Key points:

  • PepsiCo’s quarterly revenue came in below expectations, rising 0.8% to $22.50 billion.
  • Organic growth is expected to be around 4% in 2024, down from previous forecasts of at least 4%.
  • PepsiCo shares fell 3.4% to $158.03, a nine-month low.

PepsiCo reported second-quarter results Thursday that missed revenue forecasts. The company’s sales have slowed due to pricing pressure and increased competition from private labels in the snacks and soda segment, especially in the key U.S. market.

Company measures

Analysts say food prices, while showing signs of stabilizing after a period of rapid growth, still remain above pre-pandemic levels. This limits the ability of companies such as PepsiCo to further raise prices in the face of declining sales.

PepsiCo in the second quarter ended June 15, as in the first, increased average product prices by 5%. However, total organic sales declined 3% during the period.

The company has reported weak year-to-date sales across many food categories, including snacks, as consumers become smarter about spending.

In response to these trends, PepsiCo is expanding the flavor offerings of its flagship brands, such as Lay’s, Doritos and Cheetos, and offering products at different price points to meet the needs of different consumer groups.

PepsiCo shares fall after lowering revenue and sales forecasts

PepsiCo shares fell 3.4% to $158.03, a nine-month low, after the company said it cut its 2024 guidance. Organic revenue growth in fiscal 2024 is expected to be around 4%, below previous forecasts of at least 4%.

Sales at Frito-Lay North America, the second-largest unit, fell 4% and sales at North America’s largest beverage unit fell 3.5%.

Despite the decline in sales, PepsiCo posted earnings growth in its quarterly report. Adjusted earnings per share were $2.28, beating LSEG’s forecast of $2.16. This was made possible by lower production and other costs after the peak of the pandemic, as well as rising prices. The company’s revenue for the quarter rose 0.8% to $22.50 billion, slightly missing analysts’ estimates of $22.57 billion.

“PepsiCo must step up efforts to maintain growth,” said AJ Bell investment analyst Dan Coatsworth. “The company will need to use different levers depending on the products to remain competitive.”