PepsiCo’s Price Hikes, Steady Demand Add Sparkle to Annual Forecast
PepsiCo Inc. raised its annual forecasts on Tuesday after price hikes undertaken to offset higher costs and steady demand helped the soda and snack giant beat first-quarter results.
The results pointed to a resilient consumer and followed similar quarterly performances by rival Coca-Cola and Nestle. PepsiCo’s shares rose 2 percent in early trading.
Average prices jumped 16 percent in the first quarter, PepsiCo said, while organic volume slipped 2 percent.
Global consumer goods companies have raised prices since the pandemic to battle a jump in costs of raw materials, labor and shipping.
“We do not expect commodity prices to decrease for us, only the rate of inflation will get a little bit lighter during the course of the year,” Chief Financial Officer Hugh Johnston told Reuters.
Meanwhile, the Frito-Lay maker also plans to raise prices in some regions, in contrast to its decision earlier this year to hit a pause.
Majority of the pricing is in place, but “there are some markets, highly inflationary markets around the world, where we might have to take additional pricing,” CEO Ramon Laguarta said in an earnings call.
PepsiCo expects 2023 organic revenue to rise 8 percent, compared with its prior forecast of a 6 percent increase. Annual core earnings per share was revised to $7.27, compared with $7.20 earlier.
The raised forecast at this stage in the year suggests “very deep confidence in what is going on in the snacking business and also the improvements on the beverage side,” said Markus Hansen, a portfolio manager at Vontobel Quality Growth, adding the company is historically very conservative.
Sales in the North America beverage unit, PepsiCo’s largest business and which houses 7UP and Gatorade, rose 8 percent in the quarter.
Net revenue rose 10 percent to $17.85 billion, topping estimates of $17.22 billion. Adjusted profit of $1.50 per share also beat estimates of $1.39.
By Ananya Mariam Rajesh
