In response to growing consumer demand for value-conscious options, PepsiCo has unveiled plans to lower prices on certain snack products, citing ongoing inflation and higher borrowing costs as key factors influencing consumer spending behaviours.
During the second-quarter earnings call, PepsiCo’s CEO, Ramon Laguarta, highlighted the need for a “value reset”, particularly for products like unsalted potato chips and tortilla chips. Laguarta emphasized that these adjustments are aimed at making products more affordable and attractive to cash-strapped consumers. Additionally, PepsiCo plans to ramp up marketing efforts for selected offerings to bolster consumer appeal.
“While brands like SunChips and PopCorners continue to see growth, we recognize the importance of providing value to consumers after a period of sustained inflation,” said Laguarta. He reassured analysts that while adjustments are necessary for certain segments of their portfolio, an overall reset is not warranted.
The move comes as many retailers, including Target, Kroger, and Aldi, have slashed prices in efforts to stimulate consumer spending amid rising grocery costs. Despite recent improvements in government inflation data, grocery prices have soared by 25% since 2021, according to Fortune.
Analysts remain cautiously optimistic about PepsiCo’s strategy, acknowledging the resilience of the salty snack’s category despite current economic challenges. Robert Moskow from TD Cowen noted that while fundamentals in the industry remain solid, ongoing consumer cutbacks and changing work patterns could continue to impact sales into 2025.
Looking ahead, PepsiCo anticipates navigating these challenges while maintaining growth, projecting low-single-digit growth for Frito-Lay North America in the second half of 2024 and throughout 2025.