PepsiCo Raises Annual Forecasts On Back Of Buoyant Demand, Price Hikes

PepsiCo Inc raised its annual forecasts on Tuesday after price hikes undertaken to offset higher costs and steady demand helped the soda and snack giant beat first-quarter results.

Global consumer goods companies have raised prices to battle sky-rocketing costs of everything from aluminum cans to labor and shipping since the supply-chain disruptions during the pandemic and aggravated by the Russia-Ukraine conflict.

 

"We do not expect commodity prices to decrease for us, only the rate of inflation will get a little bit lighter during the course of the year," Chief Financial Officer Hugh Johnston told Reuters.

Meanwhile, the Frito-Lay maker also plans to raise prices in some regions, in stark contrast to its decision earlier this year to hit a pause.

 

Majority of the pricing is in place but "there are some markets, highly inflationary markets around the world, where we might have to take additional pricing," CEO Ramon Laguarta said in an earnings call.

Average prices jumped 16% in the first quarter, PepsiCo said, while organic volume slipped 2%.

 

The company's shares rose 2% in premarket trading as the results pointed to a resilient consumer and followed similar performances by Nestle earlier in the day and by rival Coca-Cola on Monday.

PepsiCo's raised forecast at this stage in the year suggests "very deep confidence in what is going on in the snacking business and also the improvements on the beverage side," said Markus Hansen, a portfolio manager at Vontobel Quality Growth, adding the company is historically very conservative.

 

Sales in the North America beverage unit, PepsiCo's largest business and which houses 7UP and Gatorade, rose 8% in the March quarter.

PepsiCo said it expects 2023 organic revenue to rise 8%, compared with its prior forecast of a 6% increase. It sees annual core earnings per share of $7.27, compared with $7.20 earlier.