Food and Beverage Business

PepsiCo reports a “slowdown” in the US with declining volumes in the fourth quarter

PepsiCo reports a "slowdown" in the US with declining volumes in the fourth quarter PepsiCo Food and Beverage Business

PepsiCo CEO Ramon Laguarta has emphasized a “slowdown” in its US operations after experiencing volume declines in its convenient foods business. This comes as part of an overall slowdown in demand in the North American market for both food and beverages. According to Laguarta, this is due to a combination of pricing and disposable income dynamics, as well as a shift from in-home to away-from-home consumption.

As a result of these challenges, PepsiCo has revised down its full-year 2024 guidance for organic revenue growth and core constant currency earnings per share growth. The company now forecasts organic revenue growth of at least 4% and core constant currency earnings per share growth of at least 8%, a reduction from the previous forecast.

Laguarta remains optimistic about the consumer outlook for 2024, citing low unemployment rates and expected wage increases. Despite the current challenges, he expects a rebound later in the year.

The recent volume declines have been attributed to recent price increases from PepsiCo, which affected demand. These price hikes led to action from major retailers, such as Carrefour, which pulled PepsiCo brands from its shelves across various European markets.

In its North American Quaker Foods division, which includes brands like Doritos and Cheetos, PepsiCo reported an 8% volume decline in the fourth quarter, driven in part by a recall after a “food safety incident”. On the other hand, its Frito-Lay North America division experienced a 2% volume drop, although Laguarta anticipates a return to profitable volume growth in 2024.

Despite the challenges in the North American market, PepsiCo’s international business posted a 12% organic revenue growth in 2023. Laguarta sees this international segment as a significant opportunity for the company and expects it to grow faster than the US business in 2024.

In its full fiscal 2023, PepsiCo reported net sales of $91.5bn, showing a 9.5% organic growth year-on-year. While total revenue for the fourth quarter decreased marginally, operating profits increased significantly from the previous year.

PepsiCo continues to navigate challenges in the food and beverage industry and sees significant potential in the international market despite the current slowdown in the US business. As the company adapts to changing consumer trends and economic dynamics, it aims to leverage its global presence for sustained growth.

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