Flat sales at Pepsi

Muslim countries are posing Pepsi a problem

PepsiCo, the soft drinks and snack food group, has boosted its profits for the three months to June, but sales have proved disappointing thanks to South America's troubled economies and a boycott of American goods in the Middle East.

Amid the deepening gloom in the US markets - the Dow Jones average had fallen in seven of the previous eight sessions - Pepsi shares were down $3.29 or 8.2% at $37.01 by 1625 GMT, having at one point touched a 27-month low.

Pepsi, which as well as its cola owns brands such as Gatorade sports drinks and Frito-Lay snacks, said it made $888m in the second quarter or 49 cents a share, on sales that rose just 2.3% from the previous year.

The sliding currencies in Argentina and Brazil were partly responsible, Pepsi said, as well as weakening sales for its Tropicana fruit juices.

Higher marketing costs and unseasonably cool weather was also a drag on sales, the company said.

But also on the list of problems was the boycott in the Middle East and in Muslim regions of US goods because of the belief that the US is backing Israel at the expense of the Palestinians in the West Bank and Gaza Strip.

Despite the disappointing figures - which fell short of most observers' expectations - Pepsi reiterated its belief that it can boost profits per share by 13-14% for the full year, and that its purchase of the Quaker food company late last year will produce $200m in savings in 2002.