The standard volume measure is pounds for North America and kilos for International. Pound and kilo growth are reported on a systemwide and constant territory basis, which includes currently consolidated businesses and unconsolidated affiliates reported for at least one year.
FRITO-LAY NORTH AMERICA
|
|
% Growth Rates
|
|
($ in millions)
|
1998
|
1997
|
1996
|
.
|
1998
|
1997
|
|
Net Sales
|
$
|
7,474
|
$
|
6,967
|
$
|
6,628
|
.
|
7
|
5
|
|
Operating Profit
|
.
|
|
.
|
|
|
.
|
Reported
|
$
|
1,424
|
$
|
1,388
|
$
|
1,286
|
.
|
3
|
8
|
|
.
|
Ongoing
|
$
|
1,478
|
$
|
1,410
|
$
|
1,286
|
.
|
5
|
10
|
Ongoing excludes unusual impairment and other items of $54 in 1998 and $22 in 1997 (see Note 3). Unless otherwise noted, operating profit comparisons within the following discussions are based on ongoing operating profit.
|
1998 vs. 1997
Net sales grew $507 million due to increased volume and a favorable mix shift to higher-priced products.
Pound volume advanced 5% led by core brand growth and "WOW!" products. The growth in core brands, excluding their low-fat and no-fat versions, was led by double-digit growth in Lay's brand potato chips and double-digit growth in Doritos brand tortilla chips. These gains were partially offset by declines in Ruffles brand potato chips, "Baked" Lay's and "Baked" Tostitos brand products and the elimination of Doritos Reduced Fat brand tortilla chips.
Reported operating profit increased $36 million. Ongoing operating profit increased $68 million reflecting the higher volume and the favorable mix shift, partially offset by increased operating costs. The increase in operating costs was led by increased A&M, higher manufacturing costs, reflecting costs associated with new plants and lines related to "WOW!" and Doritos 3-D products, and higher S&D expenses. A&M grew at a significantly faster rate than sales and volume due to increased promotional allowances and "WOW!" launch costs. S&D grew at a slightly slower rate than sales but faster than volume.
1997 vs. 1996
Net sales grew $339 million reflecting increased volume and the benefit of higher pricing taken on most major brands late in 1996.
Pound volume advanced 3%. Growth of our core brands, excluding their low-fat and no-fat versions, was led by high single-digit growth in Lay's brand potato chips, strong double-digit growth by Tostitos brand tortilla chips and single-digit growth by Doritos brand tortilla chips. "Baked" Lay's brand potato crisps reported low double-digit growth. However, the remainder of our low-fat and no-fat snacks business depressed the overall growth rate.
Reported operating profit grew $102 million. Ongoing operating profit rose $124 million, reflecting the higher pricing and volume growth, partially offset by increased manufacturing costs and G&A expenses. The increased manufacturing costs related to new plant capacity and the planned introduction of new products in 1998. S&D grew slower than sales, A&M was about even with prior year and G&A increased significantly faster than sales reflecting information systems-related expenses and customer focus leadership training. Operating profit growth was hampered by the absence of a 1996 gain from the sale of a non-core business.
FRITO-LAY INTERNATIONAL
|
|
% Growth Rates
|
|
($ in millions)
|
1998
|
1997
|
1996
|
|
1998
|
.
|
1997
|
|
|
|
|
|
|
|
Net Sales
|
$
|
3,501
|
$
|
3,409
|
$
|
3,122
|
.
|
3
|
.
|
9
|
|
|
Operating Profit
|
.
|
|
.
|
|
|
.
|
Reported
|
$
|
367
|
$
|
318
|
$
|
346
|
.
|
15
|
,
|
(8
|
)
|
|
.
|
Ongoing
|
$
|
367
|
$
|
380
|
$
|
346
|
|
(3
|
)
|
10
| |
Ongoing excludes unusual impairment and other items of $62 in 1997 (see Note 3). Unless otherwise noted, operating profit comparisons within the following discussions are based on ongoing operating profit.
|
1998 vs. 1997
Net sales increased $92 million or 3%. The increase in net sales was driven by net contributions from acquisitions/divestitures and by higher volume. The increase was partially offset by the impact of weaker foreign currencies including the unfavorable effect in Mexico of the devaluation of the peso against the U.S. dollar net of local pricing actions. Excluding Mexico, the impact of weaker foreign currencies, primarily Brazil, Poland, Australia and Thailand, reduced net sales growth by 2 percentage points. Net acquisitions/divestitures contributed 3 percentage points to the sales growth.
Salty snack kilos increased 6%, led by solid double-digit growth at Sabritas in Mexico and the Snack Ventures Europe joint venture, partially offset by double-digit declines in Brazil. Sweet snack kilos declined 2% driven by a single-digit decline at Gamesa in Mexico and a double-digit decline at Wedel in Poland. These declines in sweet snack kilos were partially offset by double-digit growth at Sabritas. Including acquisitions/divestitures, salty snack kilos increased to 14%. The increase of 8 percentage points was primarily driven by the acquisitions through partnership with, as well as, purchase of salty snack food businesses in Central and South America. Sweet snack kilos, including the effect of acquisitions/divestitures, declined 8% primarily as a result of the first quarter sale of a French biscuit business.
Reported operating profit increased $49 million. Ongoing operating profit declined $13 million. Deterioration of operating performance in Brazil due to the macro-economic conditions and market softness at Gamesa was partially offset by growth at Sabritas and in Poland. The growth in Poland was substantially driven by the sweet snack business. As part of our global strategy to focus on core businesses, we previously announced that we had completed negotiations for the sales in early 1999 of the chocolate and biscuit businesses in Poland.
1997 vs. 1996
Net sales increased $287 million due to volume gains and higher effective net pricing.
Salty snack kilos rose 11%, led by strong double-digit growth by Sabritas and our business in Brazil, while sweet snack kilos declined 5% due to a market contraction at Gamesa.
Reported operating profit decreased $28 million. Ongoing operating profit increased $34 million or 10%. Excluding foreign currency impact, ongoing operating profit increased 8%. This increase was due to volume gains partially offset by increased G&A. The higher effective net pricing was fully offset by inflation-driven higher operating and manufacturing costs, primarily in Mexico. Ongoing operating profit also benefited from the gain on the sale of a flour mill. The foreign currency impact resulted from the strength of the British pound at Walkers.
