PepsiCo, the multinational food and beverage company, has reported better than everyone’s expected quarterly earnings and revenue results. The higher prices of its snacks and drinks were the key contributors to the positive outcome, although the company’s food business worldwide saw a volume decline of 2% as a result of the price hikes, which affected consumer demand.
Despite the drop in demand, Pepsi intends to continue its “revenue management,” which usually involves raising prices, due to projections of persistent inflationary pressure in 2023. The company’s shares increased by more than 1% after the announcement.
In the fourth quarter, Pepsi reported a net income of $518 million, or 37 cents per share, which was down from $1.32 billion, or 95 cents per share, in the same quarter of the previous year.
The company attributed the decrease to the write-down of several of its brands, including SodaStream and Pioneer Foods, as a result of higher interest rates. Excluding the impairment charges and other items, Pepsi earned $1.67 per share. Net sales increased by 10.9% to $28 billion, and the company’s organic revenue grew by 14.6% during the quarter.
However, there was a decline in the demand for Pepsi products during the quarter. The volume of the company’s products fell by 7% at Quaker Foods North America and 2% at its North American beverage division.
Pepsi Zero Sugar was one exception to the trend, as its volume increased by 26%. Executives at Pepsi are optimistic about the future of the product, and the company recently relaunched the formula to match the Western Europe version more closely. As part of the relaunch, Pepsi will air two Super Bowl advertisements highlighting Pepsi Zero Sugar.
The Frito-Lay North America division reported flat volume for the quarter, despite double-digit revenue growth for several of its brands, including Doritos, Cheetos, and Smartfood.
For 2023, Pepsi projects a 6% increase in organic revenue and 8% growth in its core constant currency earnings per share, while Wall Street is forecasting a net sales growth of 3.5% and earnings per share growth of 7.3%.
During a conference call with analysts, CFO Hugh Johnston stated that the company may see a decline in volumes and a “mild” recession in the U.S. and some developed markets in the second half of 2023.
