PepsiCo reported better-than-expected revenue in the first quarter due to strong international demand for snacks and beverages.
The New York-based company said revenue rose 2% to $18.3 billion in the January-April period. That was higher than Wall Street's forecast of $18 billion, according to analysts polled by FactSet.
Pepsi reaffirmed its 2024 financial guidance, including organic revenue growth of 4%. The company said it expects to return to more normal growth rates this year after several years of price increases due to inflation.
That may have disappointed investors who were accustomed to stronger growth at PepsiCo. For example, last year organic revenue rose 9.5%. PepsiCo shares fell more than 2.5% in morning trading Tuesday.
In North America, Frito-Lay's revenue rose 2% while Pepsi's beverage sales rose 1%. Sales were hurt by the recall of Quaker Oats cereal, snack and snack products early in the quarter due to possible salmonella contamination. Quaker Foods sales declined 24% during the quarter.
But the company saw 11% sales growth in the Asia-Pacific region and 10% sales growth in Europe.
Ramon Laguarta, PepsiCo's chairman and CEO, said the company is optimistic that consumer demand will continue to rise this year in the United States and elsewhere.
“We think the consumer globally is very resilient,” Laguarta said during a conference call with investors. “It is mainly supported by two facts: very low or very low unemployment globally, and wage growth at a good pace in the majority of the countries in which we participate.”
Sales in Europe were driven by demand in Eastern Europe, Laguarta said. In Western Europe, consumers saw fewer PepsiCo snacks and drinks on grocery shelves during the quarter. Carrefour, one of the largest supermarket chains in Europe, announced in January that it would withdraw PepsiCo products from stores in France, Belgium, Spain and Italy due to unacceptable price increases. The two companies settled their price dispute and Carrefour began restocking PepsiCo products in early April.
The company said it also saw organic revenue growth in Mexico, Brazil, Egypt, Pakistan, China and Australia.
But Laguarta added a note of caution. Consumer spending in China remains cautious, he said, and PepsiCo is also closely monitoring lower-income consumers in the United States, who are buying fewer snacks or switching to store brands in the face of higher prices.
“The low-income consumer in the United States is stressed,” he said. “This is the consumer we focus on in our commerce programs, and we are learning how best to retain this consumer in our categories.”
At PepsiCo He leaned strongly into price increases Over the past two years to combat rising component costs. The fourth quarter of 2023 was the eighth consecutive quarter in which the company saw double-digit percentage price increases.
These increases moderated in the first quarter. PepsiCo said net prices rose 5% globally during the quarter, while volumes fell 2%. Some of this volume decline is strategic, PepsiCo said. The company has reduced package sizes to meet consumer demand for convenience and portion control.
PepsiCo said its net profit rose 5.6% to $2 billion in the first quarter. Excluding special items, the company had earnings of $1.61 per share. This beats Wall Street expectations of $1.52.
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