:

Marie said...

I think that Pepsi is being very smart about their moves that they are making in the market. Pepsi has bought up some great companies. For example, Pepsi bought Gatorade. Consumer trend has gone down in soda pop and up in sport drinks. Pepsi deserves everything they get from their smart planning.

Ace said...

Good for pepsi. They have done a great job advertising and promoting their product and it has paid off. I love to drink Pepsi and I'm glad to hear they are doing good. I don't see any problem with them controlling such a large part of the market. They are producing a product that people demand, and they are not hurting anyone else to get to where they are at.

Fred said...

If a company can get to the top successfully, then I don't see what the problem is. Every other company is trying to do the exact same thing, the only difference is that Pepsi has succeeded, and they haven't.

June said...

So what if it isn't fair? What is keeping other firms from entering the market? If somebody else really wanted to try to compete with the big soda companies they could. The companies that are willing to take the risk are going to reap the rewards. Such is life.

trudy said...

I think that everyone should have a fair chance. The rich only get richer whether they work or not. This may not apply directly to pepsi, but many people are fed with the silver spoon and never have to work a day in their lives. Many times it seems that i will never catch them no matter how hard I work

Dr. Tufte said...

-1 on Ace's and Trudy's comments for a capitalization errors.

There are two reasons not to read too much into this number.

First, $6.59B as a percentage of what? Large companies can make a lot of money without doing particularly well.

Second, 7% growth is not out of line. This is a nominal figure. The national economy did about 4% last year, with inflation just over 2%. That means that nominal economic growth was about 6%. This is what the average company should do. Pepsi doesn't seem to far beyond this number.