by Marion Nestle
Feb 10 2012

Pepsi cuts 8,700 jobs; 4th quarter profits rise

Pepsi is about to put 8,700 of its worldwide employees out of work.   This might make you think the company is in trouble.

Let’s have some fun with the numbers reported by Reuters in today’s New York Times

Pepsi reports increases in:

  • Annual dividends: 4%
  • Expenditures on advertising: an additional $500 million
  • Expenditures on display racks: an additional $100 million
  • Fourth quarter profits: from $1.37 billion a year ago to $1.42 billion
  • Earnings per share: from 85 cents a year ago to 89 cents
  • Revenues: up 11% to $20.2 billion

Let’s get the logic straight here:

  • PepsiCo made $1.42 billion in profits last quarter.
  • The company’s revenues, profits, and returns to investors are increasing.
  • QED: it is adding 8,700 out-of-work people to an already depressed job economy.

Only Wall Street would view Pepsi’s bottom line as problematic and its CEO, Indra Nooyi, as in trouble:

Ms. Nooyi has come under pressure from Wall Street for a stagnant stock price and a lagging North American beverage business. She has been criticized for taking her eye off the core business of sodas to expand into healthier products, such as hummus and drinkable oatmeal.

When it comes to Wall Street, forget about jobs and health.  Only one thing counts: meeting those quarterly growth targets.

Advocates for a healthier food system should not expect much help from food corporations.

They will only be able to help if forced to by public pressure and regulation.

Comments

Nice article…
Good job Marion. :)

  • chuck
  • February 10, 2012
  • 10:09 am

Wall Street is so myopic. They don’t care that there is a national and global movement to AVOID what Pepsi’s core products are. Here is how PepsiCo’s CEO tried to combat these motives. This is a quote from any interview of her:

“Doritos are not bad for you,” “Doritos are nothing more than corn mashed up, fried up in a little oil, and flavored in the most delectable way.” “Pepsi Cola was discovered in a pharmacy.” “These are not bad for you products.”

http://escapetheherdblog.blogspot.com/2011/02/everything-in-moderation.html

  • justthefacts
  • February 10, 2012
  • 12:55 pm

Drinkable oatmeal?

—–

Thanks Chuck, for that gem of a quote. It only adds to the absurdity of what Marion has already reported. I hope the fired workers are sure to divest themselves of any Pepsico (and other) crap food and beverage stocks.

  • Margeretrc
  • February 10, 2012
  • 1:18 pm

“Advocates for a healthier food system should not expect much help from food corporations.” No kidding. They’re going to give the consumers what they want. When the majority of consumers demand healthier food and stop buying the junk, things will change, but not until then. I think we can all agree that Pepsi and Doritos are not good for you. All we have to do is stop buying them. Personally, I’m going to boycott all their products because of what they are doing to their employees despite rising profits. That’s unconscionable. Of course, that isn’t going to make any difference because I’m one person and I don’t buy their stuff anyway, but I would hope that others would, too. Thanks for bringing this to our attention!
“They will only be able to help if forced to by public pressure and regulation.” Public pressure, not regulation is the answer. Hostess/Twinkies went out of business, no? They’re not blaming drop in sales, but…. http://dealbook.nytimes.com/2012/01/11/hostess-files-for-bankruptcy/

  • Sam
  • February 10, 2012
  • 2:22 pm

All the big guys have been cutting jobs during tough economic times despite huge profits, Unilever, Kraft, Nestle…no surprise Pepsi is following suit. Whose next? Coke, ConAgra?

  • justthefacts
  • February 10, 2012
  • 3:03 pm

Margaret, once again you fail to grasp the public health focus of this blog. Speaking for yourself as an adult fails to account for our collective responsibility to protect children and other vulnerable populations from the predations of unfettered capitalism.

I don’t use Pepsico products either, but I still support policies that limit their ability to market their crap to children and to try to fool their parents with disingenuous claims as well.

The recent demise of Twinkies does not mean there is less junk out there–just different junk. By your reasoning, we should never have outlawed cigarette advertising or taken other measures that have greatly reduced diseases caused by tobacco.

  • MargaretRC
  • February 10, 2012
  • 5:33 pm

@justthefacts,
That’s funny. I thought I was pretty much in agreement with this post. I didn’t see anything about marketing to children in it. That was, if I recall correctly, a previous post. I was responding to this post and agreeing that, as consumers, if we want big business to respond to our wishes, we need to tell them–by voting with our pocketbooks. I only don’t agree that it’s the government’s responsibility (or privilege) to dictate how big business does business–at least not with consenting adults. We already have laws on the books that regulate truth in advertising–I have no problem with enforcing those, be it to children or their parents or anyone else. Other than that, I don’t see how–without giving up freedoms we all cherish–regulation can be used to tell companies what they can and cannot produce, market or otherwise do to try to stay in business.

