Pepsi price cuts drive sales jump: What to know

Dr. Pepper ties with Pepsi for 2nd best-selling drink in US

There's been a shakeup in the Cola wars with second place becoming more competitive. (Credit: KDFW)

PepsiCo’s decision to lower prices paid off in the first quarter, boosting demand for its snacks and drinks.

The company reported stronger-than-expected quarterly results, with both revenue and profit rising.

Pepsi price cuts fuel sales increase

By the numbers:

Revenue jumped 8.5% to $19.44 billion in the January-March period compared to the same period a year ago, the Purchase, New York, company said Thursday. That handily beat Wall Street’s forecast of $18.95 billion, according to analysts polled by FactSet.

A notable change came in its North American food business, where demand for products like chips and snacks showed early signs of recovery.

Pepsi labels are seen on plastic bottles of the soft drink displayed on a store shelf June 13, 2006 in Des Plaines, Illinois. Doctors at the annual American Medical Association meeting in Chicago this week have called for a "fat tax" on sugary soft d

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Net income rose 27% to $2.33 billion for the quarter. Adjusted for one-time items, the company earned $1.61 per share. That also beat Wall Street’s forecast of $1.54 per share.

PepsiCo shares rose 2% in morning trading.

PepsiCo calls decision ‘holistic transformation of the business’

What they're saying:

PepsiCo said its efforts to improve affordability are beginning to resonate with shoppers. That shift helped drive growth in volumes, indicating consumers are buying more – not just paying higher prices. 

PepsiCo’s CEO Ramone Laguarta called its decision a "holistic transformation of the business."

"Price was one element. We thought that consumers needed more value given the economic situations," PepsiCo’s CEO told FOX Business on Thursday, adding, "We’re pleased with the execution of our pricing strategy." 

Going forward, PepsiCo said it expects steady growth this year, even as the broader economic backdrop remains uncertain, and consumer spending patterns remain in focus.

PepsiCo increased prices amid COVID-19 pandemic

The backstory:

PepsiCo leaned heavily into price increases to combat inflation in the aftermath of the COVID-19 pandemic. The company hiked prices by double-digit percentages for eight straight quarters in 2022 and 2023 before settling into more moderate price increases.

That took a toll on sales. Consumers stopped buying Frito-Lay snacks or shifted to cheaper store brands. PepsiCo’s market value has fallen by more than $40 billion from 2023.

But PepsiCo began cutting prices on value brands like Chester’s and Santitas last spring to win back customers. Then, last September, activist investor Elliott Investment Management took a $4 billion stake in the company and began pressing for further price cuts and other changes. PepsiCo agreed to accelerate its price cuts late last year.

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In February, ahead of the Super Bowl, PepsiCo slashed U.S. prices on Lay’s, Doritos, Cheetos and Tostitos chips by up to 15%. At a Michigan Walmart on Thursday, a 9.25-ounce bag of Doritos was advertising a price rollback to $3.97, down from $4.48.

On the beverage side, PepsiCo is also seeing new customers thanks to its recent acquisition of Poppi, a gut health soda, and a new lower-sugar version of Gatorade that has no artificial ingredients. On Thursday, PepsiCo announced that it will shift Gatorade’s packaging and marketing to focus more on hydration for general consumers and less on athletes.