PepsiCo says snacks, sodas could get pricier after scant consumer pushback
PepsiCo Inc (PEP.O) raised its full-year revenue forecast on Tuesday and said it could increase prices further in the coming months, with the beverage giant seeing little impact on demand for its sodas and snacks despite decades-high inflation.
Pandemic-induced disruptions to the global supply chain and surging raw material costs forced PepsiCo, like other packaged food makers, to increases prices for its products, and some retailers have pushed back against those hikes citing waning consumer demand.
However, PepsiCo Chief Financial Officer Hugh Johnston said the company had not seen any slowdown in demand in response to its price hikes, largely implemented late last year, and that there was room for prices to go further up.
“In a world where we’re seeing things like vegetable oil, grains and packaging prices increasing dramatically, I would be surprised if there wasn’t more (price increase) over the course of the next year,” Johnston said.
The company’s second-quarter net revenue rose 5.2% to $20.23 billion, beating estimates of $19.51 billion, according to Refinitiv data.
While packaged food companies are approaching a ceiling for price increases, PepsiCo and Coca-Cola Co (KO.N) likely have a higher limit on how much they can hike rates due to their lack of competition and dominant market share, CFRA Research analyst Arun Sundaram said.
“It’s really a duopoly between Pepsi and Coke, so they have a tremendous amount of pricing power.”
PepsiCo said it expects fiscal 2022 core revenue to rise 10%, compared with a previous forecast of an 8% increase.
The company was also looking at cutting costs with cheaper packaging and a more cautious hiring approach, Johnston said.
PepsiCo recorded a $1.4 billion charge in the second quarter, primarily related to the write down of some assets due to the Russia-Ukraine conflict.