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PepsiCo (PEP) had a strong quarter, as they reported earnings and revenue that exceeded what the experts were anticipating. This was due to the increased prices they charged for their snacks and drinks. Unfortunately, the higher prices also caused a decrease in the amount of food people purchased worldwide, leading to a 2% drop in volume for their food business.
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It’s fourth-quarter net income came in at $518 million, or 37 cents per share. This is a decrease from the previous year, when it was $1.32 billion, or 95 cents per share. The decrease was due to write-downs of certain brands, such as SodaStream and Pioneer Foods, because of rising interest rates. Looking to 2023, Pepsi is projecting a 6% increase in organic revenue and 8% growth in its core constant currency earnings per share.
Why it matters
While the company expects inflationary pressures to persist in 2023, it still sees consumer demand being resilient. A near duopoly in the carbonated drinks market with Coca-Cola Co helped it raise prices with little pushback from consumers as it battles higher freight and commodity costs, as well as the impact of a stronger dollar on international revenue. PepsiCo is in a "real sweet spot" in terms of consumers since they have enough money to buy themselves affordable treats Chief Financial Officer Hugh Johnston explained.
