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PepsiCo’s rising prices continue to boost sales but hurt volumes for the CPG giant—and it says more price hikes are coming.
Net revenue grew 6.7% in the third quarter, supported by an 11% increase in prices, leading the company to boost its full-year outlook for the third consecutive quarter. As prices rose, consumers pulled back: Total volume dipped 2.5% globally. PepsiCo Beverages North America took a particularly hard hit with a 6% volume drop, despite 6% growth in organic revenue.
- Chairman and CEO Ramon Laguarta said the company cut promotions for its bottled water business in North America to improve its margin, which had a negative impact on volume.
Consumers are “being more selective,” vice chairman and CFO Hugh Johnston said, both about the products they’re buying and where they’re buying them, and Laguarta noted the company has been reducing packaging sizes to make products more affordable. Despite these changes, channels that are typically stressed during economic downswings, like the convenience stores and food service, have continued to grow, according to Johnston.
“We expect the consumer to continue to be cautious,” he said. “And to the degree that they are worse than that, we’ve got cost plans in place that we would use to mitigate whatever challenges we face.”
When analysts inquired about commodities costs contributing to the rising prices, Johnston declined to share specifics. He confirmed to Reuters that the company has “some modest level of price increases” still to come next year.
+1: Laguarta also shut down predictions that a rise in appetite-suppressing medications like Ozempic could affect food sales, particularly for brands that market high-fat, salty, and sweet foods, saying “the impact is negligible in our business.”