Mixed results
Slow demand in convenient foods
During the second quarter, PepsiCo saw soft category demand within its North America convenient foods business. The Frito-Lay North America segment saw organic revenue decline slightly, as inflationary pressures led to a slowdown in demand for snacks.
The Quaker Foods North America division saw organic revenue fall 18% due to product recalls and weak category performance. The performance of the Quaker Foods division negatively impacted total organic revenue growth by 60 basis points in Q2. PepsiCo Beverages North America saw organic revenue growth of 1% in the quarter.
The company is working on offering its products across a wide range of price tiers to ensure affordability. It is also focusing on expanding its presence in fast-growing channels like the away-from-home channel.
Meanwhile, PepsiCo’s international business performed well in the second quarter, with organic revenue growth of 5.5%, driven by gains in the Europe, and Africa, Middle East, and South Asia (AMESA) divisions. Organic revenue grew 3.5% in the convenient foods business and 10% in the beverages business.
Updated outlook
While PepsiCo expects its businesses to remain resilient, it is seeing a moderation in category growth as customers remain cautious with their budgets and purchases. The company plans to increase its investments in the Frito-Lay North America business to provide more value to customers and to drive growth. As a result, it has updated its outlook for the full year of 2024.
The company now expects organic revenue growth of approx. 4% in 2024 versus the prior outlook of at least 4%. It expects international organic revenue growth to exceed North America revenue growth. It also expects the revenue impacts related to the product recalls at Quaker Foods to moderate during the back half of the year.
PepsiCo expects core EPS of at least $8.15 for 2024, which represents a 7% increase YoY. It also expects at least an 8% increase in core constant currency EPS for the year.