PepsiCo is anticipating further price hikes and changes to its product mix as it braces for rising expenses and higher levels of inflation for the rest of the year.
CEO Ramon Laguarta said PepsiCo is sharpening its revenue management capabilities with “mix and assortment solutions,” which could be smaller sizes in its variety packs. Hugh Johnston, the company’s CFO, added that the company may sometimes choose to reduce the number of chips in a bag rather than increase prices.
As food and beverage companies grapple with how to deal with inflation and rising input costs, food companies of all sizes are looking for ways to offset some of those expenses without passing all of them on to cash-strapped consumers.
With a portfolio of iconic snacks and drinks, PepsiCo so far has shown an ability to withstand the brunt of inflation.
The company’s quarterly revenue increased to $20.2 billion from $19.2 billion a year ago. For the second consecutive quarter, PepsiCo raised its outlook, forecasting revenue growth of 10% this year—up from 8%—as consumers keep buying its offerings.
But even a giant like PepsiCo is treading carefully when it comes to the current instability sweeping the economy. While consumers have generally accepted higher prices, PepsiCo can’t be sure that will continue, especially with further price hikes planned by the company.
PepsiCo noted this quarter that it is looking at smaller sizes, either in the packaging or how much product is contained inside. So-called shrinkflation — where companies reduce the size or quantity of a product while charging the same price — is nothing new, but the current environment has made it a popular tool for many businesses, especially those that make food and beverages.