Updated February 10th, 2024 at 14:07 IST
PepsiCo posts sales decline amid price hikes, forecasts slower growth in 2024
CEO Ramon Laguarta acknowledged the waning demand, particularly in the US, where consumers are showing reluctance towards higher prices for sodas and snacks.
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PepsiCo sales decline: PepsiCo on Friday posted an unexpected decline in quarterly sales and a bleak outlook for organic revenue growth in 2024. The beverage and snack giant attributed the slowdown to consumer resistance against price hikes, prompting a dip of up to 4 per cent in its shares.
CEO Ramon Laguarta acknowledged the waning demand, particularly in the US, where consumers are showing reluctance towards higher prices for sodas and snacks. This resistance comes after PepsiCo implemented multiple price hikes over the past two years to offset rising production costs and protect profit margins. Laguarta noted that both food and beverage segments witnessed a slowdown in the fourth quarter, partly due to pricing pressures and tightening household budgets.
The impact of these price increases was evident in January when Carrefour, Europe's largest food retailer, announced its decision to refrain from stocking PepsiCo's brands citing "unacceptable price increases".
In the fourth quarter, PepsiCo reported a 0.5 per cent decline in revenue to $27.85 billion, marking its first sales drop in 14 quarters. Analysts, on the other hand, had anticipated a 1.4 per cent increase to $28.40 billion. Don Nesbitt, portfolio manager at ZCM, commented on the performance, stating that while expectations were high for PepsiCo, it was anticipated that the company would struggle to implement pricing strategies as successfully as in the past.
Looking ahead, PepsiCo forecasts annual organic revenue growth of at least 4 per cent, a significant deceleration from the robust 9.5 per cent growth reported in fiscal 2023. However, the company remains optimistic about fiscal 2024 core earnings per share, expecting $8.15 compared to the anticipated $8.14.
Chief Financial Officer Jamie Caulfield assured investors of moderating raw material costs in fiscal 2024. Additionally, the company announced a 7 per cent increase in its annual dividend.
Despite core gross margin expansion of 97 basis points in the fourth quarter driven by a 9 per cent increase in average prices, organic volume saw a 4 per cent decline. Analyst Gerald Pascarelli from Wedbush highlighted concerns over volume performance not aligning with pricing trends, posing a near-term headwind for PepsiCo.
(With Reuters inputs.)
Published February 10th, 2024 at 14:04 IST