Business

PepsiCo’s U.S. sales decline as consumers respond to price hikes

By Jake Beardslee · February 12, 2024

PepsiCo executives told investors on Friday that the company is seeing a slowdown in both food and beverage sales in the United States during the fourth quarter. “Part of that is a slowdown due to pricing and disposable income situation,” said CEO Ramon Laguarta on the earnings call, according to Business Insider.

PepsiCo, known for brands like Mountain Dew, Lay’s, Cheetos and Gatorade, has raised prices in recent years to offset rising ingredient and supply chain costs. However, Laguarta acknowledged that these price hikes may be negatively impacting sales. Fourth quarter global revenues dipped 0.5% to $27.85 billion, with North American sales falling roughly 3.5% to $16.28 billion.

Sales declines were seen across PepsiCo’s three main North American divisions - Frito-Lay experienced a 3% decrease, PepsiCo Beverages dropped 2.4%, and Quaker Foods tumbled 15.7%. Laguarta noted the company was lowering guidance for 2023 as it expects the trend to continue into the new year.

However, Laguarta remains optimistic about 2024, pointing to factors like expected wage growth outpacing inflation. He also hopes interest rate cuts this summer will boost consumer spending. While sales have shifted from in-home to away-from-home locations, Laguarta said portion sizes are often smaller for on-the-go purchases.

To stay competitive, PepsiCo is optimizing its portfolio by discontinuing some slower-selling brands. It recently removed certain bottled waters and multi-serve bottles, and halted Mountain Dew Energy sales. The CEO noted Pepsi Zero and Baja Blast flavors of Mountain Dew are performing well. A new drink called Starry is also finding success among younger consumers.

Net revenues climbed 18% in Latin America but dipped slightly in other regions. It remains to be seen if PepsiCo’s strategies can help reignite growth in the crucial US market amid an inflation-weary consumer climate.