PepsiCo Raises Revenue Guidance on Price Hike Strategy

Early this week, PepsiCo Inc raised its full-year guidance for revenue, commenting that they may continue to raise prices over the next few months.  Apparently, the beverage giant believes the existing price increases have not had much impact on consumer demand for the company’s popular soda and snack products, even in the midst of the highest inflation rates in a decade.

Of course, hundreds of companies across every industry have experienced various kinds of disruptions thanks to the pandemic.  Primarily, the shutdowns have caused massive delays and shortages in the global supply chain and that has resulted in surging costs for raw materials.  These quickly escalating prices have led to higher retail costs and this has caused some retailers to push back, commenting that it is, in fact, negatively affecting consumer demand.

At the same time, PepsiCo Chief Financial Officer Hugh Johnston insists that they have not seen any slowdown in consumer demand even as the price hikes continue.

In addition, Johnston explains, “We are facing inflation like everyone else, and we think that is going to persist for a while, but we are taking enough pricing to be able to manage the inflation, and our focus is really much more on how we drive costs out of the business.”

The price hikes, for the most part, started this year, and the company firmly believes there is still some room in the market for even more.

As a matter of fact, Johnston goes on to say, “In a world where we’re seeing things like vegetable oil, grains and packaging prices incresing dramatically, I would surprised if there wasn’t more (price increase) over the course of the next year.”

All this in mind, PepsiCo posted second-quarter revenue of $20.23 billion which is an increase of more than 5 percent. More importantly, perhaps, this beat the analyst consensus estimate of $19.51 billion.