The Impact of Rising Prices on PepsiCo’s Snack Sales
Sales of PepsiCo snack products in North America have experienced a decline in the second quarter of this year, leading the company to consider adjusting prices. According to a report released by PepsiCo on July 11, revenues from their Frito-Lay snack brand saw a decrease in Q2 compared to the same period last year, which had seen a growth of 14 percent. The company attributed this decline to rising prices and the resulting impact on consumer demand.
PepsiCo stated that “persistent inflationary pressures and higher borrowing costs” have led to tighter financial conditions for households. As a result, consumers are becoming more value-conscious and are adjusting their spending patterns and preferences across various brands, packages, and channels. PepsiCo Chairman, Ramon L. Laguarta, acknowledged this shift during the earnings call, mentioning that consumers are now seeking more value from their snack purchases.
In particular, Laguarta highlighted unsalted snack products such as potato chips and tortilla chips as needing a “value reset and value intervention” for certain consumers. The average price for a 16-ounce bag of potato chips has increased by 46 percent since January 2020, rising from $4.49 to $6.56 in June 2024, according to data from the Federal Reserve Bank of St. Louis. Laguarta emphasized the need to give back some value to consumers after several years of inflation.
To address changing consumer preferences, PepsiCo plans to offer a “broad array of price tiers” across flavors, packages, and channels. The company aims to adapt to the shifting landscape by providing options that cater to different budgets and needs.
Apart from the decline in Frito-Lay snack brand revenues, PepsiCo also experienced an 18 percent decrease in its Quaker Foods brand in North America. This decline was primarily attributed to product recalls and inflationary pressures. In December 2023, Quaker had to recall several batches of granola bars and cereals due to potential contamination by Salmonella bacteria, which can be particularly dangerous for children. However, PepsiCo expects the impact of these factors on revenue to moderate throughout the year.
Despite the challenges faced in the snack market, PepsiCo reported an overall net revenue growth of 0.8 percent in Q2 compared to the same period in 2023. The company remains optimistic about future growth, as the savory snacks market in America is projected to grow by an annual rate of 4.7 percent between 2023 and 2027, according to a report from Agriculture and Agri-Food Canada.
However, concerns about the health consequences of snacking persist. While snacks continue to be popular, studies have shown that American adults consume an average of 400–500 calories per day through snacking alone. Fruits and vegetables make up only 5 percent of these snack calories, with most snacks being low in fiber and high in sugar. This has raised concerns about the link between snacking and obesity.
In conclusion, rising prices have had a significant impact on the sales of PepsiCo’s snack products in North America. The company acknowledges the need to provide more value to consumers and plans to offer a range of price options to cater to their changing preferences. Despite the challenges, PepsiCo remains optimistic about the future growth of the snack market. However, there are also concerns about the health consequences of excessive snacking, which calls for a balanced approach to consumption.