  • MargaretRC
  • February 10, 2012
  • 5:56 pm

Oh, and for the record, @justthefacts, I’m fine with outlawing cigarette adds that make a very unhealthy product out to be harmless. As I said, companies do need to be held accountable for the truth in their advertising. And I don’t believe cigarette ads are totally outlawed–i still see adverts in some magazines. But Doritos and cigarettes aren’t quite in the same category. Government has a right to tell Pepsi they can’t tell people Doritos and Pepsi are healthy or even harmless, but it can’t tell them not to make them, sell them or even advertise them as tasty, any more that they can tell tobacco companies to stop making and selling cigarettes. Only we can do that–by not buying them. “Regulation” doesn’t necessarily only relate to marketing to children.

Thank you Marion for writing this piece. I thought I was out of my mind when I read the article this morning. I had to read it twice and I was still completely confused. The stock price went down a little bit. So what?

One thing that strikes me whenever I read Marion’s article is: She demands change, but just about no vision of implementing it.

What changes to the corporate world? Should corporations be abolished? Or would corporations only selling organic foods have the freedom of not being responsible to their shareholders?

Come on, Marion, be it a be more than a Cassandra.

  • Steve
  • February 10, 2012
  • 7:34 pm

In general, I agree with the whole “Food Politics” premise. Having said that, I’m also a pragmatist and in order to be effective, we must deal with the real world and not cloud our thinking/actions. To this end, fairness in analysis is required.

You indicate a 11% increase in revenue, and a 3.6% increase in profit and 4.7% increase in earnings per share. Clearly, *profitability* (profit as a percent of sales) is declining, and that’s where the market pressure is coming from. Some may not like this, but it is the way the world works.

Also, you state that 8,700 jobs are to be cut. To be fair — and I say this not knowing the answer, so it may or may not support your position — since you are comparing revenue/profits year on year, is that reduction of 8,700 also year on year? Or perhaps did employment grow through the four quarters of the year, resulting in decreased per employee efficiency/profitability, and now it is being adjusted more in line with the business model? In other words, while they may be cutting 8,700 jobs *now*, when compared with a year ago (to be comparable to the numbers you are using), will they be up, down, or the same after the cuts?

Last, you understandably lament the loss of 8,700 jobs (world-wide, by the way), which will result in an average cost savings of $500 million over the next three years (per the NYT article), but you don’t offset that by the jobs created by an additional $500 million in advertising — jobs likely to be created in the U.S.

  • NYFarmer
  • February 11, 2012
  • 9:45 am

In Upstate NY, we are hearing that Pepsi is planning on building what will become North America’s largest yogurt plant in Batavia, New York. Newspaper articles have cited the fact that Europeans consumer significantly much more yogurt than Americans, and market anaysts believe that Americans are ready for more healthy yogurt. Witness the success of Chobani and Fage, both made right here in Upstate NY. Of course, the NY location will enable Pepsi to take advantage of a milk pricing structure that leaves NY dairy farmers with the lowest pay of all farmers in the Northeast. And, they get the added benefit of being conveniently located near the NYS THruway to whisk fresh yogurt to the Northeast Corridor. And, of course, NYC consumer groups have long fought to cheap milk, having successfully broken NY dairy farmer collective bargaining efforts in the past. So, cheap milk feedstocks are virtually guaranteed.

  • justthefacts
  • February 11, 2012
  • 10:13 am

Margaret, I maintain that your focus is on individual behavior rather than public health. Children in public schools are not likely to stop buying Doritos from vending machines unless the machines are removed. Education will help, but that too, is being fought by lobbyists.

Doritos have the potential to be just as dangerous as cigarettes in the long haul. They are very salty, fatty, high in calories, and are mostly highly processed carbs–the worst kind.

Lastly, no one is saying that Doritos can’t be made or sold–just that their marketing and access to kids should be regulated for the sake of public health which will result not only in better national health outcomes, but reduced costs for health care as well.

I fully agree that adults need to “just say no” to unhealthy foods, but again, marketing messages are designed by experts in psychology to thwart all efforts by public health advocated by repeating their feel good messages ad nauseum. Perhaps equal time for public service messages could be a solution?

  • Margeretrc
  • February 11, 2012
  • 5:07 pm

@justthefacts, Yes, my focus in commenting on this post is on individual behavior. I did not and do not see anything in this post about kids. Perhaps I should have read between the lines? I agree with you about vending machines in schools–they should not be there. I’ve said that before. But isn’t that the responsibility of the individual school district? And believe me, I know just how dangerous Doritos can be over the long haul. Perhaps you are right that they are just as dangerous as cigarettes–IDK. In any case, I am not against doing whatever is necessary (and possible) to limit kids’ access to Pepsi and other junk food products in school. If a legal way can be found to regulate/ban adverts to kids, too, I say go for it. But who decides what is “junk food” and what is not? My definition of junk food may be different than that of someone else. And how far can and should we go in taking over individual/parental responsibility? I am as concerned about public health as you or anyone else, but I am against government overreach in the name of public health. There are such things as individual rights and responsibility–and parental rights and responsibility, too. You can’t just run roughshod over them in the name of public health.

