PepsiCo’s 2Q Profits Up Even As Customers Cut Back On Buying

PepsiCo reported higher-than-expected earnings in the second quarter but acknowledged that after raising prices every quarter for more than two years, customers are not buying as many of its snacks and drinks, reported Dee-Ann Durbin for the Associated Press (AP).

The company is seeing customers of all income levels pull back on snack purchases or shift to cheaper store brands. I Photo: AWholeLotOfSpinky Flickr

PepsiCo said that North American demand for its Frito-Lay snacks was “subdued” during the quarter, and sales volumes dropped 4%.

Chairman and CEO Ramon Laguarta said the company is seeing customers of all income levels pull back on snack purchases or shift to cheaper store brands. “In the US, there is clearly a consumer that is more challenged,” Laguarta said during a conference call with investors.

“They want more value to stay with our brands.” The average US price for a 16-ounce bag of potato chips hit $6.63 in May, according to data from the US Federal Reserve, up 18% from two years ago.

Laguarta said PepsiCo plans to amp up deals and advertising in the second half of this year. Prices for some products, like plain potato chips or tortilla chips, may be coming down.

For other products, PepsiCo hopes to emphasize their value or invest in more visible in-store promotions. It also hopes to accelerate sales of its healthier brands — like PopCorners, Smartfood, and SunChips — which have been growing at a faster pace than the rest of its portfolio.