Amid rising inflation and financial pressures on U.S. households, PepsiCo has announced plans to reduce prices on select snacks to cater to value-conscious consumers. The food and beverage giant, known for brands like Fritos, Doritos, and Pepsi, highlighted the shift in consumer spending patterns and preferences towards more affordable options.
In a statement during their second-quarter earnings call, PepsiCo CEO Ramon Laguarta acknowledged the need to adjust prices for certain products like unsalted potato chips and tortilla chips to attract consumers. Laguarta also mentioned increasing marketing efforts for some offerings while emphasizing the growth of brands like SunChips and PopCorners among consumers less concerned about value.
“After years of inflation, it’s time to give back some value to consumers,” Laguarta stated. “While some parts of our portfolio may require value adjustments, an overall reset may not be necessary.”
The impact of consumer cutbacks on spending has led to declining volumes for food and beverage companies, including PepsiCo’s Frito-Lay North America segment, which saw a 4% organic volume decline in the recent quarter. Retailers like Target, Kroger, and Aldi have responded by slashing prices to attract more customers amid rising grocery costs.
Despite recent improvements in inflation data, grocery prices have surged by 25% since 2021, according to Fortune. Laguarta emphasized the need for new entry price points and promotional strategies to appeal to specific consumer segments.
Analyst Robert Moskow noted that PepsiCo remains optimistic about the long-term prospects of the salty snacks category despite current challenges. However, he anticipates continued pressure on the category due to consumer cutbacks and shifting work patterns.
“We expect modest growth for FLNA in the second half of 2024 and 2025, with a prolonged slowdown in broader snacks driven by consumer behavior changes and return-to-office trends,” Moskow stated in a research note.