The Pepsi Challenge for 8,700 People is to Find a New Job

PepsiCo PEP announced on Thursday that it is planing on cutting around 8,700 jobs at it looks to restructure business in an attempt to offset commodity costs and increase investment in advertising and marketing in North America. PepsiCo, which makes Pepsi soda, Tropicana juice and Doritos chips said on Thursday that the job cuts represent 3 percent of its workforce, not a particularly high number but not something that will be of any comfort to the 8,700 families having to find work in a difficult economy. PEP says that it expects to save an additional $1.5 billion by 2014, on top of the $1.5 billion in cost cutting that the company had previously announced. The news comes on the back of Pepsi rival Coca-Cola's KO own cost-cutting announcement which came on Tuesday, although Coke looked slightly better as it said that it would be adding jobs as part of the exercise. Pepsi said that it had to make these difficult decisions due to the fact that is is expecting 2012 to be the second year in succession with higher-than-average costs for commodities. According to Pepsi, it is not able to offset those costs with higher prices due to the current economy causing consumers to be particularly careful with their money. "2012 will be a year of transition, one in which we will make the right investments to position PepsiCo properly to achieve long-term high-single-digit core constant currency earnings per share growth," CFO Hugh Johnston said in a statement. Pepsi is not only planning on shedding jobs though. Fortunately, the company has more up its sleeve than that. The company plans to increase advertising and marketing behind its brands by between $500 million and $600 million in 2012, focusing on the domestic market in North America. The company is also planning on increasing dividends and share buybacks this year in order to return cash to its shareholders. Perhaps Pepsi's greatest challenge at present is the shift in consumer tastes towards healthier snacks and drinks. People are no longer happy to accept that Diet Pepsi or any other diet soda drinks are a healthy alternative to the full-fat drink. That is probably why Pepsi shelled out $5 billion on Russian fruit juice company Wimm-Bill-Dann. Of course, Pepsi's pursuit of Coca-Cola has been the challenge that it has faced for pretty much the entirety of its existence. The two companies continue to go head-to-head, and KO has always managed to keep it's nose in front. It's a shadow that every Pepsi CEO that has come and gone must secretly hope to get out of, but none of them have managed it yet. There are questions surround the feasibility of Pepsi's attachment to Frito-Lay, following Kraft's recent decision to split it's high-growth snack segment from its slower-growing grocery segment, but PEP seems determined to stick it out. Pepsi's revenue climbed 11% to $20.16 billion in the fourth quarter as the company earned $1.15 a share. Analysts expected to see earnings of $1.13 a share on revenue of $19.89 billion. In the Thursday research report, J.P. Morgan said that it is rating PEP as Overweight with expectations low, while it still sees risk across the rest of its beverage/HPC universe. Citi said that it lauds Pepsi's decision to invest heavily in its business, although it questions whether it will be successful in its initiatives. Deutsche Bank believes change is afoot at PEP, saying that it believes the company is finally focusing on its US beverage business and, dominant Frito franchise notwithstanding, continued emphasis on nutrition. Is it possible that Pepsi's way to finally get ahead of Coke is to concentrate on healthier foods?