PepsiCo: Weak Demand for Drinks and Snacks in North America Drags Q4 Revenue

PepsiCo will spend the year ahead restoring consumer demand for snacks and drinks in North America after facing revenue declines in Q4 2024, CEO Ramon Laguarta said in an earnings report today.

• The food and beverage giant reported net revenue of $27.8 billion in the quarter ending December 28, down slightly from $27.9 billion in Q3 2023
• Organic revenue growth accelerated 2.1% versus the previous quarter
• Earnings per share were $1.96, compared to $1.78 in the prior year period

In a prepared statement, Laguarta attributed the mixed results to the subdued category performance in North America, as well as the continued impacts of its Quaker recall and business disruptions “due to geopolitical tensions in certain international markets.”

A Portion Control-Focused Snacks Strategy

Looking at the company’s food sales categories, the Frito-Lay North America business reported a 2% drop in organic revenue as the “salty and savory snacks categories underperformed broader packaged food.” Volumes in the segment slid 3% in the quarter.

Though Laguarta believes there is a “higher level of awareness” among American consumers regarding health and wellness, he said PepsiCo is seeing very little impact from the increasing usage of GLP-1 drugs. Rather, the most important strategy for the Smartfood and SunChips maker moving forward is portion control.

“Portion control is something we’ve been implementing for many years, and we’ve seen the long-term evolution of our portfolio with lower-sodium, lower-fat, lower-sugar and plant-based [offerings],” Laguarta told shareholders during this morning’s earnings call.

PepsiCo’s portfolio has also received a better-for-you boost from the recent $240.8 million acquisition of Sabra Dipping Company and the $1.2 billion acquisition of Siete Foods. During today’s call, executives said the brand additions enable PepsiCo to participate in meals and mini meals more intentionally.

To capture a greater share of consumers’ wallets, PepsiCo will also expand its away-from-home presence with culinary experiences and product offerings like the Doritos After Dark restaurant, Doritos Locos Tacos and Tostitos Cantinas Food Trucks.

Internationally, the company experienced headwinds from “geopolitical tensions,” yet PepsiCo delivered 6% organic revenue growth in the segment.

Prioritizing  ‘Attractive Segments’ in Beverage

Examining the company’s North America Beverages business, volumes dropped 3% in Q4, while organic revenue rose just 1%. Core operating profit declined in the quarter due to a double-digit increase in advertising and marketing spend.

The segment did, however, see some bright spots in the full fiscal year, with Pepsi Zero Sugar delivering double-digit revenue growth and Gatorade gaining market share. Additionally, PepsiCo completed the nationwide rollout of Mountain Dew Baja Blast, which generated more than $1 billion in annual retail sales (including the foodservice channel).

Within its broad beverage portfolio, PepsiCo will continue to elevate and prioritize focus on attractive segments like zero sugar, functional hydration and sports nutrition. Additionally, Laguarta said the company, which owns Muscle Milk, is “trying to participate” in growing consumer interest in protein beverages “with a sense of urgency.”

Looking ahead, the conglomerate is forecasting low-single-digit organic revenue growth and mid-single-digit core constant currency EPS.

“We’re very confident our North America business will accelerate this year. We see opportunities, especially away from home, with billions of occasions on a daily basis. We need to capture [consumers] with much more intentional products,” said Laguarta.