Thanks to double-digit percent increases for the prices of many of its popular snack and beverage products, PepsiCo saw a big jump in revenues in the quarter.
Overall, PepsiCo said revenues rose 9.3 percent to .2 16.2 billion in the first quarter. But the bulk of that growth was fueled by price increases in the three-month period. Its Frito-Lay North American division, home to Lay’s, Doritos and Cheetos chips, saw volumes grow a modest 2 percent while pricing soared 12 percent in the quarter. Likewise, a 12 percent increase in prices helped offset a 1.5 percent decline in volumes in its Quaker Foods group.
Like other food and beverage companies, PepsiCo is walking a fine line, determining how much it can raise prices on its key products before consumers balk and either buy less or seek out cheaper substitutes. Still, acknowledging that consumers are facing higher prices in all aspects of their lives, executives said they would be watching behaviors closely as they weigh further price increases for the year.
“We think the consumer is very early in the process of adjusting to the new inflationary environment,” said Ramon Laguarta, chief executive of PepsiCo, on a call Tuesday morning with Wall Street analysts and investors. He added that the company’s primary objective was to “keep consumers with our brands.”
Indeed, PepsiCo executives said they believed consumers would continue to buy their popular snacks and beverages, despite rising inflationary pressures. “If you look over time, our categories have always performed pretty well during inflationary times, and, as a result of that, as a company, our performance has been pretty inflation-resistant as well as recession-resistant,” said Hugh Johnston. the chief financial officer of PepsiCo.
Big food companies and restaurants like Chipotle and McDonald’s are raising prices and, for the most part, have seen little resistance among consumers, who are not bothered by paying a quarter or a dollar more than they did a year ago for a burger or a burrito .
But, like other food companies, PepsiCo continues to face strong headwinds from rising commodity and transportation prices. The company said the prices it paid for food and other materials it uses to manufacture and package its beverages and snacks were running higher than it had previously expected.
Net income for the quarter climbed to $ 4.3 billion, up from 1.7 billion a year earlier. But the bulk of the profit, 3.3 billion, came from the sale of its Tropicana, Naked and other juice brands to the French private equity firm PAI Partners, a deal that was announced in August.
The gains in PepsiCo’s revenues also come despite a drop in sales related to Russia’s invasion of Ukraine. PepsiCo has a long history with Russia, doing business there for more than 60 years, and owns several manufacturing plants in the country. Last year, Russia accounted for 3.4 billion, or more than 4 percent, of the company’s total revenues.
In early March, PepsiCo said it was suspending sales of its beverage brands in Russia but would continue to sell essential items like milk, baby formula and food that it manufactures there for humanitarian reasons.
During the quarter, the company took more than 241 million in charges related to its operations in Russia and Ukraine, but company officials noted that a manufacturing plant in Kyiv had reopened.
In trading Tuesday morning, PepsiCo’s stock was up about 0.3 percent, to 174.19.