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As consumers become more “value conscious,” PepsiCo plans to lower the prices of some of its snacks.
The food and beverage giant, which oversees Fritos, Doritos and the eponymous cola, said in prepared remarks for its second-quarter earnings call that persistent inflation and high borrowing costs are putting financial pressure on American households. PepsiCo said this has led to consumers becoming “more value-conscious in their spending patterns and preferences across brands, packages and channels.”
Ramon LaGuarda, Pepsico's The CEO told analysts that the prices of certain products, such as unsalted products, were: Potato chips and tortilla chips will likely need to be adjusted to make them more appealing to consumers. Some products will have to be marketed at a higher level. At the same time, other Acceptable suggestions, e.g.: Sun chips Sales of brands like Popcorner are on the rise, and consumers who buy these brands aren't concerned about value.
“After three or four years of massive inflation, it’s worth giving it back to the consumer.” Laguarta said, “S“Some parts of the portfolio need a value adjustment. I don’t think the entire portfolio needs a… reset.”
As cash-strapped consumers look for ways to save money, many have cut back on spending. That has spilled over to food and beverage companies, with volumes down across almost every sector. PepsiCo said its Frito-Lay North America organic volumes were down 4 percent in the most recent quarter.
Several retailers, including Target, Kroger and Aldi, have slashed prices to attract shoppers into stores and increase their willingness to buy products.
According to Fortune, despite recent improvements in government inflation data, groceries are still 25% more expensive since 2021.
“For certain consumers, new entry point price points and perhaps new types of promotional mechanisms are needed.” LaGuarda said.
TD Cowen analyst Robert Moskow noted that PepsiCo management has reiterated: The basics of salty snacks remain the same, and the current challenges are seen as a result of “temporary perceptions of value and difficult comparisons with previous years.” Still, Moscow said The sector is likely to remain under pressure in the coming months.
“We see the volume slowdown in broad snacking continuing into 2025 as consumers scale back on discretionary categories and continue to return to office-based work patterns,” he said in a research note. “As a result, we forecast (low-single-digit) growth for FLNA in the second half of 2024 and 2025.”
