Price Hikes Helped PepsiCo Achieve Greater Revenue Than Expected

The grocery store may be a pretty stressful place for consumers these days with inflation off the rails — but, for PepsiCo, things are looking great. The soda and snack giant enjoyed terrific sales in the second quarter. (Good for them.) During Q2 (April to June), the overall snack food index sold 3% less by volume, reports the Associated Press. Yet, meanwhile, net prices increased by a whopping 15%. If this figure seems steep, consider that it represents the sixth consecutive month-on-month price increase by PepsiCo of 10% or more.

In January 2019, the average price of one can of soda in a 12-pack was 35 cents. As of September 2022, it had risen to 51 cents (a 45% leap) and prices have only continued climbing since then. The snack-size chip bags have gotten smaller, too; the 9.75-ounce bag is now 9.25 ounces.

PepsiCo is doing so well, in fact, that it has already blown Wall Street's prior Q3 revenue prediction of $21.7 billion out of the water. Now, the company is expected to rake in $22.3 billion — and PepsiCo CEO and chairman Ramon Laguarta is actually surprised that the price-hiking strategy worked so well. "Our brands are stronger. The perceived value of our products is better than it was, and obviously, we've been able to raise prices and consumers stay within our brand," said Laguarta, via Food Business News. "Buying less while spending more" seems to be the uninvited theme for consumers in 2023.

Prices anticipated to drop by Q4 2023

PepsiCo is the umbrella company of a wide and diversified portfolio of household brands, including Cheetos, Doritos, Cap'n Crunch, Dole, Brisk, Lay's, Gatorade, Mountain Dew, and countless more. In other words, the company is an international multi-brand conglomerate with the leverage to set market prices as high as possible. Many of these individual brands drew double-digit net revenue growth in Q2. In fact, the company cites this product diversity as the crucial element that has stopped customers from switching to generic brands. PepsiCo offers snacks and beverages from salty chips to unsalted baked snacks, spicier bites, sports drinks, and zero-sugar sodas.

On the upside for grocery shoppers, in June, U.S. inflation hit its lowest rate since 2021. As Q3 rolls in, PepsiCo CFO Hugh Johnston says price hikes are anticipated to fall back into the single digits. (Whoopee.) Indeed, in order for inflation across the board to start cooling, it will be essential that this happens. As Lael Brainard, director of President Biden's National Economic Council, predicts, "It will be important for corporations to continue to bring their markups back down after having raised them to unusually elevated levels over the past 2 years, which would help in reducing inflation," via the Associated Press. PepsiCo's earnings per share are expected to increase by 12% this year.