PepsiCo is steadfast on its long-term organic growth target despite falling short in 2024, with an emphasis on better-for-you in both snacks and beverages.
Chairman and CEO Ramon Laguarta said yesterday (4 February), as he talked through the latest results with analysts, that he is “very confident” in getting to a 4-6% organic print, and even achieving the top-end of the guidance.
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A low single-digit rate is expected for the new year after PepsiCo delivered 2% growth in the 12 months to 28 December. Volumes were down, however, across the North American snacks and Quaker Foods divisions, and flat for beverages.
International volumes were generally positive, a segment that generates the bigger portion of the group’s revenue, which stood at $91.8bn last year.
Laguarta made no mention on the potential impact of US tariffs, if they come to fruition after Trump paused his planned measures on Canada and Mexico. However, he did make reference to external risks.
As the PepsiCo CEO forecast a mid-single-digit trajectory for core constant currency EPS in 2025 (9% last year), he said “the world is very volatile”.
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By GlobalDataLaguarta added: “You think from the geopolitical point of view or some of the potential decisions that governments might take going forward.
“We can invest in the business and continue to invest for the long term, as we always manage the business, but also give us flexibility to react to potential circumstances that might come our way in the coming months, especially, I would say, the first half of the year.”
Investment will be focused on “permissible” snacks to drive growth in the Frito-Lay business, such as lightly salted and lower sodium products, and also cutting down fat, as well as portion control as consumers turn more to health.
The call for protein benefits will also feature in snacks and drinks, with Laguarta pointing to a “sense of urgency” to invest in protein beverages, along with “functional” hydration, zero-sugar and sports nutrition.
“Very little impact” so far from GLP-1 drugs
Laguarta suggested PepsiCo’s better-for-you emphasis is not particularly driven by the rise in availability of the GLP-1 weight-loss or obesity drugs.
He explained, fielding a question from an analyst: “We continue to study GLP, obviously, with a lot of detail. And, at this point, we see that because of the lower levels of adoption and people coming in and out of the treatment, we see very little impact in our business and in our category, at this point.
“I think portion control is a highly strategic strategy that we’ve been implementing for many years. But also, the long-term evolution of our portfolio with lower sodium, lower fat, lower sugar, positive ingredients, plant-based protein, whole grains. All those are a strategic adjustment and evolution of our portfolio that we’ve been making for many years.”
Salty snacks within Frito-Lay were a key focus of attention on yesterday’s analyst call as volumes fell 2.5% last year. That decline, however, was less than the 14% drop in Quaker Foods and a 3% decrease in North America beverages.
“In snacks, after five years of very fast growth and gaining almost 200 basis points of share, 2024 has been a slowdown,” the PepsiCo chief told analysts.
“Our number one priority this year has been stabilising the category, making sure that consumers come back to the category with good ROI investments. I think we can say that we see that happening.”
Asked if a pullback in pricing would help drive a recovery in snack volumes, the CEO countered: “I wouldn’t assume that we’re going to have negative pricing. I don’t think that’s our strategy.”
He added: “What I’m saying is we’re going to have much more surgical offerings to consumers, especially around price partitions [sub $1-2 packs], which I think we can do price and sizing in a way that we give consumers optionality without diluting the pricing of our business or the category.
“We’ll have a much more surgical price-pack strategy and execution strategy that we think will drive growth for the category given where the consumer is in their disposable income evolution after the high inflation years that we just crossed.”
PepsiCo also plans to offer so-called partitions in beverages to drive revenue growth.
“We have an opportunity to do better on the top line in beverages. And that is the focus for this year, continue to expand the margin but drive acceleration on the top line behind better price back, a much more focused innovation against zero, against functional hydration,” Laguarta explained.
