By Sruthi Ramakrishnan and Anjali Athavaley
(Reuters) - PepsiCo Inc on Tuesday reported a better-than-expected quarterly profit as its commodity costs fell and demand for its snacks and non-carbonated beverages rose in North America.
PepsiCo has been introducing beverages with less sugar and more natural ingredients as consumers in North America, its biggest market, turn calorie-conscious and opt for products perceived as healthier.
Shares of the company, whose non-carbonated beverages include energy drink Gatorade, Lipton teas and Tropicana fruit juices, were up 2.2 percent to $97.90 in mid-morning trading.
"The innovation in North American beverage is working really well right now," Chief Financial Officer Hugh Johnston said in an interview, referring to products such as Diet Pepsi, which is free of artificial sweetener aspartame, and Mountain Dew Kickstart.
Revenue from PepsiCo's North America beverages business rose 4 percent in the third quarter, accounting for a third of its total revenue.
Sales volumes of carbonated beverages fell 2 percent in the region, but other beverages rose 10 percent, Johnston said.
Revenue from its snacks business, which includes Frito-lay and Doritos chips, increased 1 percent in the region.
This is the first time PepsiCo has broken out its North American quarterly beverage sales numbers.
PepsiCo also raised its target for 2015 adjusted earnings growth to 9 percent from 8 percent on a constant-currency basis.
"We find the second consecutive guidance raise particularly encouraging given the macro and category volatility that (PepsiCo) continues to face," said Cowen and Co analyst Vivien Azer in a note.
The net income attributable to PepsiCo fell to $533 million (£351 million), or 36 cents per share, in the quarter ended Sept. 5 from $2.01 billion, or $1.32 per share, a year earlier.
PepsiCo said it took a charge of $1.4 billion, or 92 cents per share, as it changed its accounting method for Venezuela operations.
The company said it would exclude results of local Venezuelan units and joint venture from its financial statements from the current quarter. It will include only revenue from the sales of inventory there if cash is received.
Excluding items, the company earned $1.35 per share.
Net revenue fell 5.2 percent to $16.33 billion, the fourth straight quarter of declines, partly due to a strong dollar.
Analysts on an average had expected a profit of $1.26 per share and revenue of $16.15 billion, according to Thomson Reuters I/B/E/S.
(Reporting by Sruthi Ramakrishnan in Bengaluru and Anjali Athavaley in New York; additional reporting by Subrat Patnaik; Editing by Kirti Pandey and James Dalgleish)