PepsiCo is wrestling with a soda slump at home as it works to revive its snack momentum. Chief Executive Ramon Laguarta told analysts, "We don't feel good about the beverage business." He added, "We're putting all of the urgency of the business and the focus in improving our performance in soft drinks."
Management now expects a key earnings metric to grow between 1% and 2% in the current fiscal year, trimming its previous 4% to 6% outlook. International sales are still growing, but the company is aiming to rebound in North America, where third-quarter organic revenue slipped a bit across food and beverages.
Year to date, North American beverage volumes have fallen 3%, and the mix shows zero-sugar and flavored varieties outperforming full-sugar drinks. Earlier in 2024, PepsiCo reduced prices on select big-name snacks to spur demand. Laguarta said those cuts "helped reverse a decline in sales growth and push the business into slightly positive territory," though "less volume growth than what we had initially anticipated" showed how much financial strain consumers are under.
With inflation still biting, PepsiCo said it will raise some prices in the months ahead. Laguarta noted those earlier cuts give the company "flexibility in what we do to absorb this new wave of inflation," and even after increases, prices next year are expected to remain below 2025 levels.
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PepsiCo, which owns Smartfood popcorn and Poppi soft drinks, plans to lean in on brands including Poppi, Pepsi and Mountain Dew. The company also intends to keep rolling out more options with protein and fiber, simpler ingredient lists, and products using different oils such as avocado oil.
Snacks have their own challenges. Earlier this year, the price of PepsiCo's chips drew heat after the company lost grocery shelf space because they had become too pricey, with some bags topping $7. Chief Financial Officer Steve Schmitt said cutting prices afterward squeezed margins.
PepsiCo is also testing a combined snacks-and-beverages setup, which Laguarta called valuable. He said the integrated model will fit some parts of the country, while in other areas the company will look at refranchising its bottling.
At 11:08 a.m. in New York, the stock was up 1.2%. Even so, shares are down 14% for the year through Wednesday's close, while the S&P 500 Index is up 14% over the same span. In a Thursday morning note, RBC Capital Markets analyst Nik Modi said, "While there have been some signs of progress, rate of improvement has stalled given the inflationary pressures," adding results were "marginally better than feared."
For your wallet, the story here is pricing and demand. Soda volumes in North America are sagging, snacks are getting price resets, and PepsiCo is pushing more "better-for-you" products while investing behind core labels. If you follow consumer staples, watch how those price increases land in the coming months and whether the brand investments lift volumes without denting margins too much.
Snacks holding up while soda slips is a useful signal. Join Market Briefs free and read the data.
