PepsiCo reduces sales forecast as consumers cut back on soda spending
By Oluwaseyi Lawal
PepsiCo has revised its annual sales growth projection on Tuesday, lowering expectations as cost-conscious consumers in North America reduce spending on sodas and salty snacks, favoring more affordable private-label alternatives.
The company, which owns brands like Mountain Dew, 7up, and Lays, now anticipates organic sales to increase at a low single-digit rate for fiscal year 2024, down from its earlier prediction of a 4% rise.
Commenting on this, the CEO Ramon Laguarta said, “The cumulative impacts of inflationary pressures and higher borrowing costs over the last few years have continued to impact consumer budgets and spending patterns.”
According to a report by Reuters, Increased prices for food and other goods have led consumers to cut back on spending, choose smaller packages and portions, and reduce their visits to convenience stores, which are usually a significant source of PepsiCo’s beverage sales.
Additionally, PepsiCo reported an unexpected decline in third-quarter revenue, partly due to a 13% drop in sales at Quaker Foods, still struggling with the effects of product recalls earlier this year.
Despite the challenges, PepsiCo managed to bolster its profits through price hikes, cost management, and efficiency-boosting measures across its operations, allowing the company to maintain its full-year adjusted profit forecast.
CEO Laguarta mentioned that heightened geopolitical tensions, including conflicts in the Middle East, along with macroeconomic pressures, are anticipated to continue in certain international markets.
In the quarter ending September 7, net revenue decreased by 0.6% to $23.32 billion, falling short of the projected $23.76 billion. However, the company posted adjusted earnings of $2.31 per share, exceeding the forecast of $2.29 per share, based on data from LSEG. The company’s shares remained steady in early trading.
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