PepsiCo has lowered its sales forecast for the year due to a decline in consumer spending on its snacks and drinks in the U.S., China, and other markets. The company now expects its organic revenue to increase in the low single-digit range for the year, down from the previously expected 4%. This is attributed to weak demand for Frito-Lay snacks and drinks, as well as a big recall of Quaker Oats granola bars and cereals. Consumers have also been pushing back on higher prices, which has affected the company’s performance in the third quarter.
PepsiCo Chairman and CEO Ramon Laguarta mentioned that the company made efforts to make its Lay’s brand more affordable in the third quarter, such as adding product promotions, more chips per bag, and value packs. These efforts have led to Lay’s gaining market share, and now the company plans to expand these strategies to its Doritos and Tostitos brands. Frito-Lay prices increased by just 0.5% in the quarter, and despite a 1.5% decrease in sales volumes, Laguarta remains optimistic about the long-term prospects for PepsiCo’s brands.
While North American beverage sales volumes fell 3% in the quarter, PepsiCo is still experiencing strong growth in markets like India and Brazil. Laguarta acknowledged that consumer spending is slowing in China, Mexico, and some parts of Europe, leading to a 3% rise in prices globally and a 2% decline in sales volumes. The company remains positive about its brands, especially those that cater to health-conscious shoppers. PepsiCo recently acquired Siete Foods, a Mexican-American brand specializing in tortillas, salsas, sauces, and snacks, to enhance its health-minded portfolio.
The third-quarter revenue for PepsiCo was flat at $23.3 billion, missing Wall Street’s expectation of $23.8 billion. Net income fell by 5% to $2.9 billion, or $2.13 per share. However, after adjusting for one-time items, PepsiCo earned $2.31 per share, exceeding analysts’ expectations of $2.29 per share. The company’s revenue growth, which had been growing by double-digits in recent years, has slowed down in the last few quarters. Despite the challenges, PepsiCo’s shares remained flat in early trading on Tuesday.
PepsiCo’s CEO still believes in the long-term potential of the company’s brands, emphasizing that younger consumers tend to indulge in snacks and mini-meals throughout the day. The company also noted the appeal of its brands to health-conscious shoppers, such as Smartfood popcorn and PopCorners. While facing challenges in certain markets, PepsiCo is confident in its ability to navigate the changing consumer behaviors and maintain a strong position in the industry. Overall, the company remains focused on innovation and strategic acquisitions to drive growth and adapt to evolving consumer trends.
In response to the evolving market dynamics, PepsiCo is continuously making adjustments to its product offerings and pricing strategies. The company’s efforts to make its products more affordable and appealing to consumers have shown promising results, with Lay’s gaining market share in the third quarter. By expanding these strategies to other brands and investing in health-conscious options, PepsiCo aims to capture a broader customer base and sustain its growth in the long run. Despite the challenges faced in the current market environment, PepsiCo remains determined to overcome obstacles and position itself for future success.
