PepsiCo overcomes lagging US sales in a strong second quarter
Plastic bottles of Pepsi are displayed at a grocery store in New York on Nov. 15, 2023. (AP Photo/Ted Shaffrey, File)
PepsiCo reported better-than-expected earnings and revenue in the second quarter and expressed confidence that new and revamped products can boost its lagging North American sales in the second half of this year.
In a conference call with investors Thursday, PepsiCo Chairman and CEO Ramon Laguarta said the company plans to introduce protein-enhanced versions of snacks like Pop Corners in the next few months and will eventually make high-protein versions of some of its biggest sellers. Protein beverages are also going on sale later this year.
“Consumers are adopting protein solutions in their diets at a pace that was not the case in a few years back,” Laguarta said. “We can provide democratized solutions at large scale. That’s what we’re trying to do.”
Laguarta said a relaunch of Lay’s potato chips and Tostitos tortilla chips without artificial colors or ingredients is also coming later this year. PepsiCo said in April that it was accelerating a planned phase-out of artificial colors and ingredients after U.S. health officials called on companies to make that shift.
But Laguarta didn’t say whether PepsiCo is planning a shift to real sugar in its U.S. sodas. Late Wednesday, President Donald Trump said in a social media post that Coca-Cola had agreed to use real cane sugar in its flagship product in the U.S. instead of high-fructose corn syrup. Coke didn’t confirm the change but promised new offerings would be shared soon.
“If the consumer is telling us that they prefer products that have sugar and they prefer products that have natural ingredients, we will give the consumer products that have sugar and have natural ingredients,” Laguarta said. “So this is a journey of following the consumer, trying to be maybe one step ahead of the consumer but not too many steps.”
Sales of Frito-Lay and other snacks fell 1% in North America during the April-June period, PepsiCo said Thursday, while beverage sales slid 2% in the region.
Years of double-digit price increases from PepsiCo and changing consumer preferences has weakened demand for the company’s drinks and snacks, the company said in February. It said Thursday that it’s trying to combat perceptions that its products are too expensive by expanding distribution of value brands like Chester’s and Santitas.
Sales rose in some other regions, including Latin America and Asia. PepsiCo said low- or no-sugar versions of its trademark Pepsi saw strong sales globally.
Revenue rose less than 1% to $22.7 billion in the April-June period. That was higher than the $22.3 billion Wall Street forecast, according to analysts polled by FactSet.
PepsiCo’s net income fell 59% to $1.3 billion. Adjusted for one-time items, including impairment charges related to its Rockstar and Be & Cheery brands, PepsiCo earned $2.12 per share. That was also higher than the $2.03 analysts had forecast.
PepsiCo shares rose nearly 6% in morning trading Thursday.
PepsiCo lowered its full-year earnings expectations in April, citing increased costs from tariffs and a pullback in consumer spending. The company reaffirmed that guidance Thursday.
Its tariff costs have risen since then. In June, the Trump administration hiked the tariff on imported aluminum from 25% to 50%.