PepsiCo shares fell about 5% on Thursday after it reported quarterly results and warned costs would rise in the second half of the year. the company stated cost of goods Sales will rise in the coming months even as the company spends more on promotions and lowers prices to attract customers looking for cheaper products.
Investors were disappointed as PepsiCo did not raise its full-year forecast, instead leaving it unchanged despite beating revenue estimates. Sales at PepsiCo’s North American food business fell 2%, indicating that demand for snacks in its largest market remains weak.
Rising costs hit PepsiCo
According to Reuters, food and beverage companies are facing higher packaging and shipping costs due to high oil prices caused by the Iran war. The company is also responding to changing consumer habits, as consumers now want healthier products while also seeking better value for money.
PepsiCo Chief Financial Officer Steve Schmidt said the company expects input costs to rise in the second half of fiscal 2026. Schmidt added that tariff refund claims and productivity savings should alleviate some of the financial pressure from rising costs. In an effort to win back customers, PepsiCo has cut prices by up to 15% on popular North American snack brands such as Lay’s and Doritos.
Pepsi price cut
As inflation continues to impact household budgets, many shoppers are purchasing cheaper brands and smaller pack sizes. Chief Executive Ramon Laguarta said PepsiCo’s international business was performing well, helping to increase organic sales, Reuters reported. Laguarta also said consumer budgets remain tight, inflation According to Reuters, demand for the company’s products continues to suffer.
The company said high gas prices led to a larger-than-expected reduction in consumer spending, causing people to buy fewer snacks and drinks. PepsiCo is changing its product lineup to introduce food and beverages without artificial colors or flavors to meet growing demand for healthier options. New products include low-sugar Gatorade, Propel protein powder and Quaker Protein Rice Krispies, targeting health-conscious consumers.
Health product recommendations
According to Reuters, eMarketer analyst Suzy Davidkhanian said that as consumer preferences continue to change, PepsiCo’s biggest challenge is maintaining the relevance of its famous brands. Davidkhanian said shoppers are still spending money, but they are now thinking more carefully before buying and expect more choices from trusted brands.
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PepsiCo did not change its outlook for fiscal 2026, maintaining its organic revenue growth forecast at a range of 2% to 4%. The company also maintained its forecast for core constant-currency earnings per share growth of 4% to 6%.
PepsiCo Earnings Outlook
Schmidt says Pepsi Advertising and marketing spending in North America will be increased in the second half of the year to support sales growth. He told analysts the company would remain “on offense,” meaning PepsiCo plans to continue investing amid rising costs, Reuters reported.
LSEG data showed that PepsiCo’s quarterly revenue increased 6.4% to $24.18 billion, exceeding analysts’ expectations of $23.95 billion. Quarterly core earnings per share were $2.20, up from $2.12 in the same period last year. While PepsiCo beat revenue and earnings estimates, investors focused more on weak North American snack sales, rising costs and unchanged guidance, which sent the stock lower.
