Marketing costs pull back Pepsi's Q3 performance

Pepsi-Cola Products Philippines Inc’s income was sluggish despite strong sales volumes in the last quarter due to bigger marketing spend.

In a statement, Pepsi Philippines mentioned that it has increased its marketing expenses in the last three quarters by 15% to P534.2 million from P453.2 million in the same period in 2012.

In addition to investments in coolers, trucks and similar assets, the company’s operating expenses grew by 12 percent for the quarter and 16 percent for the nine-month period.

Sales volume rose by 20% for the quarter and 21$ for the nine-month period thanks to the investment but its consequences in terms of expenses has started to show starting in Pepsi's net income for the third quarter.

Despite rosy gross sales up 13% to P6,063 million from P5.244 million in 2012, the company's net income in the last quarter just rose 2.90 percent to P122.80 million in the July to September period, from P119.34 million year-on-year.

The company did fare generally better throughout the year, with nine-month total revenues improving to P19.4 billion from P16.56 billion in 2012 and net income to P780.7 million from P696.8 in the same comparable period last year.

“This achievement is considered remarkable in the face of intense competition. The rainy months of the third quarter is normally off-peak for the beverage players but we managed to overcome this and outperformed the industry for yet another quarter," Pepsi-Cola Philippines president Partho Chakrabarti said in a statement.