PepsiCo has revised its annual sales growth target amidst changing consumer preferences, influenced by economic pressures.
- The forecast for a 4% rise in organic sales has been adjusted to a low single-digit growth expectation.
- In the latest quarter, ending 7 September, PepsiCo’s net sales experienced a slight decline, falling below market estimates.
- Evolving shopping behaviours, particularly in North America, have been further influenced by inflation and increased borrowing costs, affecting consumer spending.
- Despite the dip in sales, PepsiCo maintains its full-year adjusted profit forecast, supported by strategic price increases and cost controls.
PepsiCo, grappling with changing consumer preferences, has adjusted its annual sales growth target. Originally projecting a 4% increase in organic sales, the company now anticipates a low single-digit rise. This decision comes amidst a broader trend of consumers curbing expenditure on fizzy drinks and snacks, opting for more affordable own-label alternatives. The impact of these behavioural shifts has been particularly pronounced in the North American market.
Over the quarter ending 7 September, PepsiCo’s net sales decreased by 0.6%, reaching $23.32 billion (£17.82 billion), which fell short of the anticipated $23.76 billion (£18.16 billion). This downturn reflects consumers’ shifting preferences in response to economic challenges, such as inflation and escalated borrowing costs, which have strained household budgets.
PepsiCo’s chief executive, Ramon Laguarta, highlighted the significant role of inflationary pressures and higher borrowing costs in altering consumer spending patterns. Shoppers have increasingly turned to smaller portion sizes and alternative retail formats, such as own-label products, as they adjust to the cost-of-living crisis.
Despite a decrease in sales volume, PepsiCo has successfully defended its profit margins. Strategic price increases, alongside stringent cost control measures, have enabled the company to uphold its full-year adjusted profit forecast. While North America has witnessed substantial changes, internationally, regions such as Latin America, China, and Europe are also experiencing reduced sales volumes.
The persistence of inflation and borrowing costs continues to challenge consumer purchasing power, leading to significant adjustments in spending habits. As a result, companies like PepsiCo, which have historically relied on brand loyalty for sales, now face the necessity of revising growth forecasts and strategies to meet evolving market demands.
PepsiCo’s response to consumer shifts highlights the broader impact of economic pressures on global spending habits.
