"We're greatly encouraged by the strong start to 2013. We delivered solid organic revenue growth and double-digit core EPS growth in the first quarter, driven by our balanced food and beverage product and global geographic portfolio. Our investments in creating this portfolio are paying off and our brand and innovation strategies are driving sustainable top-line growth," said Chairman and CEO Indra Nooyi.
"We are driving increased marketplace execution and making higher investments in marketing and innovation to drive future growth. In the first quarter, our advertising and marketing expense increased by 11 percent, while our core operating margin increased 80 basis points.
"Importantly, we're laser focused on ramping up the effectiveness and efficiency of every aspect of our operating system, from procurement to manufacturing to selling and distribution. For the full year 2013, we expect to deliver approximately $900 million in productivity savings as part of our three-year, $3 billion productivity program, which will fund future growth investments and further enhance our operating margins. And, we've already begun to identify the next tranche of productivity savings to extend beyond our current program.
"We are squarely on track to deliver on our financial commitments for 2013, and remain committed to acting with urgency and intensity to create long-term value for our shareholders."
Organic revenue grew 4.4 percent and reported net revenue grew 1 percent. Organic revenue growth was driven by balanced volume growth and effective net pricing. Structural changes, primarily refranchising in China, negatively impacted reported net revenue performance by 3 percentage points and foreign exchange translation had a 0.5-percentage-point unfavorable impact in the quarter.
Core constant currency operating profit increased 9 percent reflecting solid revenue growth and productivity gains, partially offset by increased advertising and marketing expense. Reported operating profit declined 4 percent and included the impact from the devaluation of net monetary assets in Venezuela, net impact of mark-to-market adjustments on commodity hedges, and certain restructuring and integration costs.
The company's core effective tax rate was 24.5 percent, below the prior year quarter primarily due to income mix shift and the reversal of international tax reserves, partially offset by the lapping of a 2012 tax benefit related to prepayment of Medicare subsidy liabilities. The company's reported effective tax rate was 26.3 percent and included the impact related to the Venezuela devaluation, restructuring and integration costs and hedging losses.
Core EPS was $0.77 and reported EPS was $0.69. Core EPS excludes a $0.07 per share impact from the devaluation of net monetary assets in Venezuela, a net impact of $0.01 per share related to mark-to-market adjustments on commodity hedges, and a $0.01 impact from restructuring and integration charges. Mark-to-market gains and losses on commodity hedges are subsequently reflected in core division results when the divisions recognize the cost of the underlying commodity in net income.
