PepsiCo sees sales and prices holding up

Snack and beverage giant PepsiCo last week increased its organic growth revenue forecast for the year and said it has seen little evidence of consumers reacting adversely to increased prices.

Why it matters

PepsiCo’s CFO reported that “elasticities are good right now” in many markets around the world, which suggests that, even as inflation and cost of living increases take their toll on consumers, its products may be seen as affordable treats in difficult times. 

Even rising fuel costs aren’t affecting US consumers’ snack purchasing habits at gas stations – an area of recent retail focus for the business – when they fill up their tanks. “We don’t see any meaningful consumer behavioral change as gas prices go up,” said CEO Ramon Lagurta during a Q2 earnings call. 

Takeaways 

• Pepsi reports that non-sugar soft drinks are growing 3x as fast as full sugar drinks. 
• Consumers are increasingly health conscious and are buying smaller packs or cans as an indulgence without too many calories – but that also means there are opportunities for increased frequency of consumption. 
• “Consumers are looking for additional functionality and are willing to pay for that,” said Lagurta.

Key quote

“We’re going to continue to optimize it [trade budget] and maybe move those resources to some other areas where we can get better demand generation” – Ramon Laguarta, Chairman & CEO, PepsiCo.

Sourced from Seeking Alpha