PepsiCo Cuts Revenue Forecast Amid Slowing U.S. Demand

PepsiCo, the multinational food and beverage corporation, has revised its organic revenue forecast for the year, citing a decline in U.S. consumer demand for its products. This adjustment comes as the company, founded in 1965 through the merger of Pepsi-Cola and Frito-Lay, faces challenges in its home market.

The Purchase, New York-based company now anticipates a low single-digit increase in organic revenue for the year, a significant reduction from its previous projection of 4% growth. This metric, which accounts for foreign currency fluctuations and the impact of acquisitions or divestments, reflects the company's core performance.

PepsiCo's performance in North America has been notably subdued, affected by multiple factors. A major recall of Quaker Oats products, a brand acquired by PepsiCo in 2001 as part of its strategy to diversify into healthier options, has impacted sales. Additionally, the company has observed weak demand for its Frito-Lay snacks and beverages. Frito-Lay North America, which is the largest globally distributed snack food company, experienced a 1.5% decline in sales volumes, while North American beverage volumes decreased by 3%.

In response to consumer pushback on pricing, PepsiCo has committed to reducing costs for certain products, particularly in its snack category. This decision comes after years of price increases, with consumers beginning to resist higher prices during the summer of 2024. As a result, Frito-Lay prices saw only a modest 0.5% increase in the third quarter.

Globally, PepsiCo implemented a 3% price increase across its portfolio. However, sales volumes declined in all markets except Europe. This trend aligns with the company's recent focus on expanding its presence in the plant-based food and beverage market and adapting to changing consumer preferences for non-carbonated beverages.

The company's third-quarter financial results, reported on October 8, 2024, reflect these challenges. Revenue remained flat at $23.3 billion, falling short of the $23.8 billion anticipated by analysts. This stagnation marks a significant shift from the double-digit revenue growth PepsiCo frequently achieved in recent years. Net income for the quarter decreased by 5% to $2.9 billion, or $2.13 per share. On an adjusted basis, earnings per share reached $2.31, slightly exceeding analyst expectations of $2.29.

In response to these results, PepsiCo's shares experienced a 1% decline in premarket trading. This market reaction comes as the company continues to navigate a complex business environment, balancing its commitment to sustainability goals, including achieving net-zero emissions by 2040, with the need to maintain financial performance.

As PepsiCo addresses these challenges, it continues to leverage its diverse product portfolio, which includes 23 brands generating over $1 billion each in annual retail sales. The company's global presence, spanning more than 200 countries and territories, provides a broad base for potential growth and recovery.