Corporate Profiles - 2024 - 100

COMPANY overview
PepsiCo, Inc.
Facing headwinds from Quaker recall,
Frito-Lay volume decline
I
nflation over the past year has swirled
throughout the food industry, cutting into
the financial results of Frito-Lay North
America (FLNA), Inc., a star performer in recent
years for PepsiCo, Inc., Purchase, NY, which
also dealt with a Quaker recall during the year.
Ramon L. Laguarta, chairman and chief executive
officer of PepsiCo, spoke highly of FritoLay
on Feb. 21 at the Consumer Analyst Group of
New York conference in Boca Raton, Fla., noting
FLNA generates $25 billion in annual sales.
Yet PepsiCo in June announced plans to
eliminate 88 jobs at its Frito-Lay potato chip
facility in Middletown, NY. PepsiCo operates 30
Frito-Lay plants in the United States.
Unit volume at FLNA fell 1% in fiscal-year
to be about granularity. "
Robert Moskow, an analyst for TD Cowen,
highlighted Frito-Lay's struggles on July 8.
" Unexpected near-term weakness in the US
salty snacks category presents a significant
challenge to the company's sales guidance in
the near term, " he wrote in a research note.
" We lower our 2024 and 2025 sales estimates
to 3.8% but keep EPS (earnings per share) unchanged,
owing to flexibility in the P&L from
significant productivity. "
He added, " We see rising probability that
Chief executive officer -
Ramon L. Laguarta
2023 and then 3% over the first 24 weeks,
ended June 15, of the current fiscal year. Inflationary
pressures and higher borrowing costs
caused household financial conditions to tighten,
company executives said.
" Now in the US, there is clearly a consumer
that is more challenged and is a consumer that is
telling us that in particular parts of our portfolio,
they want more value to stay with our brands, "
Laguarta said in a July 11 earnings call.
While some parts
of the snacks portfolio
need value adjustments, others do not, he said.
" I don't think the overall portfolio needs
a reset, " Laguarta said. " I think this is going
100 \ October 2024
Frito and other snack companies will need to
increase investment in promotional discounting
beyond their initial plans to improve their
volume trends. "
PepsiCo in early October announced plans to
acquire Siete Foods, also known as Garza Foods
Ventures LLC, for $1.2 billion. Siete Foods
makes " heritage-inspired " tortillas, salsas, seasonings,
sauces, cookies and snack.
The recall at a Quaker plant in Danville, Ill.,
occurred in December 2023, initially involving
granola bars and cereals and then snacks as
well. Plans to permanently close the plant were
announced in April 2024. Quaker in the United
States has other baking plants in Cedar Rapids,
Iowa, and Columbia, Mo., as well as one in Peterborough,
Ont. Over the first 24 weeks of the
year, operating profit at Quaker Foods North
America was $36 million, down from $317
million in the same time of the previous year.
Sales volume at PepsiCo Beverages North
America declined 4% in the 24-week period,
but zero-sugar varieties and certain flavor extensions
performed well in the second quarter.
The Mountain Dew brand has returned to sales
growth, Laguarta said July 11.
" I think we made the strategic decision to
have multiple flavors driving the brand and
made Baja a structural part of the portfolio versus
just an LTO (limited-time offering), " he said.
Internationally, PepsiCo plans to to build a
plant in Vietnam that will supply over 23,000
tonnes of snacks per year to markets in Vietnam
and Cambodia. CP
PepsiCo, Inc. net income
in millions
2023
$9,074
2022
$8,910
2021
$7,618
Source: PepsiCo, Inc.
PepsiCo, Inc. net revenue
in millions
2023
$91,471
2022
$86,392
2021
$79,474
Source: PepsiCo, Inc.
PepsiCo, Inc. share price
$150
$160
$170
$180
$190
HIGH =
May 16, 2024 = $180.30
LOW =
Oct. 12, 2023 = $153.31
Sept. 4, 2024 = $177.17
Sept. Nov.
2023
Jan.
2024
March May
Source: New York Stock Exchange
PEPSICO, INC.
July
Sept.
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Corporate Profiles - 2024

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