(DailyDig.com) – A revenue report by PepsiCo on July 11 was below expectations for the second quarter of this year. The company’s most prolific market, the U.S., saw sales lagging behind expectations due to private label competition and price increases. Consumers focused most of their food shopping on essentials and postponed spending on snacks during the high inflation and interest rates in the nation. The working poor are the households most affected by the devalued dollar.
Ramon Laguarta, PepsiCo’s CEO, stated in his filing that the US demand for snack foods had decreased, and the result was lackluster sales in the second quarter. In speaking to the company’s investors, Laguarta told them that customers are spending their dwindling money on nonessential products by purchasing store brands instead of name brands.
He also said U.S. consumers must conserve money by not buying snacks. After many years of price increases for their product, PepsiCo has priced itself out of the market for most poor working families.
Although analysts believe that prices have begun to halt increasing and even reduced a little, they are still above the prices that were in place prior to the pandemic levels. This does not allow PepsiCo much room to increase their prices as consumers move to store brands.
According to Bloomberg’s estimated second-quarter analysis for PepsiCo, the average should have been 2.9 percent. Instead, the reported revenue was 1.9 percent. For the same time period, the volume of their food products was two percent less than it had been the year prior.
According to Laguarta, as the consumer continues to search for more value for their money, even including those who may be well above the working-class poor, his company must consider the lost revenue. As they ramp up production, they must not continue to increase prices.
PepsiCo is working on adding new and hopefully exciting flavors for the consumer and selling them at a variety of prices. They are also focusing on developing more healthy snacks. Laguarta said that their efficiency is paramount to success.
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