PepsiCo raises annual revenue forecast, warns of potential price hikes as supply disruptions persist

USA – American multinational snack and beverage company PepsiCo Inc has raised its full-year revenue as lifting of pandemic-induced restrictions boosted demand for its sodas and snacks. 

During the release of its Q3 results the company said it was expecting fiscal 2021 organic revenue to rise about 8%, compared with its prior forecast of a 6% increase. 

PepsiCo’s net revenue rose 11.6% to US$20.19 billion in the quarter ended Sept. 4, above analysts’ estimates of US$19.39 billion, according to IBES data from Refinitiv. 
 
The company said revenue from its North America Beverage unit, its largest business, rose 7% in the third quarter on a double-digit increase in net revenue from food-service joints and strong demand for its Mountain Dew soft drink. 
 
Frito-Lay North America business also saw revenues rise by about 6% in the quarter, signaling that pandemic driven demand for salty and savory snacks was still holding strong even as people start spending less time at home. 

However, PepsiCo’s net attributable income fell about 3% to US$2.22 billion, due in part to higher distribution costs as it grappled with rising raw material prices and global supply chains disruptions. 

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 Additional price hikes on the horizon

The maker of Pepsi soda and Lays potato chips said it would likely raise prices again early next year, as it looks to overcome ever-increasing supply-chain challenges. 

PepsiCo has already raised prices of its sodas and snacks in recent weeks, echoing the strategy of broader packaged foods industry as rising raw material prices pinch profit margins. 

The company however notes that everything from a shortage of Gatorade bottles to a lack of truck drivers is driving costs up even further, necessitating a price review.

“I do expect there will probably be some price increases in the first quarter of next year as well, as we fully absorb and lock down the impact of commodity inflation,” Chief Financial Officer Hugh Johnston said, adding that he expects most supply-chain disruptions to moderate by the end of 2021. 
 
PepsiCo’s UK business has also been hit by a shortage of truck drivers in post-Brexit Britain due to immigration rules and a loss of about a year of driver testing and training. 
 
Despite experiencing supply chain troubles, Johnston says he does not expect a shortage of PepsiCo products in supermarkets, saying the company should be in better shape by the end of the fourth quarter. 

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