Products from PepsiCo's Doritos and Cheetos brands for sale in a Walmart store in Encinitas, Calif. In February, the company cut prices by up to 15 per cent on some brands to regain market share.Mike Blake/Reuters
PepsiCo PEP-Q beat analysts’ estimates for quarterly revenue and stuck to its annual targets on Thursday, as recent price cuts for key snack brands helped revive demand in the U.S. and continued strength in its energy drinks and prebiotic sodas.
The price cuts were taken in February on brands such as Lay’s and Doritos by up to 15 per cent to help win back shelf space at retailers following consumer backlash against several quarters of hikes, and drove the first rise in volumes in the North America foods category in a year.
The upbeat results come as investors worry over the fallout of the Iran war on global consumer goods companies amid a surge in energy costs and higher raw-material prices.
“As we look ahead, the macroeconomic environment has become more volatile and uncertain because of ongoing geopolitical conflicts,” chief financial officer Steve Schmitt said in a statement.
PepsiCo under pressure to show results from turnaround drive
The beverage and snacks giant’s shares were last marginally down in choppy premarket trading.
PepsiCo typically hedges about nine to 12 months out for packaging raw material and the company expects this to provide some near-term protection.
Higher cost of living could also push consumers to be more frugal, analysts and investors have said, forcing companies like PepsiCo to be prudent about their expectations for the year.
PepsiCo on Thursday also announced a refresh of the Gatorade energy drinks brands to include new formulas with low sugar, as well as a product with a proprietary electrolyte blend to promote longer hydration which will begin rolling out later this year.
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The company’s key North America foods category has struggled over the last few years as budget-strained consumers traded down to cheaper brands or switched to healthier alternatives.
PepsiCo is also cutting down on the number of products it offers and shutting some production centers to simplify its North America supply chain to rein in costs following pressure from activist investor Elliott Management.
North America foods category volume grew 2 per cent in the reported three-month period, compared with a 1-per-cent drop in the fourth quarter.
The company said first-quarter revenue rose 8.5 per cent to US$19.44-billion, compared with estimates of US$18.94-billion, according to data compiled by LSEG.