  • justthefacts
  • February 12, 2012
  • 5:36 pm

Margaret, I think we have found some common ground at last and I’m glad of it. Really.

I think it’s easy enough to define “junk” food. Anyone such as Marion could do that in a heartbeat. As long as it’s left to science and not industry that can be accomplished.

Much of public health (Marion, correct me if I’m wrong here) is aimed at children as they cannot speak for themselves–nor can they choose whether or not they have responsible parents or schools that don’t cave to financial pressures and industry pressure. It is the children advertisers are anxious to reach-you and I have seen the light and made informed choices, whereas children of busy parents are left to the tv/computer set and its litany of junk food feel good messages.

Only regulation (or at the very least a balance of industry and public service messages) can help to counteract the negative effects of industries that are only out to enrich their shareholders. Trying to bring some scientific information into the equation is hardly “running roughshod” over parents.

  • Margeretrc
  • February 12, 2012
  • 8:54 pm

I’d be more inclined to think a balance of industry and public service messages–plus education in school, is a more realistic approach. Because, as I said in a comment to the previous post, eliminating advertisements by industry, while perhaps an honorable goal, will also dry up the funds for children’s programming. Who do you think pays for the programming in the first place? With no one (or at least fewer companies) to pay for ad spots, where will the money come from to pay for children’s entertainment? It does not create itself. I totally understand the wish to protect those whose parents are lax in their duties, but we need to be realistic, as well.
And the definition of “junk food” is more problematic than you think. Leaving it to science, rather than industry, is fine, but even scientists can’t seem to decide. I’m fine with labeling pretty much all processed food as junk, but will they? Granola bars and cereals are junk, as far as I’m concerned, but some, including Marion, would probably argue they’re not. As you know, I think foods high in sat fat are fine, but I know you and Marion do not–and we both think we have science on our side. You see the problem? This is by no means a simple issue. I am totally fine with keeping vending machines out of schools, with education and public service messages. Good luck getting anything more.

  • Steve
  • February 12, 2012
  • 9:10 pm

@justthefacts: I’m curious if you have (at least an opening) definition for “junk food”. I almost posted on that subject, but saw your comment, so I’d be curious what you (and others) may think about a working definition.

  • NYFarmer
  • February 12, 2012
  • 10:50 pm

Pretty much all processed food is “junk” We have a visitor from Ethiopia who walked out of our grocery store saying she could not eat any of the “unreal” food. A few summers ago, some students from the Middle East came to stay with us. They insisted on eating from the garden. When we got to know them better they said they perceived anything processed as junk. In the world of dairy, the dairy goodness of 100% real is processed and watered down to turn the real milk taken in by processors into products containing a mere shadow of nutrient dense milk as “food”.

[...] Marion Nestle of Food Politics points to a sign of our times: “Pepsi cuts 8,700 jobs; 4th quarter profits rise.” He cites these numbers from a Reuters report: Pepsi reports increases in: [...]

  • chuck
  • February 13, 2012
  • 9:53 am

@NYFarmer

And you can guarantee Pepsi is building a factory that churns out low/no fat pasteurized yogurt. much of the good in yogurt will be processed out. i am sure they will add some artificially made vitamins and call it healthy. most will be fooled by the marketing. public health comes down to personal education.

  • justthefacts
  • February 13, 2012
  • 5:19 pm

@Steve

Good question! Discussion isn’t as useful without clarity of terms.

My definition of “junk” food would be–and I think this is consistent with Marion’s thinking–anything that has more than five ingredients.

I’m sure there are some exceptions to this–my tabouleh for example–but that is homemade food, not supermarket or prepackaged food.

Another factor would be nutritional value. Ice cream could have only five ingredients (a popular brand used this as a marketing tool), but have high caloric content per serving with little nutrition beyond the calcium from the dairy. A bacon-cheese burger would only have three ingredients but could have hundreds of calories.

So I guess I’d have to say that junk food is mostly things that are prepackaged and come from the center aisles of the store, but could also include anything that is prone to be over-consumed–mostly because it is packaged, served, or marketed as though the package or serving is one serving when it actually is FOUR.

Of course, in everyday language, we are usually referring to soda, chips, and maybe pastries–things that are almost entirely empty calories.

Things like flavored yogurt is where is gets more complicated. I’d call it junk because of the sugar (and resulting excess calories), but there surely are worse things. It’s the marketing that comes into it in this case. It’s pushed as “healthy” when it would be a lot healthier if it was plain or had only unadulterated fruit added. Then again, if you only eat one serving and your calories aren’t as restricted as mine, it might be fine, so what do you think?

