PepsiCo CEO Ramon Laguarta has said the US consumer is “much more price conscious” and demand is suffering after years of price hikes.
The Lay’s and Doritos owner reported that its Frito-Lay division, which covers salty snacks, saw operating profit and volumes fall during the company’s second quarter as a result of faltering demand.
Speaking to analysts after PepsiCo reported its second-quarter financial results today (11 July), Laguarta said: “This need for value or more value consciousness I think is impacting every household in the US. It is different levels of income. I think it’s impacting everybody.”
The PepsiCo chief executive stressed the US consumer’s hunt for “value” is the “problem to address”.
He said: “I think once we address that situation, we will be back in growth, and we feel pretty good about the tools and the resources we have and the actions that we’re taking and we're quite encouraged by [the] recent performance of the business.”
Laguarta told analysts that PepsiCo is in a position to “give some value back” to the consumer in the second half of this year, alongside further investments in marketing and “better execution”.
The Frito-Lay North America (FLNA) division saw operating profit fall from $1.65bn last year to $1.59bn. Meanwhile, volumes slid 4%.
When asked by an analyst if Frito-Lay products are priced too high, Laguarta said: “I don’t think the overall portfolio is -- needs a reset. I think this is going to be about granularity, it’s going to be about good execution of that granularity, and that’s what I think we’re well prepared to do throughout the full value chain.”
Meanwhile, PepsiCo’s Quaker Foods division continued to suffer due to a product recall, which prompted the closure of a US granola bar and cereal factory in April.
Last December, the US Food and Drug Administration issued a recall for more than 40 Quaker Oats products due to concerns about salmonella contamination. In April, PepsiCo then permanently closed the facility concerned in Danville, Illinois.
The division, which operates as Quaker Foods North America, saw organic revenue decline 21%, reaching $561m. Meanwhile, PepsiCo reported an operating profit for the unit of $85m compared to a profit of $129m in the second quarter of 2023.
PepsiCo adjusted its guidance for full-year revenue to growth of approximately 4% on an organic basis. The business previously forecast growth of “at least 4%”.
In the second quarter, the company generated organic revenue growth of 1.9% to $22.5bn, while operating profit jumped year-on-year from $3.66bn to $4.05bn.
The company’s net income rose from $2.75bn in the second quarter of 2023 to $3.08bn this time around.
