PepsiCo Bets On Price Hikes To Raise Annual Profit Forecast Again

By Reuters
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PepsiCo Bets On Price Hikes To Raise Annual Profit Forecast Again

PepsiCo raised its annual profit forecast for a third time this year, as the company banks on the multiple price increases it undertook across its major markets and resilient demand for its snacks and beverages.

PepsiCo and rival Coca-Cola have been largely shielded from the effects of price hikes due to their near-domination of the global carbonated drinks market, as well as cost-conscious consumers spending on products categorised as 'affordable luxuries'.

Shares of the company, which owns brands including Mirinda, and Gatorade, rose over 2% in premarket trading after it beat third-quarter profit estimates.


Price Increase

The company's average prices jumped 11% in the third quarter ended 9 September, while organic volume slipped 2.5%. That compared with an average price increase of 16% in the first quarter of 2023.

Net revenue rose nearly 7% to $23.45 billion in the quarter, edging past estimates of $23.39 billion, according to LSEG data.

On an adjusted basis, PepsiCo earned $2.25 per share, topping estimates of $2.15.

Investors have been concerned about multiple prices undertaken to offset higher costs resulting from pandemic-related supply-chain snags and the Russia-Ukraine war denting demand.


Meanwhile, countries like France are also piling pressure on major consumer goods makers such as PepsiCo and Procter & Gamble to bring down product prices.

Quarterly Highlights

Organic revenue at PepsiCo's North America beverage unit, the company's largest business, rose 6% in the third quarter, but volumes fell 6%.

PepsiCo has also benefited from its large snacks business that sells everything from Doritos to Cheetos. The Frito-Lay North America unit reported a 7% jump in organic revenue increase while volumes fell marginally.

The company expects fiscal 2023 core earnings per share of $7.54 compared with its prior forecast of $7.47, while maintaining its annual organic revenue growth at 10%.


Chair and CEO Ramon Laguarta added, “We believe that our businesses can continue to perform well in the coming years with category growth normalising, as we have made numerous investments in our brands, manufacturing capacity, go-to-market systems, supply chain, technology, and people, to execute against our strategic framework and modernise our company.

“Therefore, we expect our full-year 2024 organic revenue and core constant currency EPS growth to be towards the upper end of our long-term targets as we advance towards our vision to become the global leader in beverages and convenient foods by winning with pep+.”

News by Reuters, additional reporting by ESM.

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