PepsiCo projected its annual profits to fall short of expectations and has reported quarterly revenues that did not meet the expectations on Tuesday. This happened because the maker of Doritos grapples with declining demand for its sodas and snacks like Lay’s in the United States, its largest market.
In the premarket trading, shares of PepsiCo dropped by 2%. American consumers are tightening their belts, cutting back on spending on soft drinks and salty snacks to focus on essential purchases.
This shift has compelled PepsiCo to resort to promotions to drive volume growth after experiencing several quarters of slowdown because of price increases.
The company aims to entice consumers back by offering multi-packs and mini canisters. It caters to those who prefer smaller sizes or are opting for more affordable alternatives found in retail stores.
PepsiCo has also committed to significant investments that are aimed at revamping its current product lineup and launching new offerings. It includes ethnic-inspired flavors through its Sabritas, Natu Chip, and Marias brands to stimulate demand.
Executives have stated in the prepared remarks of the company, “We anticipate a gradual improvement in our North American performance as the year unfolds and our commercial strategies take effect.”
In the fourth quarter, PepsiCo’s North American beverages and Frito-Lay North America, its two largest segments, experienced a 3% decline in volume. The overall organic volume for the company decreased by 1% for the quarter ending December 28. Whereas the average prices increased by 3%.
Nik Modi, an analyst at RBC Capital Markets remarked, “The Frito-Lay segment is still trying to regain its footing as high prices impact snacking trends… the beverage sector continues to lose market share, and we believe PepsiCo is nearing its breaking point.”
PepsiCo expects a low-single-digit increase in the core earnings per share for fiscal 2025. It is in contrast with the predictions of the analysts based on data from LSEG.
Business Journalist
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