PepsiCo reported recently that sales volumes fell 4% and that demand for its Frito-Lay snacks was “subdued” in North America during the second quarter. Ramon Laguarta, the company’s chairman and CEO, stated that consumers of all income levels are cutting back on their snack purchases or switching to less expensive store brands.

“[…] Now in the US, there is a consumer that is more challenged. And it’s a consumer that is telling us that in particular parts of our portfolio, they want more value to stay with our brands. That is not for all consumers. It’s some consumers. That is not for all the portfolios. It’s some parts of the portfolio. We have been working on different tactics to give the consumer what they want, and we see that it’s working. That’s why we feel comfortable about — given the oxygen that we have in the P&L, that we’ll be able to deploy in a very targeted way, thinking long term about the category, making sure that it has good ROI, that we’ll be able to turn around, especially what you were referring, the food business, to positive volume and with that, a higher level of net revenue. So that’s how we’re thinking about the second half,” Ramon Laguarta, Chairman of the Board, Chief Executive Officer, of PepsiCo Inc, said, during the Q2 2024 PepsiCo Inc Earnings Call.

According to data from the US Federal Reserve, the average cost of a 16-ounce bag of potato chips in the US reached USD6.63 in May, an increase of 18% over the same month two years prior.

Laguarta added that prices for some products, like plain potato chips or tortilla chips, may be coming down. For other products, PepsiCo hopes to emphasize its value or invest in more visible in-store promotions. It also hopes to accelerate sales of its healthier brands — like PopCorners, Smartfood, and SunChips — which have been growing at a faster pace than the rest of its portfolio.

“And the sweet spot, for us, is not to promote, but it’s to promote to who needs it in their products that need it versus a blanket approach to promotion. So that’s where we’re investing a lot of time. I think we’re much more capable from the insights and diagnostic point of view and also from our ability to execute more granularly all these interventions, be it digital, be it with particular channels or customers. To give you an example, we feel that the unsalted part of our portfolio, if you think about potato chips or tortilla chips, needs some value reset and value intervention for some consumers. When we think about flavored potato chips or other parts of our portfolio, no. I mean, consumers are staying in the category, are staying in our brands, and they’re buying with pretty high frequency as in the past. There are other parts of the portfolio that are growing very, very fast, especially the permissible part of — what we call permissible portfolio, positive choices. This is — when you think about brands like Sunchips, PopCorners, Smartfood, or the Simply range, Off The Eaten Path, those brands are growing. And there, it’s not about value. There, I think, it’s more about, and the way we’re going to approach it, is more marketing, investment, awareness, execution, availability. So there’s different tools that we’ll be using to drive the category growth,” Ramon Laguarta mentioned.

Recent company data reveals a sharp increase in operating profit at Pepsi Beverages North America offset decreases at Frito-Lay North America and Quaker Foods North America.

Operating income at Frito-Lay North America totaled USD1.59bn in the second quarter, down 3.4% from USD1.65bn in the same period a year ago. Net revenue dipped 0.5% to USD5.87bn in the second quarter, with flat results on an organic basis. Volume was down 4%. Retail sales for brands such as PopCorners, Smartfood, SunChips, Bare, and Off the Eaten Path outperformed the rest of Frito-Lay’s snacks portfolio, PepsiCo noted.