PepsiCo lifts profit forecast again as price hikes fail to dent demand

PEPSICO on Tuesday (Oct 10) raised its annual profit forecast for a third time this year, as the company banks on the multiple price increases it had undertaken across its major markets and resilient demand for its snacks and beverages.

Shares of the company, which owns brands including Mirinda, and Gatorade, rose nearly 3 per cent in premarket trading after it beat third-quarter profit estimates.

PepsiCo kicks off earnings from consumer goods firms against the backdrop of rising concerns over several rounds of price hikes crimping demand, as well as countries like France pressing packaged food makers to cut prices to rein in inflation.

Average prices jumped 11 per cent in the third quarter ended Sep 9, PepsiCo said, while organic volume slipped 2.5 per cent.

Wedbush analyst Gerald Pascarelli said pricing in the quarter was probably a little stronger and volumes were probably a little weaker, “but at the end of the day, the positive pricing is clearly driving operating leverage here.”

PepsiCo and rival Coca-Cola have benefited from their near-domination of the global carbonated drinks market, as well as cost-conscious consumers spending on products categorised as “affordable luxuries”.

PepsiCo’s net revenue rose nearly 7 per cent to US$23.45 billion, edging past estimates of US$23.39 billion, its smallest beat in 17 quarters. Adjusted profit of US$2.25 per share also topped expectations of US$2.15, according to LSEG data.

The company’s large snacks business, which sells everything from Doritos to Cheetos, has helped counter falling demand in the beverages unit.

The Frito-Lay North America unit reported a 7 per cent jump in organic revenue increase while volumes fell marginally.

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The company said it had focused more on “selling profitable volume” as consumer preferences continue to evolve towards smaller packages.

PepsiCo expects fiscal 2023 core earnings per share of US$7.54 compared with its prior forecast of US$7.47, while maintaining its annual organic revenue growth at 10 per cent. REUTERS