PepsiCo revenue disappoints as inflation-battered customers cut back on snack spending

PepsiCo’s second-quarter profits jumped but its revenue missed Wall Street’s expectations as cash-strapped customers cut back on snack spending amid persistent inflation.

The junk-food conglomerate — which owns brands including Pepsi, Frito-Lay, Quaker and Gatorade — also lowered its fiscal 2024 expectations, predicting organic revenue will reach 4%. While this number technically meets PepsiCo’s initial 4% goal, company executives said it is at the lower end of the range.

“When we’re saying at least 4[%], we were talking more about around 5% in our minds,” CEO Ramon Laguarta told analysts on a call. “Now we’re talking around 4…it’s related specifically to the consumer in the U.S.”

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Shares fell 3% Thursday after the company announced the lukewarm projections.

The company raised average product prices by 5% in the second quarter – falling in line with first quarter price hikes – and overall volumes slipped 3% as the CEO cited the effects of inflation.

“Throughout we are seeing much more price sensitivity and consumers looking for more value across all income groups,” Laguarta told Reuters . “Now that is something that we have to take into consideration.”

The disappointing results represent a larger hit across the soda and snack industry. Though product prices – pushed up due to a long-lasting inflation surge – are starting to come back down, they are still higher than normal, according to analysts.

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In an attempt to sway customers, the soda-snack conglomerate will be adding new flavors to its popular brands, including Lay’s, Doritos and Cheetos. The company is also offering a range of products at different price points.

“We have green shoots with some of the activities we’ve been executing, and July 4 has been very strong for us,” Laguarta said.

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PepsiCo’s largest business – the North America beverages division – saw volumes drop by 3.5%. Its second-largest business – Frito-Lay North America – saw volumes fall 4%.

PepsiCo did surpass earnings per share expectations, hitting an adjusted profit per share of $2.28 – higher than LSEG estimates of $2.16.

While revenue rose – up 0.8% to $22.50 billion – it came short of analysts’ expectations of $22.57 billion.

“It’s not a business to sit on its hands and there is a clear focus on profitable growth, so PepsiCo is going to have to pull various levers depending on products to try and stay on top,” an investment analyst told Reuters.

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