PepsiCo trims revenue outlook as North American snacking, key international markets lag

PepsiCo on Tuesday lowered its full-year outlook for organic revenue after its second straight quarter of weaker-than-expected sales.

The repercussions of the Quaker Foods North America recalls, weakening demand in the U.S. and business disruptions in some international markets weighed on the company’s performance in the quarter, CEO Ramon Laguarta said in a statement.

For 2024, Pepsi now expects a low-single-digit rise in organic revenue, down from its prior outlook of 4% growth. The company reiterated its forecast for an increase of at least 8% for its core constant currency earnings per share.

Shares of the company fell 1% in premarket trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

• Earnings per share: $2.31 adjusted vs. $2.29 expected
• Revenue: $23.32 billion vs. $23.76 billion expected

Pepsi 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 earned $2.31 per share.

Net sales fell 0.6% to $23.32 billion. Organic revenue, which strips out acquisitions, divestitures and currency changes, rose 1.3% in the quarter.

Demand for Pepsi’s snacks and drinks dropped this quarter. The company reported that volume for both its food and beverage divisions declined 2%. Last quarter, executives said shoppers across all income levels are changing their behavior.

Quaker Foods North America reported the steepest drop-off in volume, with a 13% slide. The company issued its first recall for potential salmonella contamination in December, then widened it in January. In June, Pepsi officially closed a plant tied to the recalls, although production had already stopped.

The consequences of the recalls are now diminishing, Laguarta and Pepsi CFO Jamie Caulfield said in prepared remarks.

Frito-Lay North America reported a 1.5% decline in volume. The company has been 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 is improving sequentially, the broader category has slowed down compared with historical performance.

“After outperforming packaged food categories in previous years, salty and savory snacks have underperformed year-to-date,” Pepsi executives said in their prepared remarks.

Volume for Pepsi’s North American beverage business fell 3%. Brands like Gatorade and Pepsi saw revenue growth in the quarter.

The Latin America and Africa, Middle East and South Asia markets also reported shrinking volume for both food and drinks.