Another Sales Guidance Reduction From PepsiCo
A lower rate of inflation isn't a panacea for consumers
I wrote yesterday about the unusually large number of consumer-related companies to have cut their full-year sales guidance in recent months amid an apparently healthy economy with above-trend GDP growth and robust corporate profit growth. PepsiCo is an early reporter, and is therefore a good indication of may come from other consumer companies. Indeed, PepsiCo reduced its full-year organic sales guidance when it reported its 2Q results, and numerous other consumer companies proceeded to do the same. This morning, PepsiCo did so again, this time reducing its outlook from 4% growth to “low-single-digit” growth; the company noted the cumulative effects of inflationary pressures over the last few years on its categories. In its Frito-Lay North America business, volume was down 1.5%, primarily the result of a high-single-digit decline in Tostitos, a mid-single-digit decline in Cheetos and a low-single-digit decline in variety packs.
Of course, the cumulative effects of inflationary pressures on consumers are evident in PepsiCo’s prices, which were up 5% in 2021, 14% in 2022 and 13% in 2023, and are up another 4% year to date. In other words, its cumulative price increases since the beginning of 2021 have been an eye-opening 36%.