Pepsi: ‘Value-Conscious’ Consumers Cut Back on Snacks

PepsiCo

PepsiCo’s snack food revenues dipped during its latest quarter as consumers continued to exercise caution.

The food and beverage giant released second-quarter earnings results Thursday (July 11) showing revenue growth of 1.9%, down from 13% the same quarter last year.

In commentary released before the company’s earnings call, CEO Ramon Laguarta said PepsiCo’s Quaker Foods business in North America was “significantly impacted” during the quarter by product recalls.

Frito-Lay North America saw a slight decline in organic revenue, he noted, adding that the business has performed well overall in recent years, following “significant” brand, capacity, go-to-market and supply chain investments.

“However, the impacts of persistent inflationary pressures and higher borrowing costs over the last few years have resulted in tighter household financial conditions,” Laguarta said in the commentary. “Accordingly, the year-to-date performance across many food categories, including snacks, has been subdued, and consumers have become more value-conscious with their spending patterns and preferences across brands, packages and channels.”

Consumers are struggling with high prices across nearly every grocery aisle, according to the PYMNTS Intelligence report “The Online Features Driving Consumers to Shop With Brands, Retailers or Marketplaces.”

Among consumers who bought groceries in the previous month, 23% said facing higher prices than other merchants was the main issue or challenge faced in the process.

“This share is greater than those who said the same in any other industry and greater than those who said the same of any other difficulty purchasing groceries,” PYMNTS wrote last week.

There could be some relief for shoppers, as food and packaged goods brands and retailers are offering more discounts after years of price increases.

Data from NielsenIQ showed that 28.6% of products were sold with promotions. That’s compared to 25.1% three years ago, as the power of manufacturers and retailers to raise prices has been somewhat depleted.

“Consumers are voting with their wallet,” said Carman Allison, a vice president at NielsenIQ. “If your price goes up too aggressively, a lot of times consumers will switch brands. They will switch stores.”

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