PepsiCo indicates decline in demand due to price hikes

PepsiCo sales dip: PepsiCo reported an unexpected decrease in quarterly sales and projected a slowdown in organic revenue growth for 2024, indicating that recent price increases may be impacting demand for its beverages and Lay's crisps.

Before the market opened on Friday, the company's shares were down approximately 2 per cent.

For nearly two years, PepsiCo managed to maintain its margins by passing on higher production costs to customers. However, it is now facing diminishing demand even for products typically considered "affordable luxuries," such as sodas and snacks.

In January, Europe's largest food retailer, Carrefour, announced it would not stock PepsiCo's brands due to what it termed "unacceptable price increases."

PepsiCo's fourth-quarter revenue declined by 0.5 per cent to $27.85 billion, marking the first drop in 14 quarters. Analysts had anticipated a 1.4 per cent increase to $28.40 billion.

According to YipitData, the number of units sold by PepsiCo's beverage business in the US fell by 8 per cent in November and was down 7 per cent in both October and December.

While average prices surged by 9 per cent in the quarter ending Dec. 30, organic volume declined by 4 per cent.

Wedbush analyst Gerald Pascarelli noted concerns about the company's volume performance, suggesting it may continue to face challenges in the near term.

PepsiCo forecasted annual organic revenue growth of at least 4 per cent, compared to the 9.5 per cent growth reported for fiscal 2023.

CEO Ramon Laguarta commented on the normalisation of category growth rates and the expected moderation of net revenue realisation as inflationary pressures subside.

Despite the sales decline, PepsiCo exceeded fourth-quarter profit expectations and projected annual core profit slightly above estimates, anticipating relief from input and freight costs.

The company expects fiscal 2024 core earnings per share of $8.15, compared to expectations of $8.14, and announced a 7 per cent increase in its annual dividend.

Excluding items, PepsiCo earned $1.78 per share, surpassing estimates of $1.72.

(With Reuters inputs)