PepsiCo’s Doritos Chips. (Sergio Flores/Bloomberg)
key takeaways:
- PepsiCo said on July 9 that consumers pulled back work in the second quarter due to higher gas prices, slowing its North American snack turnaround.
- North American food revenues declined 2% and shares fell 5.5% despite price cuts of up to 15%.
- PepsiCo reaffirmed its fiscal 2026 guidance and said lower prices will help gradually improve performance later this year.
PepsiCo Inc. said rising gas prices pushed consumers back in the second quarter, slowing efforts to revive its North American snack business.
The maker of Doritos, Lay’s and Gatorade saw a 2% decline in revenue and flat volumes at its North American food business after taking action to cut prices on some brands by up to 15% earlier this year.
“Consumers are in worse shape than we expected, and that’s primarily driven by gas prices,” CEO Ramon Laguarta said on a call with analysts on July 9. Laguarta said consumers are making more purchases than the company expected at convenience stores and other locations where higher gas prices drive people to buy faster.
PepsiCo shares fell as much as 5.5% in New York on July 9. The stock has slipped about 1% this year through July 8, while the S&P 500 index has gained 9.3%.
PepsiCo is ranked No. 2 on Transportation Topic’s Top 100 list of North America’s largest private carriers.
PepsiCo has been working to boost sales of its salty snacks and there have been signs of an early bounce back after cutting prices on medium-sized bags by 15% to lure back pressured consumers earlier this year. But this pace slowed down in the second quarter.
“While there have been some signs of progress, the pace of recovery has stalled given inflationary pressures challenging consumer price equations,” Nick Mody, co-head of global consumer and retail research at RBC Capital Markets, said in a note. He also said he expected PepsiCo to continue to cede market share in beverages to rivals Coca-Cola Co. and Keurig Dr. Pepper.
Keurig Dr Pepper ranks 12th on the private TT100.
The company reaffirmed its guidance for fiscal year 2026 and said Its low prices are expected to help its turnaround efforts gradually through the end of the year.
“Our North America business was softer than we expected in the second quarter, and we now expect a more gradual improvement in performance trends for the remainder of this year,” Chief Financial Officer Steve Schmidt said in prepared remarks.
Due to the ongoing conflict in Iran, gas prices in the US have increased by more than $4 per gallon.
Connected: Shaky US-Iran ceasefire reignites concerns over fuel prices
Laguarta said the company is making some of its price cuts based on differences in shopping patterns among different segments of the U.S. population. He also said PepsiCo’s decision to lower prices on medium-sized bags as part of the settlement has caused some delays in the company getting more shelf space back with retailers.
Recently it has increased the prices of some small bags. The company has also introduced products with more protein and fiber as it grapples with consumers’ growing preferences toward healthier, less processed foods. Laguarta said healthier offerings are doing “very well” and PepsiCo has seen growth in both volume and revenue in multipacks of smaller, portion-controlled snacks.
PepsiCo reported adjusted earnings per share, a measure of profitability that strips out some one-time costs, of $2.20 for the quarter, slightly above the average analyst estimate.
