Sales of Lower-Fat Snacks Help Boost PepsiCo Earnings 15%

PepsiCo Inc., the world’s No. 2 soft-drink maker, said second-quarter earnings climbed 15% after sales were boosted by Gatorade and the introduction of a lower-fat line of Lay’s potato chips and Cheetos cheese puffs.

Net income rose to $1.01 billion, or 58 cents a share, from $875 million, or 48 cents, a year earlier. Sales increased 6.8% to $6.54 billion, the biggest gain in more than a year, said PepsiCo, based in Purchase, N.Y.

Frito-Lay sales rose 6% in North America after the company in May started selling its Natural line of snacks, which are cooked in more healthful oils and include organic ingredients. The unit accounts for about 60% of PepsiCo’s sales. Chief Executive Steven Reinemund has sought to counter lackluster soda demand by selling new products to health-conscious consumers.

Beverage sales in North America rose 7%, more than analysts’ forecasts, because of demand for Gatorade sports drinks and Aquafina water.

Shares of PepsiCo rose $2.40, or 5.4%, to $46.95 on the New York Stock Exchange. The stock had risen 5.5% this year.

Second-quarter profit matched the average estimate of analysts surveyed by Thomson First Call. PepsiCo reiterated that it expects to earn $2.16 to $2.19 a share this year.

Frito-Lay announced in September that it would begin using corn oil to make Doritos, Tostitos and Cheetos snack foods as more consumers seek to eliminate harmful fatty acids from their diets. The Food and Drug Administration said Wednesday that food companies would be required to include details about trans fatty acids on product labels by 2006.

About a third of Frito-Lay’s revenue gain came from higher prices for its more healthful items, sales of which are increasing faster than the rest of its business, executives said.