This was not an easy quarter for the American retail giant.
High gasoline prices eat chips and cola
PepsiCo presented mixed results for the period ending June 13, which quickly translated into market sentiment. The company’s shares plunged in early trading by over 4%, settling at 137,86 USD.
What stood in the way of a full success? Global turbulence and geopolitical tensions triggered by the US-Iran war struck a blow to oil prices. As a result, by the end of May, the average price of a gallon of gasoline in the US hit a four‑year high of 4.56 USD.
When refueling drains American wallets, they first cut back on small pleasures. The company’s CEO, Ramon Laguarta, admitted outright that consumer conditions were worse than forecasted, and the main culprit is the astronomical gas station prices.
The sharp drop in demand was felt especially by “convenience” stores located at gas stations, where drivers had previously reflexively reached for a can of Pepsi and a pack of Lays.
Chart. PepsiCo stock price.
Source: TradingView.
See also: Fuel prices have shot up! Will gas stations become expensive? The Middle East is getting worse.
Wall Street counts cents, while US demand sputters
Analyzing hard data, PepsiCo reported a net income of 2.98 billion USD (2.18 USD per share), a significant increase compared to 1.26 billion USD a year earlier.
However, after excluding restructuring costs, the adjusted earnings per share were 2.20 USD, one cent less than Wall Street expected (2.21 USD).
Net revenues rose by 6,4% to 24,18 billion USD, beating analysts’ forecasts of 23.95 billion USD.
In organic terms, sales jumped by 2,4%. The devil is in the details, specifically in sales volume. Although global food product sales increased by 3% and beverages by 2%, international markets saved the final balance.
In North America, there was a sputter. Food sales volume in the region stagnated, while the beverage segment saw a painful drop of 4%. The American consumer, squeezed by inflation, started tightening their belt.
See also: Oil market shock. UAE leaves OPEC and OPEC+. Reuters warns of “chaos.”
Price war and the great return of iconic brands
The problem of weakening domestic demand in North America has been dragging PepsiCo for two years, directly resulting from earlier price hikes.
The company has already tried an aggressive counter‑offensive. In February, the conglomerate decided to take a bold step and lowered prices for flagship products such as Lay’s, Tostitos, Doritos, and Cheetos by up to 15%, attempting to win back fleeing customers.
However, a price war alone is not enough to win the battle for modern consumer attention. PepsiCo also focused on technology and a marketing lift, refreshing the image of its icons such as Gatorade and Lay’s. The new “branding” aims to attract younger generations and breathe new life into mature market segments.
The giant believes that when gasoline prices fall, Americans will again reach for their favorite snacks. The question is only how deeply inflation has entrenched itself in consumer habits and whether a brand lift will be enough to win against an empty wallet.
See also: Oil at $150 per barrel. Experts paint bleak forecasts. Fuel prices enter a “radical scenario.”
Source: CNBC.
