Inflation and a pivot in US to healthier snacks weighs on PepsiCo in the fourth quarter

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PepsiCo said Tuesday that high prices and changing consumer tastes have weakened U.S. demand for its snacks and drinks but it's confident it can turn that around in the coming year.

The Purchase, New York-based company said its revenue fell slightly to $27.78 billion in the fourth quarter. That was short of Wall Street’s forecast of $27.89 billion, according to analysts polled by FactSet.

U.S. demand flagged last year after two years of outsized, double-digit price increases. The average price of a 16-ounce bag of potato chips peaked at $6.68 in October 2023, according to government data.

PepsiCo hit the brakes on prices, which rose 4% globally in 2024. The company focused on making its snacks more affordable, adding product promotions, more chips per bag and value packs. It also invested more heavily in its Chester’s and Santitas value brands, which saw strong revenue growth last year.

In a conference call Tuesday, CEO Ramon Laguarta said those efforts are paying off and consumers have begun buying salty snacks again. Still, North American sales volumes for both Frito-Lay snacks and beverages fell 3% in the October-December period.

PepsiCo is also closely watching a longer-term trend toward healthier snacking, Laguarta said. The company isn’t seeing much impact from the growing use of GLP-1 weight loss drugs like Wegovy, he said. But people are looking for smaller, portion-controlled snacks, healthier ingredients like whole grains and lower sodium and fat.

“There’s a higher level of awareness in general of American consumers toward health and wellness,” he said.

PepsiCo is well-positioned to meet that need with products like Pepsi Zero Sugar, SunChips and its Simply line of chips, which have no artificial colors or flavors, Laguarta said. And more healthy, “permissible” snacks are coming, he said.

“We’re very confident that our North American business will accelerate this year," Laguarta said.

PepsiCo is also trying to amp up its away-from-home offerings, like its Doritos Locos Tacos collaboration with Taco Bell and its Tostitos Cantina food trucks.

PepsiCo's snack food and beverage volumes both climbed 1% globally in the fourth quarter, with strong growth in Africa and Asia.

Net income rose 17% to $1.5 billion. Adjusted for one-time items, PepsiCo earned $1.96, or two cents better than analysts had forecast.

PepsiCo expects organic revenue growth in the low single digits in 2025. Organic revenue is adjusted for foreign currency exchanges and the impact of product acquisitions or divestments. The company reported organic revenue growth of 2% in 2024.

The company, which closed four U.S. bottling plants in October, also plans to continue a multi-year push to enhance productivity, including adding more automation in its plants and warehouses.

PepsiCo shares fell 2% Tuesday.