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Snacks and drinks seller PepsiCo’s quarterly revenue declined despite raising prices, in a sign that consumers are becoming more hesitant after years of food price inflation.
Sales declined 0.5 per cent year on year to $27.8bn in the fourth quarter, the US company reported on Friday, a figure that missed analysts’ expectations of $28.4bn. The revenue drop was the first year-on-year decline since the coronavirus pandemic lockdowns of the second quarter of 2020.
Pepsi said the fall was largely due to a recall in Quaker granola products over salmonella concerns and weak sales in North America.
“We’re seeing a bit of a slowdown in the US in both the food and beverage category,” chief executive Ramon Laguarta said on a call with investors. “Part of that is a slowdown due to pricing and disposable income.”
The company known for products such as Doritos chips and its namesake fizzy drinks raised prices 13 per cent in 2023, down from a 16 per cent increase in 2022 but well above its 4 per cent increase in 2019.
After years of strong inflation, there are signs of pushback. Consumers purchased fewer of Pepsi’s beverages and snacks in 2023, with volumes declining 1 per cent and 2 per cent, respectively. In January the French food retailer Carrefour stopped stocking Pepsi products due to what it planned to tell customers were “unacceptable price increases”.
Other consumer goods companies have raised prices to pass on higher commodity and operating expenses to consumers but have struggled to maintain volume growth.
Cadbury chocolate maker Mondelez said last month that it did not expect higher prices to contribute to 2024 revenue growth as much as they did last year, after it reported volume declines in its most recent quarter. The US company said it has planned for “potential customer disruption” in Europe as record-high cocoa markets led it to raise prices again this year.
More broadly, inflation trends have been decelerating. The increase in the consumer price index in the US was 3.4 per cent in December, far below a peak of 9.1 per cent in June 2022.
“You’ll see more balance between pricing and volume that you have seen in previous years,” said Laguarta, as he expected commodity and operating expenses to ease.
McDonald’s chief executive Chris Kempczinski said on Monday that he expected same-store sales growth to return to a historical average of 3 per cent and 4 per cent in 2024, down from an increase of 9 per cent in 2023, as prices comes down in line with inflation.
Pepsi earned $1.3bn or 94 cents a share in the fourth quarter, up from $518mn or 37 cents a share one year earlier.
Shares of Pepsi fell 2.9 per cent in midday trading on Friday.
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