PepsiCo (PEP) missed expectations for second-quarter revenue on Thursday as a series of price hikes and competition from private-label brands slowed sales of its snacks and soda, mainly in the United States, its largest market. Analysts noted that product prices, which are starting to normalize after nearly two years of multiple hikes, remain higher than pre-pandemic levels, limiting the company's ability to raise prices further as volumes shrink. The company reported Q2 revenue of $22.50 billion, falling short of the estimated $22.57 billion, and shares dropped over 3%.
PepsiCo raised average product prices by 5% for the quarter ended June 15, consistent with the first quarter. However, overall organic volumes slipped 3% during the reported period. CEO Ramon Laguarta highlighted the increasing price sensitivity among consumers across all income groups, which is prompting the company to enhance productivity and efficiency. The company is also introducing new flavors to its brands like Lay's, Doritos, and Cheetos, while offering products across different price tiers to cater to various consumer preferences.
Market Overview:- PepsiCo missed Q2 revenue expectations.
- Raised average product prices by 5%.
- Overall organic volumes slipped 3%.
- Increasing price sensitivity among consumers.
- Introducing new flavors to brands like Lay's, Doritos, and Cheetos.
- Offering products across different price tiers.
- Shares fell to a nine-month low.
- Fiscal 2024 organic revenue expectation revised to about 4%.
- Focus on profitable growth and various strategies to maintain market position.
The company's snacking business, Frito-Lay North America, saw a 4% drop in volumes, while the North America beverages division experienced a 3.5% decline. Shares of PepsiCo fell to a nine-month low after the company revised its fiscal 2024 organic revenue expectation to about 4%, down from prior expectations of at least 4%. Despite the revenue shortfall, easing production and other expenses from pandemic peaks, along with the impact of price hikes, helped PepsiCo post an adjusted profit of $2.28 per share, beating estimates of $2.16.
Investment analysts noted that while PepsiCo is facing challenges with slowing sales, the company's focus on profitable growth remains clear. The company is expected to leverage various strategies depending on the product to maintain its market position. The company's revenue rose 0.8% to $22.50 billion in the quarter, although it did not meet analyst estimates.
