PepsiCo said on Tuesday it planned “modest” price hikes next year as demand held up despite multiple increases that prompted the snacks and beverages giant to raise its 2023 profit forecast for a third straight time.
Shares of the company, which owns brands including Mirinda, and Gatorade, rose nearly 2% in early trading after third-quarter profit beat estimates.
PepsiCo kicks off quarterly earnings from consumer goods firms against the backdrop of rising concerns that multiple price hikes could crimp demand, as well as countries like France pushing for price cuts to help rein in inflation.
“As we get into next year there will be some modest level of price increases coming,” Chief Financial Officer Hugh Johnston told Reuters in an interview.
Average prices jumped 11% in the quarter ended Sept 9, while organic volume slipped 2.5%.
The profit margin gives PepsiCo the room to either keep the prices the same or maybe even reduce them but clearly in the short term the company has not gotten to that point where it feels the need to reduce prices drastically, said Brian Mulberry, client portfolio manager at Zacks Investment Management. Zacks has a 1% stake in PepsiCo.
PepsiCo and rival Coca-Cola have benefited from their near-domination of the global carbonated drinks market, as well as cost-conscious consumers spending on products categorized as “affordable luxuries”.Meanwhile, Johnston said the company was “not seeing any impact” yet from the popularity of weight-loss drugs that could alter consumption patterns.
The surge in demand for such drugs, which include Wegovy and Ozempic, has triggered worries about a likely hit to sales for major packaged food companies.
Adjusted profit of $2.25 per share topped expectations of $2.15, according to LSEG data.PepsiCo forecast fiscal 2023 core earnings per share of $7.54, up from $7.47 earlier, while maintaining its annual organic revenue growth forecast at 10%.