PepsiCo's plan fails to quench market's thirst

PepsiCo, based in Purchase, New York, expects to cut 8,700 jobs, or 3 percent of its global workforce, across 30 countries as part of a plan to save an extra $1.5 billion over the next three years.

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It also plans to increase advertising and marketing by $500 million to $600 million this year, with the majority being spent on North American brands including Pepsi, Mountain Dew, Sierra Mist, Gatorade and Tropicana.

PepsiCo also reported a higher-than-expected fourth-quarter profit.

CEO Indra Nooyi, who took over the company in late 2006, 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 and salty snacks such as Fritos and Doritos chips to expand into healthier options such as hummus and drinkable oatmeal.

She defended her choices at a meeting with investors on Thursday.

"It's an 'and' game, not an 'or' game," Nooyi said.

TRANSITION YEAR

PepsiCo forecast a 5 percent decline in 2012 earnings.

Coupled with an expected 3 percent hit from currency exchange rates, that means a bigger step back in earnings from 2011 than expected, James Tierney, chief investment officer at W.P. Stewart, said. "But this will take time and we have three to four quarters before we know if it is working."

"The positive is they are doing something. More ad spending is a positive and costs cuts are encouraging," he said.