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PepsiCo has revised its organic revenue growth expectations for the year following a continued decline in consumer purchases of its snacks and beverages in the US.
The food and beverage giant, headquartered in Purchase, New York, now forecasts a modest increase in organic revenue, with growth in the low single-digit range—down from its previous forecast of 4%.
In a statement released Tuesday, PepsiCo attributed the weaker performance to multiple factors, including a significant recall of Quaker Oats granola bars and cereals, as well as lower demand for its Frito-Lay snacks and drinks.
Specifically, Frito-Lay North America saw a 1.5% dip in sales volume, while North American beverage sales dropped by 3%.
US consumers resist price hikes, hurting PepsiCo’s sales
After years of gradually increasing prices, US consumers began resisting higher costs over the summer, causing a notable slowdown in PepsiCo’s North American market.
The company responded by announcing plans to reduce prices on select products, such as potato chips and tortilla chips, in an effort to regain consumer interest.
Frito-Lay’s prices rose just 0.5% in the third quarter, a stark contrast to previous price hikes.
Globally, however, PepsiCo maintained its pricing strategy, raising prices by 3% outside the US, though sales volumes were down across most regions except for Europe, which showed a positive performance.
PepsiCo faces revenue stagnation and profit decline
Despite PepsiCo’s efforts, third-quarter revenue remained flat at $23.3 billion, falling short of Wall Street’s expectation of $23.8 billion, according to FactSet.
This flat performance is a departure from the company’s double-digit growth seen in recent years, as quarterly revenue growth has significantly decelerated in the last few quarters.
PepsiCo’s net income also took a hit, declining by 5% to $2.9 billion, or $2.13 per share.
However, adjusted for one-time expenses, the company’s earnings per share stood at $2.31, slightly surpassing analysts’ estimates of $2.29 per share.
As a result of the weakened performance, PepsiCo’s stock saw a 1% drop in premarket trading, reflecting the broader concerns over slowing consumer demand and price sensitivity in key markets.
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