PepsiCo remains committed to its long-term organic growth target, despite a challenging outlook for 2024, focusing on better-for-you options in both snacks and beverages.
Chairman and CEO Ramon Laguarta expressed confidence during discussions with analysts regarding their latest results. He stated he is “very confident” in achieving a 4-6% organic growth rate, even aiming for the upper end of this guidance.
For the new year, a low single-digit growth rate is anticipated, following a modest 2% growth in the 12 months ending December 28. The company reported declines in volumes across its North American snacks and Quaker Foods divisions, with beverages flatlining.
In contrast, international volumes indicated positive trends, contributing significantly to the group’s revenue, which reached $91.8 billion last year.
While Laguarta did not address the potential impacts of U.S. tariffs—initially paused by Trump—he acknowledged external risks affecting the business landscape.
The PepsiCo CEO forecasted a mid-single-digit growth trajectory for core constant currency EPS by 2025 (up from 9% last year) but cautioned, “the world is very volatile.”
Laguarta emphasized, “From a geopolitical perspective, or regarding potential future government decisions, we will invest in the business and maintaining our long-term approach ensures flexibility to respond to unexpected challenges in the upcoming months, particularly in the first half of the year.”
Investment will prioritize “better-for-you” snacks to stimulate growth in the Frito-Lay division, focusing on lightly salted, lower sodium options, fat reduction, and portion control as consumer health consciousness rises.
Furthermore, Laguarta highlighted the growing demand for protein-rich snacks and beverages, noting an urgency to enhance offerings in protein drinks, as well as functional hydration, zero-sugar, and sports nutrition products.
Very little impact so far from GLP-1 drugs
Interestingly, Laguarta suggested that PepsiCo’s commitment to healthier products is not primarily influenced by the increasing availability of GLP-1 weight-loss or obesity treatments.
In response to an analyst’s question, he stated, “We continually evaluate GLP, but currently, due to low adoption rates and fluctuations in patient participation, we observe minimal impact on our business and sector at this stage.”
“Implementing portion control has been a long-standing strategic focus. Additionally, our continuous efforts towards evolving our portfolio with healthier options—such as lower sodium, lower fat, and the inclusion of positive ingredients like plant-based proteins and whole grains—highlight our commitment to strategic growth.”
Salty snacks within the Frito-Lay portfolio received significant attention during yesterday’s analyst call, following a 2.5% decline in sales last year. This downturn, however, was less severe than the 14% drop in Quaker Foods and a 3% decrease in North America beverages.
“After five years of rapid growth and gaining nearly 200 basis points of market share, 2024 has marked a slowdown,” commented the PepsiCo chief during the analyst’s call.
“Our primary focus this year is stabilizing the category, ensuring consumer return to snacks through effective ROI investments. Indicators suggest we’re starting to see this unfold.”
When queried about whether price reductions might aid in reviving snack volumes, the CEO clarified, “I wouldn’t presume we’re moving toward negative pricing; that’s not our strategy.”
He added, “We aim to implement more targeted options for consumers, particularly at price points below $1-2, thus providing choices without detracting from our business or market pricing.”
“We’ll adopt a more strategic pricing approach, a plan we believe will stimulate category growth, especially considering consumers’ evolving disposable income following recent inflation periods.”
Additionally, PepsiCo intends to introduce similar strategies for beverages to enhance revenue growth.
“There’s an opportunity to improve our beverage performance. Our focus this year will be on augmenting top-line growth with enhanced price strategies and targeted innovations addressing zero-sugar and functional hydration,” Laguarta concluded.
