USA- Ramon Laguarta, PepsiCo’s CEO, has announced plans to reduce prices for some of its snack offerings as consumers become more value-conscious amid pricing and inflation challenges.
The CEO acknowledged inflation and higher borrowing costs have significantly put financial pressure on households in the US. Laguarta also acknowledged this financial pressure has caused consumers to become more conscious about the value they receive from purchases, especially in the food sector.
The CEO revealed the prices of some of its snacks offerings like tortilla chips and unsalted potato chips will need to be revised downwards to make them more attractive to the dwindling customer base. The lower-performing snacks offerings will also require enhanced marketing.
However, higher-performing snack offerings like PopCorners and SunChips are unlikely to experience price reductions or enhanced marketing.
The CEO said, “There is some value to be given back to consumers after three or four years of a lot of inflation. Some parts of the portfolio need value adjustments. I don’t think the overall portfolio… needs a reset.”
The inflation pressures have caused a decline in disposable spending, negatively affecting demand in the food and beverage sector. Sales volumes have declined across the food sector. In Q1 2024, PepsiCo reported a 4% decline in North America sales.
Retail and snacking players like Aldi, Kroger and target have reduced prices of some of its product offerings to attract consumers as a response to the dwindling demand in the food and beverage sector.
However, despite recent improvements in inflation data, snacks and groceries are still 25% more expensive compared to 2021.
The planned pricing restructuring was revealed after PepsiCo announced it had missed Q2 2024 revenue estimates. The company reported revenues of US$22.5 billion for the reported quarter, which was lower than the US$22.57 projection.
The company’s snacking wing experienced a 4% decline in sales volume for the reported quarter, indicating a need for an appropriate response strategy. The planned pricing strategy is only part of the company’s overall response strategy.
Dan Coatsworth, an investment analyst with AJ Bell, said, “It’s not a business to sit on its hands, and there is a clear focus on profitable growth, so PepsiCo is going to have to pull various levers depending on products to try and stay on top.”
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