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Pepsi: Snack, Soda Consumer Resiliency Drives Growth

PepsiCo

PepsiCo is crediting its quarterly growth to resilient consumer behavior, especially on an international scale. 

The soda and snack food giant on Tuesday (April 23) released earnings showing 2.3% net revenue growth, while forecasting an additional 4% for the coming year.

“I would say the consumer globally, we think, is very resilient,” Ramon Laguarta, PepsiCo’s chairman and CEO, said during an earnings call.

“And we see it in, as you saw, from our international business performance. And it’s basically supported by two facts, very low unemployment or quite low unemployment globally and wages growing at a good pace in the majority of the countries where we participate. So, those two things make us feel quite good about the consumer,” he added. 

The company’s growth on an international level came despite the fact that French grocery chain Carrefour had decided to stop carrying PepsiCo products earlier this year.

According to Carrefour, the decision was driven by “ unacceptable price increases” on the part of PepsiCo. 

PepsiCo said that Carrefour had “mischaracterized the chain of events,” saying the two companies could not agree on a contract, leadingPepsiCo to stop supplying them.

Drilling down, Laguarta highlighted some areas the company is keeping an eye on, such as the Chinese market, where consumers “are being very cautious,” as well as lower-income consumers in the U.S.

“The lower income consumer in the U.S. is stretched. … He is strategizing a lot to make their budgets get to the end of the month,” Laguarta said. “And that’s a consumer that is choosing what to buy, where to buy and making a lot of choices. That’s a consumer that we’re emphasizing in our commercial programs.”

Research by PYMNTS Intelligence has found that 60% of shoppers have cut down on nonessential retail purchases, with half of them seeking cheaper retail merchants.

By contrast, just 45% of low-income shoppers (those who make less than $50,000 per year), 41% of middle-income ($50,000 to $100,000), and 28% of high-income shoppers said they had traded down on quality in the last year. 

The research also found that consumers are showing more loyalty to brands than to stores. While 47% of grocery shoppers had traded down in terms of merchants, just 32% had done so for snacks and 29% did so for nonalcoholic beverages.