PepsiCo surprises with profit hike

Although higher selling prices are weighing down PepsiCo volumes to a limited extent, its profits are exceeding expectations as consumers still remain relatively loyal to their favourite brands.

Affordable luxury

PepsiCo is optimistic after surprisingly strong results in the third quarter: sales rose 6.7 % and earnings per share as much as 15 %, although volumes fell 1.5 %. PepsiCo now expects full-year earnings per share to grow 13 %, one percentage point higher than previously forecast. Sales would go up 10 %.

Prices rose 11 % on average last quarter, slightly less than the 16 % rise in the first quarter. In North and Latin America, consumers appear to be buying somewhat fewer snacks and soft drinks as a result of the price increases with which the brand manufacturer is offsetting higher costs. Overall, however, the impact on volumes remains limited, as soft drinks and snacks are a form of “affordable luxury” on which consumers are not likely to skimp. The multinational’s strong brands also have little competition.