PepsiCo today reported a surprise drop in quarterly sales and forecast a sharp slowdown in organic revenue growth for 2024.
The news comes as multiple price hikes weigh on demand for the company’s beverages and Lay’s crisps, particularly in the United States.
A likely pushback for the company’s products, dubbed “affordable luxuries”, was previously flagged by investors and analysts.
They noted that PepsiCo had passed on higher production costs to customers since the pandemic in an effort to protect its margins.
In a post-earnings call, PepsiCo chief executive Ramon Laguarta said both food and beverage sales had slowed in the fourth quarter, in part due to pricing and tightening of household budgets.
“We are seeing a bit of a slowdown in the US,” Laguarta said.
Revenue
In January, Europe’s largest retailer Carrefour asserted it would not be stocking PepsiCo brands “due to unacceptable price increases.”
PepsiCo’s shares were down 2% in early trade.
Coca-Cola’s shares also fell 0.8% in light of its rival’s news.
PepsiCo's fourth-quarter revenue fell 0.5% to $27.85 billion, its first drop in 14 quarters.
Analysts had expected a 1.4% rise to $28.40 billion, according to data from the London Stock Exchange Group (LSEG).
The snacks and drinks giant forecast annual organic revenue growth of at least 4%. This is less than half the 9.5% growth reported for fiscal 2023.
However, the company expects fiscal 2024 core earnings per share to be $0.01 above expectations at $8.15.
PepsiCo expects raw material costs to moderate from levels seen in fiscal 2023, according to chief financial officer Jamie Caulfield.
It also announced a 7% increase to its annual dividend.
Core gross margin expanded 97 basis points in the fourth quarter as average prices jumped 9%. Organic volume slipped 4%.
