PepsiCo said Thursday it’s raising prices on some chips and drinks after a disappointing third quarter — pivoting from a recent effort to save consumers money — due to soft soda sales and struggles pulling off its turnaround plan.
Doritos, Ruffles, SunChips and some soda brands will see prices jump in the single-digit percentage range, the company said. Prices on these items will still be lower than they were at the start of the year.
Pepsi said it needs to raise some prices to offset rising costs for fuel, aluminum and agricultural supplies, which have skyrocketed due to the Iran war and tariffs.
But it’s a notable strategy shift from February, when the company slashed prices on Lay’s, Doritos, Cheetos and Tostitos by up to 15% just ahead of the Super Bowl in an attempt to win back inflation-battered consumers.
PepsiCo CEO Ramon Laguarta said the lower prices helped bring back some customers, but third-quarter earnings in the North America division were weaker than expected – and its turnaround is taking longer than they had hoped.
Frito-Lay snack food volumes were flat compared to the same period last year, while beverage volumes slipped 2%.
“We don’t feel good about the beverage business,” Laguarta said during a conference call Thursday, admitting the company’s sodas – including its flagship Pepsi brand – had fizzled compared to competitors.
He added that PepsiCo will put “all of the urgency of the business and the focus on improving our performance in soft drinks.”
Pepsi noted challenges including increased competition and rising input costs. Experts have also pointed out that weight-loss drugs and more widely available soda alternatives are factors.
The company plans to cut costs and use the savings to ramp up investments in Poppi, the healthy probiotic soda brand it acquired last year, as well as Mountain Dew and Pepsi.
PepsiCo embarked on a turnaround process last fall after activist investor Elliott Investment Management took a $4 billion stake in the company and demanded it lower its prices.
It had hiked prices by double-digit percentages for eight quarters in a row through 2022 and 2023, arguing it had to cover rising costs as inflation ran rampant in the wake of the pandemic.
Despite lowering prices this year, the company has been facing sluggish demand for sodas and snacks, as shoppers cut back on non-necessities and rising GLP-1 usage weighs on sales of junk food.
In the third quarter, the company’s best-performing products in North America included snacks with simpler ingredients, including Doritos without artificial colors or flavors, as well as hydration drinks like Gatorade and energy drinks like Celsius. It plans to expand its high-protein offerings to win over weight-loss drug users, since they need to be on high-protein, high-fiber diets.
PepsiCo reported better-than-expected revenue in the third quarter thanks to strength in its international business, which accounts for 41% of company revenue. Its global snack food volumes jumped 4%, helped by World Cup-related demand for Lay’s snacks.
It recorded adjusted earnings per share of $2.34, above Wall Street estimates of $2.29.
The company lowered its annual forecast, now expecting adjusted earnings per share to grow 2.5% to 3.5% – down from a previous estimate of 5% to 7% growth. However, it expects full-year revenue to grow 6%, at the high end of a previous 4% to 6% forecast range.
Shares in PepsiCo jumped 2.6% Thursday.