PepsiCo increases revenue forecast as it implements price hikes and smaller sizes to fight rising costs.

PepsiCo increases revenue forecast as it implements price hikes and smaller sizes to fight rising costs.

On Tuesday, PepsiCo increased its year revenue outlook as inflation raised prices while users paid more for its Gatorade drinks and Doritos chips.

With the anticipation of rising higher costs in the second half of the year, the company plans to keep reducing product sizes and introducing other means to control rising expenses.

According to Hugh Johnston, PepsiCo’s chief financial officer, “We are facing inflation like everyone else, and we think that is going to persist for a while, but we are taking enough pricing to be able to manage the inflation, and our focus is much more on how do we drive costs out of the business.”

Meanwhile, Pepsi, in the second quarter of the year, reported a net income of $1.43 billion, down from $2.36 billion a year earlier.

The firm’s margins fell as it experienced bigger freight and commodity costs in the second quarter. Ramon Laguarta, the Pepsi CEO, said that the company is facilitating its cost management initiatives with “mix and assortment solutions,” deploying smaller sizes for its various packs. 

Johnston added that the organization might sometimes decide to lessen the number of chips in a bag instead of hiking the prices.

While a bigger price weighed on the company’s profits, PepsiCo witnessed a higher hit from the Ukraine war. The company disclosed a $1.17 billion charge for the quarter surrounding the conflict.

Due to Russia’s invasion of Ukraine, PepsiCo says it’s pausing its sales in Russia except for essential items, such as baby formula. Now, it’s presently attempting to reposition or discontinue some of its Russian dairy and juice brands.

Excluding the items, PepsiCo earned $1.86 per share. Its net sales increased 5% -$20.23 billion, and the organic revenue climbed to 13%.

More so, PepsiCo’s North American beverage unit witnessed organic revenue growth of 9%, though its volume went down to 1%. Aquafina, Gatorade, and Lifewtr witnessed double-digit growth in the quarter.

North America’s Quaker Foods was the only domestic unit to disclose volume growth. The organic revenue rose to 18%, aided by a double-digit rise in pasta and rice, cookies, and oatmeal. The volume climbed to 2%.

PepsiCo expects organic profit growth in 2022

In 2022, the company now anticipates organic profit growth of 10%, up from its earlier forecast of 8%. This signifies the second successive quarter PepsiCo increased its revenue forecast without updating its earnings direction. 

The company, in the meantime, still anticipates core continuous currency earnings per share growth of 8%.

“The North American business will be resilient, and most of its international markets will be strong, despite macroeconomic and geopolitical volatility”, Laguarta added.

You can read the company’s full earnings report here.

Image by mohamed Hassan from Pixabay