PepsiCo has faced a challenging road, reporting lower-than-expected sales for two consecutive quarters, which has prompted the company to revise its full-year organic revenue forecast downward.
In the aftermath of the financial results announcement, CEO Ramon Laguarta addressed the media, highlighting several factors that have influenced the company’s performance. These include the Quaker Foods North America recall, dwindling demand in the U.S. market, and disruptions in some international markets.
Looking ahead to 2024, PepsiCo now projects low single-digit growth in organic revenue, a significant drop from its earlier forecast of approximately 4%. However, the company remains bullish on core earnings per share, maintaining an expectation of at least 8% growth.
As for the third quarter results, PepsiCo reported a net income attributable to the company of $2.93 billion, or $2.13 per share. This marks a decline from $3.09 billion and $2.24 per share during the same period last year. When excluding certain items, earnings per share were reported at $2.31.
Net sales dipped by 0.6%, totaling $23.32 billion. Conversely, organic revenue—adjusted for acquisitions, divestitures, and currency fluctuations—saw a slight increase of 1.3% this quarter.
Throughout this period, demand for PepsiCo’s snacks and beverages waned. The company experienced a 2% drop across its food and beverage sector, as executives noted a shift in buying behaviors among consumers of various income levels.
The Quaker Foods North America segment suffered the most, with sales plummeting by 13%. The division initiated a recall last December due to potential salmonella contamination, expanded the recall in January, and officially closed a related production facility in June, despite having halted operations there prior.
Laguarta and Chief Financial Officer Hugh Johnston acknowledged in their financial statement that the effects of the recall are beginning to diminish.
Meanwhile, Frito-Lay North America reported a 1.5% decrease in sales. The company is actively working to provide consumers with more affordable snack options and increase inventory of popular brands like Cheetos, SunChips, and Stacy’s Pita Chips. While this division has enjoyed consecutive sales growth, the momentum has slowed compared to its historical performance.
PepsiCo’s leadership remarked, “After outperforming the packaged foods category in recent years, salty snacks have underperformed so far this year.”
Additionally, the North American beverage segment experienced a 3% decline in sales, although brands like Gatorade and Pepsi did see revenue growth this quarter.
Sales in Latin America and regions such as Africa, the Middle East, and South Asia also encountered downturns in both food and beverage categories.
