Consumer spending trends are evolving. Take, for example, eating habits.
PepsiCo Tuesday (Oct. 8) reported its third-quarter earnings — a 0.6% decline in net sales to $23.32 billion, alongside a modest 1.3% growth in organic revenue — which reflect a broader consumer shift toward value consciousness across income levels.
“The consumer is reassessing patterns,” CEO Ramon Laguarta told investors and analysts during the company’s earnings call. “They’re snacking more, eating mini-meals rather than large meals, especially with Gen Z.”
Laguarta noted that inflation and rising living costs have made consumers more cautious spenders. PepsiCo is adjusting its strategy to align with these preferences, especially among younger generations, who prefer convenient and varied snacking options over traditional meals.
“We have been working for many, many years at evolving our portfolio based on the trends of the market,” Laguarta explained. “Clearly, the consumer has been moving for more permissible snacks and unstructured meals. We are providing consumers with better options to fulfill their needs for a treat or any other occasion.”
As Laguarta said, “The big opportunity we see is consumers are changing their eating habits. They’re eating more calories in small portions throughout the day. Those kinds of meals are becoming more popular. We see the positive trends for the category and are leaning in with innovation there. There are a lot of occasions our brands belong in and can satisfy consumers there. We’re moving that portfolio in that direction.”
This includes a focus on direct-to-consumer strategies as well as refining its presence in quick-service restaurants (QSRs), where many consumers are opting to dine.
As the company navigates this period of subdued consumer spending, it is exploring opportunities that resonate with value-conscious shoppers, Laguarta said. PepsiCo’s efforts to elevate brand loyalty through targeted investments and enhanced product offerings underscore its recognition of the importance of consumer behavior in driving growth.
Executive Vice President and Chief Financial Officer Jamie Caulfield added: “The recovery of the consumer in the U.S. has been slower than we anticipated. Right now, we’re focused on the consumer and stimulating demand.”
While revenue grew, it was a decrease from the 8.8% growth recorded in 2023. Laguarta emphasized the impact of persistent inflation and higher borrowing costs, which have tightened household budgets and led to subdued spending across various categories. This situation was further exacerbated by product recalls affecting Quaker Foods, although international sales growth helped to partially offset weaker performance in North America.
Looking ahead, PepsiCo anticipates a low single-digit increase in organic revenue for the fourth quarter, down from a previous projection of around 4%.