In spite of rising prices, food and beverage demand in the United States remains strong. While households are feeling more and more pinched in the face of heightened inflation, major food companies like PepsiCo have felt compelled to raise prices in an attempt to offset the higher cost of goods and labor.
Speaking of labor, the labor market in the US is still among the tightest in history. The overall labor pool is limited, of course. However, employers are still having trouble finding workers even after trying to raise wages in any way substantial enough to attract the right talent. Combined with the rocky economic outlook, things are getting more complicated.
For example, even as the beverage giant reported better-than-expected quarterly sales and profits, executives at PepsiCo said they now need to cut costs. This will, hopefully, offset any pressure the current economic times have put on their profit margins. Of course, they will also hope this helps to temper what might still be on the macroeconomic horizon.
Indeed, PepsiCo increased their full-year guidance, in October, as they anticipated a boost in sales on the heels of higher prices. Unfortunately, some of their business units—Frito-Lay North America, for one—reported volume shrinkage, a sure sign that consumers are cutting back as household discretionary spending continues to dwindle.
With that in mind, PepsiCo will now join the likes of other major companies like Ford Motor Co and Walmart Inc to cut costs by trimming said labor pool. And the job cuts will more likely affect corporate workers as the companies retain their front-line staff. In addition, an advertising slowdown has even affected tech and media companies who are now gearing up to lay people off.
For Pepsi, the layoffs will most affect their food and beverage operations in Chicago and the business in Plano, TX and Purchase, NY. The beverage arm is expected to take a bigger hit since the snacks sector already went through a similar labor reduction; though this was through a voluntary retirement program.
In all, PepsiCo employs approximately 309,000 people around the world. Nearly half of those jobs are located within the United States.
