USA – PepsiCo has revised its sales growth forecast for fiscal 2024, citing weaker consumer spending in North America, as inflationary pressures and higher borrowing costs have driven shoppers to opt for cheaper, private-label brands over its popular sodas and snacks.
The company now expects its organic sales to grow in the low single-digit range, down from its previously anticipated 4 percent rise.
PepsiCo’s CEO, Ramon Laguarta, highlighted the challenges posed by economic conditions, stating, “The cumulative impacts of inflationary pressures and higher borrowing costs over the last few years have continued to impact consumer budgets and spending patterns.”
Rising prices for food and other essentials have prompted North American consumers to cut back on convenience store purchases—where PepsiCo typically sees higher beverage sales—and to gravitate toward smaller packages and portions.
In the third quarter of 2024, which ended on September 7, PepsiCo experienced a revenue drop, partially driven by a 13 percent decline in sales from its Quaker Foods division.
The Quaker Foods segment is still recovering from product recalls earlier this year, which significantly impacted its performance.
Despite these setbacks, PepsiCo managed to sustain its full-year profit target, supported by price hikes, stringent cost controls, and efficiency measures implemented across its operations.
“Our businesses remained resilient in the third quarter, despite subdued category performance trends in North America, the continued impacts related to certain recalls at Quaker Foods North America, and business disruptions due to rising geopolitical tensions in certain international markets,” added Laguarta.
Strong cost control measures helped the company boost profitability, even as global challenges persisted.
For the third quarter, PepsiCo posted a 0.6 percent decline in net revenue, falling to US$23.32 billion from US$23.45 billion in the same period the previous year.
Gross profit also saw a decrease, dropping by 2.7 percent to US$10.4 billion from US$10.68 billion.
PepsiCo’s international markets, including Latin America, South Asia, and Europe, which had previously helped offset the weakness in its North American business, are now seeing a slowdown in volumes due to geopolitical and macroeconomic pressures.
Despite these challenges, the company recorded double-digit revenue growth in India, driven by its growing strength in Southeast Asia and India’s markets.
However, in the Africa, Middle East, and South Asia (AMESA) division, PepsiCo’s net revenue fell by 4 percent to US$1.55 billion, impacted by unfavorable foreign exchange rates and declining organic volume.
Beverage unit volume in the AMESA region declined by 2 percent, with sharp declines in the Middle East and Nigeria contributing to this downturn.
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