PepsiCo plans for job cuts in North America Unit ahead of anticipated recession

US – PepsiCo, the maker of Pepsi soda, has joined the growing list of American companies reducing headcount ahead of an anticipated recession, according to The Wall Street Journal.

The layoffs will affect employees of its food and beverage businesses in Chicago; Plano, Texas, and its headquarters in Purchase, New York, the Journal reported, citing people familiar with the matter and a company memo.

The layoffs at PepsiCo may mark a shift in the U.S. economic outlook after a year in which the Federal Reserve has aggressively raised interest rates.

Those rate hikes are expected to crimp consumption, but so far, the jobs market has stayed strong and most of the layoffs have been in the technology and media sectors.

The company’s beverage unit is expected to be hit harder by the cuts because the snacks unit already shrank its workforce through a voluntary retirement program.

Pepsi employed 309,000 people worldwide as of Dec. 25, with more than 40% of those jobs located in the United States, according to a company regulatory filing.

During the recent third-quarter financial results, the group raised its full-year revenue guidance after reporting a 9% net revenue growth on the back of a price increase boost.

However, some of its business units, including Frito-Lay North America, reported shrinking volume, a sign that consumers were cutting back on their snacking to better manage their budgets.

In the quarterly earnings call, chief executive Ramon Laguarta said that the company’s brands were “being stretched to higher price points” and that consumers were following.

While inflation can sometimes bring in more money for companies, even as production costs increase, Essaye noted that higher prices will eventually constrict demand.

Last month, Coca-Cola said it would offer voluntary buyouts to some workers in its North America unit, a tactic most companies use to reduce their workforces. The company currently employs about 6,000 people in North America.

In December 2020, the beverage giant also cut 2,200 jobs globally through buyouts and layoffs as part of a restructuring plan. In the U.S., the beverage giant reduced its workforce by 1,200, or 12%.

For now, a lot of firms are making small moves on labor as they wait to see how 2023 will shape up, retail analyst Neil Saunders said in his statement. He believes if things deteriorate, then the pace of layoffs could become more substantial.

This layoff, rather than inflation, according to Saunders, could become the major economic problem in 2023.

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