PepsiCo is witnessing a strong resurgence in rural markets for its food and beverage offerings, which constitute nearly 40% of its yearly revenue, according to Ahmed ElSheikh, President of the beverages and snacks division in India. The increased electrification in villages, affordable ₹5 price packs, expanded distribution networks, and improved road infrastructure are aiding PepsiCo’s rebound from the economic slowdown. ElSheikh stated that rural markets are showing notable recovery, attributed in part to the increased availability of electricity across the country, which not only supports growth but also mitigates seasonal variations in business.
For packaged goods companies, a revival in rural demand is crucial, as it accounts for a substantial portion of annual FMCG sales. After six consecutive quarters of decline, rural India returned to growth in the first quarter of 2023 and is projected to maintain this growth for the remainder of the year, according to a report by NielsenIQ.
PepsiCo, known for its popular brands like Pepsi and Lay’s chips, reported revenues of ₹8,129 crores for the fiscal year ending in March 2023, reflecting a remarkable 29% year-on-year increase in revenue, primarily driven by strong double-digit growth in the foods and beverages segment. The company attributes this growth to warm summers, robust rural demand, and effective marketing strategies. Innovation has also played a pivotal role in driving additional revenue growth in the food segment.
While adverse weather conditions, including unseasonal rains during the critical April-June summer quarter, impacted soft drink sales, PepsiCo’s annual growth outlook remains unchanged. Traditionally, the April–June period accounts for a significant portion of annual soft drink sales. The company is working to diversify its portfolio and promote year-round consumption, including energy drinks and sports drinks that aren’t tied to summer. This strategy aims to counterbalance the slowdown in weather-dependent demand.
PepsiCo is focused on localizing its portfolio and pursuing premiumization, with brands like Lay’s, Doritos, and Quaker driving premium pack sales. Despite inflation, consumer demand remains positive. However, the company is closely monitoring the effects of seasonal inflation and unpredictable weather patterns on crop cycles, as these factors could impact future economic trends.