  • MargaretRC
  • February 13, 2012
  • 7:35 pm

@justthefacts, I think you have illustrated perfectly just how difficult it is to define junk food and why regulation is not a realistic option. Yes, we can agree that soda, chips, and maybe pastries are easy to define as junk food. I would also agree that most of the stuff in the middle aisles is pretty junky, but that’s a lot of food to consider regulating ads for. Pie in the sky, anyone?
Education is the only thing that can realistically work, but it has to be the right message. There’s already a lot of education going on, in school and in the media. The fact that we still have a problem should tell you something: perhaps the message needs to be changed? Instead of a complicated message that prescribes detailed dietary advice (5 servings of this, 6 servings of that, don’t eat too much fat, blah blah blah) a simple message to feed one’s kids mostly real food that doesn’t come in a package or gigantic cup or bottle/is as close to the way nature produced it as possible is perhaps the message that should be used to counter the industry ads.

  • Steve
  • February 13, 2012
  • 11:02 pm

@JustTheFacts:

The number of ingredients concept is interesting. Granted this is just an intellectual exercise, but my preliminary thinking is something along the lines of:

“Any non-natural food that has x% of its Calories from net (total minus fiber) carbohydrates.”

Examples of natural foods being things like apples or bananas.

An interesting result of this would be that something like an jar of applesauce may get snagged in the definition but an apple, itself, wouldn’t. I think that’s a good thing.

Another aspect of this type of definition is that the whole “serving size” concept is immaterial.

I agree with you with regards to things like flavored yogurt. For interest, I compare a fruit-flavored Chobani with a plain:

Fruit-flavored: 21 net grams of carbs, 60% of total Calories
Plain: 7 net grams of carbs, 28% of total Calories

Thoughts?

[...] just read the article Pepsi Cuts 8,700 jobs, 4th Quarter Profits Rise on foodpolitics.com, and I am absolutely appalled.  With corporate greed running everything [...]

  • justthefacts
  • February 14, 2012
  • 2:11 pm

@Margaret

Well, fine, but wouldn’t you agree that the only way to counter ads is with public service announcements?

I would further argue that one simple regulation would cover any number of junk foods. Besides, it is advertising that has been targeted for regulation, not so much the foods themselves.

I still don’t see why you oppose regulation except that it seems to be a basic tenet of your world view. That’s fine, but public health experts research what works best to improve public health and they have data, so when they recommend regulation, I listen.
—–

@Steve

I don’t think it’s about food groups so much as total calories and basic ingredients.

  • Steve
  • February 14, 2012
  • 8:24 pm

@justthefacts

Interesting that you don’t think it’s so much about food groups, as your own comment pretty much focused on carbs: ice cream, sugar added yogurts, soda, chips, pastries, “center aisle foods”, etc.

If not food groups, what do you mean when you refer to “basic ingredients”?

Last, a “regulatory” definition of “total calories” would be problematic as you get into the entirely subjective “serving size” issue, which my approach avoids entirely.

  • Margeretrc
  • February 14, 2012
  • 10:07 pm

“…but wouldn’t you agree that the only way to counter ads is with public service announcements?” One way, not the only way. As I said, education is another way. But again, knowing the right message is key.
“I would further argue that one simple regulation would cover any number of junk foods.” Oh? What would that be?
“it is advertising that has been targeted for regulation, not so much the foods themselves.” Okay. All advertising? Because if not, we come back to defining what junk food is in order to decide which companies’ advertisements should be regulated.
“I still don’t see why you oppose regulation except that it seems to be a basic tenet of your world view.” Actually not. There are situations/cases where regulation is appropriate. Regulation is appropriate to protect people from other people/unscrupulous institutions. It is not appropriate to protect people from themselves. We have too much of that already. Now I know you are going to say this is protecting children from unscrupulous institutions (though, again, that wasn’t specified.) If that is indeed what is being proposed and if it can be made to work, fine. I’m merely pointing out the many obstacles in the way. “…public health experts research what works best to improve public health and they have data, so when they recommend regulation, I listen.” I’ve learned to be skeptical of much of what has been deemed “what works best to improve public health” by “the experts,” at least where food and nutrition are concerned. Considering the obesity epidemic is still with us and the rate of type 2 diabetes, even among children, doesn’t show any signs of abating, I’d say those health experts don’t exactly have a great track record. So you’ll have to pardon me if I don’t listen.

[...] a little because there are two parts to its equality story. The first, I gathered from the title, Pepsi cuts 8,700 jobs; 4th quarter profits rise, obviously someone is not being treated equally. These people are being cut, so profits can be [...]

[...] with profits. In today’s world, a company will make $1 billion in a quarter and then layoff 8,500 people as it wants to make [...]

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