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PepsiCo Rides On Price Increases To Raise Annual Forecasts

PepsiCo Inc on Wednesday lifted its annual forecasts for revenue and profit as the soft drinks and snack giant raised prices again to battle surging costs while also signalling resilient consumer demand.

The beat-and-raise pushed the company's shares 2.6% higher in premarket trade and comes against the backdrop of gloomy expectations for third-quarter results amid surging inflation and rising interest rates.

Raised Prices 

PepsiCo's domination of the carbonated drinks market with Coca-Cola has helped it raise prices with little resistance from customers, while its snacks business is benefiting from a shift to eating more at home than at restaurants to rein in discretionary spending.

"In stressful times, we're kind of the affordable luxury, so a simple snack or a beverage... is a relatively small amount of money," Hugh Johnston, chief financial officer told Reuters.

"We see our consumer as being continuing to be remarkably healthy," he said, adding that the company was seeing little push back due to the higher prices.

The price mark-ups helped revenue rise across all segments, especially in its biggest two divisions of North America beverage and Frito-Lay. Average prices were up 17% for the quarter ended 3 September, while organic volume was down 1%.

However, the beverages business, its largest, which houses brands such as 7UP, and Gatorade, posted a 1% increase in volume.

Brand Value Strength 

PepsiCo's results once again demonstrates its brand value strength in an inflationary environment, said Garrett Nelson, senior equity analyst at CFRA Research.

The company raised its 2022 organic revenue forecast for a third time this year and now expects it to rise 12%, compared to a prior forecast of a 10% increase.

PepsiCo now expects fiscal 2022 core constant currency earnings per share of about $6.73, up from its previous forecast of $6.63, even as it warned on continued freight and commodity price pressures and a stronger dollar.

For the quarter, the company earned a better-than-expected profit of $1.97 per share on revenue of about $22 billion.

News by Reuters, edited by Donna Ahern, Checkout. For more a-brand news, click here. Click subscribe to sign up for the Checkout print edition.

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