PepsiCo On Tuesday, it lowered its full-year forecast for organic revenue after a second straight quarter of weaker-than-expected sales.
CEO Ramon Laguarta said in a statement that the fallout from Quaker Foods in North America, weak demand in the United States and business disruption in some international markets affected the company's performance this quarter.
For 2024, PepsiCo now expects a low-single-digit rise in organic revenue, down from its previous forecast of 4%. The company reiterated its expectations of an increase of no less than 8% in its constant basic earnings per share.
The company's shares fell less than 1% in pre-market trading.
Here's what the company reported compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG:
Earnings per share: $2.31 adjusted vs. $2.29 expected Revenue: $23.32 billion vs. $23.76 billion expected
PepsiCo reported third-quarter net income attributable to the company of $2.93 billion, or $2.13 per share, down from $3.09 billion, or $2.24 per share, a year earlier.
Excluding items, the company had earnings of $2.31 per share.
Net sales fell 0.6% to $23.32 billion. Organic revenue, which excludes acquisitions, divestitures and currency changes, rose 1.3% in the quarter.
Demand for PepsiCo snacks and beverages declined during the quarter. The company reported that the volume of both its food and beverage divisions decreased by 2%. In the latest quarter, executives said shoppers at all income levels are changing their behavior.
In particular, weak demand in North America affected PepsiCo's overall volume. US shoppers have become more cautious, snacking less and making fewer purchases at convenience stores. Mexican sales have slowed, which Laguarta attributed in part to the country's elections in June.
Quaker Foods North America had the largest volume decline, with a 13% decline. The company issued its first recall over possible salmonella contamination in December, then expanded its scope in January. In June, Pepsi officially closed a plant linked to the recalls, though production had already halted.
The consequences of the recalls are now diminishing, Jimmy Caulfield, chief financial officer of Laguarta and PepsiCo, said in prepared remarks.
Frito-Lay North America reported a 1.5% decline in volume. The company is trying to offer more value to consumers and improve in-store availability with its snacks, which include Cheetos, SunChips and Stacy's Pita Chips. While the division's volume has been improving sequentially, the broader category has decelerated compared to historical performance.
“After outperforming the packaged food categories in previous years, salty and salty snacks have underperformed year to date,” Pepsi executives said in their prepared remarks.
In the fall and winter, Pepsi plans to invest more in Doritos and Tostitos, with the help of football season. The company offers add-on packages for Tostitos and Ruffles that offer 20% more chips.
Pepsi is also expanding its portfolio in hopes of attracting more health-conscious consumers. A week ago, the company announced its purchase of Siete Foods for $1.2 billion. The brand makes American-Mexican food, usually with accommodations for various dietary concerns.
Pepsi's North American beverage business volume declined 3%. Brands like Gatorade and Pepsi saw revenue growth during the quarter, but the energy drink category — including PepsiCo's Rockstar — saw demand weaken as traffic to convenience stores declined.
“I think this is part of the economic cycle that we are living through, and it will reverse itself in the future, once consumers feel better,” Laguarta told analysts on a company conference call.
Latin America, Africa, the Middle East and South Asia markets also reported shrinking food and beverage volumes.
