PepsiCo‘s fiscal year results reveal a 5.9% increase in net revenue, indicating the effectiveness of investments made to fortify the company’s operations.
However, the beverage titan saw a 0.5% decline in net revenue, totaling $27.85 billion, with organic revenue growth of 4.5%, down from 10.6% in the year-ago period. This marks the first drop in 14 quarters.
PepsiCo executives highlighted that high borrowing costs and reduced personal savings are constraining consumers’ budgets. The company observed a decrease in demand, particularly in the US, where consumers are resisting higher prices for sodas and snacks. This resistance comes after two years during which PepsiCo absorbed higher production costs to maintain its profit margins.
In January, Carrefour, Europe’s largest food retailer, announced its decision not to carry PepsiCo’s products, citing “unacceptable price increases.”
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The owner of brands such as Doritos, SodaStream, and Lay’s reported $1.3 billion in net income for the fourth quarter, up from $518 million in the same period the prior year. PepsiCo was negatively affected by impairment charges related to some of its brands, including SodaStream and Goodwill.
In the fourth quarter, PepsiCo’s Latin America division showed the sole increase in net revenue, with a rise of 18%, whereas the Quaker Foods North America segment experienced the most significant decline, dropping by 16%.
PepsiCo attributed the quarter’s net revenue decline to several factors, including product returns due to the voluntary recall of specific bars and cereals within its Quaker Foods North America division, discontinued sales of products resulting from the recall, and a slower growth rate in the overall category.
In the quarter, PepsiCo Beverages North America saw a 27% drop in profit, a sharp contrast to its 122% growth in the same period last year, while net revenue for its Europe unit fell by 1%.
PepsiCo’s Latin America division saw an 18% increase in Q4 net revenue. Meanwhile, the Africa, Middle East, and South Asia unit witnessed a 4% decrease in net revenue, and the company’s Asia Pacific, Australia, New Zealand, and China Region segment faced a 2% decline in revenue.
PepsiCo CEO, Ramon Laguarta, expressed satisfaction with the 2023 results, noting that the company had effectively managed through another year marked by high inflation, macroeconomic fluctuations, geopolitical tensions, and international conflicts.
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He stated that he is confident that the businesses will perform well in 2024, “Category growth rates are normalising as consumer behaviours largely revert to pre-pandemic norms and net revenue realisation moderates as inflationary pressures are expected to abate.”
Looking ahead, Laguarta stated that PepsiCo will “vigorously control” its costs to enhance productivity and increase investments in its brands, innovation, channel expansion, and its PepsiCo Positive ESG transformation strategy.
For 2024, the beverage giant now expects organic revenue to increase by at least 4% and core constant currency earnings per share to rise by at least 8%. Previously, the company had forecasted organic revenue growth at the upper end of 4% to 6% and core constant currency earnings per share growth in the high single digits.
