The Purchase, New York-based maker of Pepsi and Gatorade has been cutting costs as it navigates through a weak economy. Consumers are limiting their purchases of soft drinks and switching to healthier juices and teas.

PepsiCo said Wednesday its second-quarter profit fell two per cent while sales dropped three per cent, to beat analyst expectations.

Biggest bottlers

To save even more costs, PepsiCo has been trying to buy its two biggest bottlers since April. But Pepsi Bottling Group and PepsiAmericas rejected the US$6 billion deal, saying it undervalued them.

Analysts say PepsiCo must boost its offer to push the deal through, though PepsiCo hasn't done that yet.

On Wednesday, CEO Indra Nooyi told investors on a call she would not discuss the ongoing talks, which she said haven't affected relations with the bottlers.

"Nothing has changed because of these discussions. These discussions remain between an independent committee and PepsiCo," she said.

Instead, Nooyi focused on how the company is positioning itself for growth in developing markets like China, India and Russia, and improving business in North America.

"The bottom line is PepsiCo still must buy up its bottlers to ensure its future," said Christopher Shanahan, a research analyst with firm Frost and Sullivan.

He said creating new products like juices will only increase sales so much. Cola sales won't carry the company, either, he said, since that market is shrinking.

"Their bread and butter is Pepsi and cola, and that is a declining market," he said. "The only way they can maintain profits in a market that's basically in decline is to backward integrate and absorb their bottlers."

AP