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PepsiCo's Sales Jump After It Cuts Prices
Revenue Rises 8.5% to $19.44 Billion
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PepsiCo's decision to lower prices and cut artificial ingredients paid off in the first quarter, boosting demand for its snacks and drinks.
Revenue jumped 8.5% to $19.44 billion in the January-March period compared to the same period a year ago, the Purchase, N.Y., company said April 16. That handily beat Wall Street’s forecast of $18.95 billion, according to analysts polled by FactSet.
“The consumer is coming back multiple times to our brands, responding to our holistic value plus execution, plus advertising, plus innovation strategy,” PepsiCo CEO Ramon Laguarta said April 16 during a conference call with investors.
PepsiCo leaned heavily into price increases to combat inflation in the aftermath of the COVID pandemic. The companyhiked pricesby double-digit percentages for eight straight quarters in 2022 and 2023 before settling into more moderate price increases.
That took a toll on sales. Consumers stopped buying Frito-Lay snacks or shifted to cheaper store brands. PepsiCo's market value has fallen by more than $40 billion from 2023.
PepsiCo began cutting prices on value brands like Chester's and Santitaslast springto win back exasperated customers. Then, last September, activist investorElliott Investment Managementtook a $4 billion stake in the company and began pressing for further price cuts and other changes. PepsiCoagreed to accelerateits price cuts late last year.
READ MORE:Doritos Hit $7 a Bag, and It Cost PepsiCo Billions
In February, ahead of the Super Bowl, PepsiCo slashed U.S. prices on Lay’s, Doritos, Cheetos and Tostitos chips by up to 15%. At a Michigan Walmart on April 16, a 9.25-ounce bag of Doritos was advertising a price rollback to $3.97, down from $4.48.
PepsiCo said new products like Cheetos NKD and Doritos NKD, which have no artificial ingredients, and snacks with trendy ingredients, like Smartfood FiberPop and Doritos Protein, are also attracting shoppers, both in the U.S. and internationally.
On the beverage side, PepsiCo is seeing new customers thanks to its recentacquisition of Poppi, a gut health soda, and a new lower-sugar version of Gatorade that has no artificial ingredients. On April 16, PepsiCo announced that it willshift Gatorade's packagingand marketing to focus more on hydration for general consumers and less on athletes.
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“So two types of consumers are coming into the category, because both of a stronger core and also innovation,” Laguarta said. “And I think we’re going to continue to play both levers.”
Net income rose 27% to $2.33 billion for the quarter. Adjusted for one-time items, the company earned $1.61 per share. That also beat Wall Street’s forecast of $1.54 per share.
PepsiCo shares rose 2% in morning trading.
PepsiCo ranks No. 2 on theTransport Topics Top 100 list of the largest private carriersin North America.
