Eat, Drink, Be Merry

Image source: Vladimir Zhupanenko - Shutterstock

What's going on?

PepsiCo reported better-than-expected quarterly results on Tuesday.

What does this mean?

No matter how high prices get, you’re still going to be willing to pay for your Quaker porridge, your Aquafina water, and your tangy cheese Doritos to see you through the day. So even though Pepsi’s products were 12% more expensive last quarter than the same time in 2021, shoppers still picked up 3% more snacks and 6% more drinks (tweet this). That pushed up the drinks maker’s organic revenue – which strips out the effects of acquisitions and currency swings – by 13%. And even though Pepsi’s profit tanked by $1.2 billion on the back of the war, it still came in above expectations. The company’s optimistic things will keep going strong too: it upped its yearly organic revenue growth outlook from 8% to 10%.

Why should I care?

The bigger picture: Shrinkflation in action.
This is the second quarter in a row that Pepsi has upped its 2022 revenue forecast, but it’s not done the same for profit. That’s probably because the prices Pepsi pays its US suppliers are rising even faster than the prices it’s charging its customers – something that’s likely to hit Pepsi’s profit margins even more going forward. And while it could keep hiking prices, it’s probably aware that there’s only so far it can push things before cash-strapped customers tap out. That might be why it’s planning to save money in other ways – by, say, reducing product sizes.

Zooming out: Pepsi’s green ambitions are lip service.
The world’s three biggest soda companies – Pepsi, Coca-Cola, and Keurig Dr Pepper – release more heat-trapping gases than the country of Belgium, which is partly down to the production of their plastic bottles. That’s encouraged the industry to invest around $8 million in an initiative to reduce plastic use and increase recycling. But experts say it isn’t going nearly far enough: the three biggest players earn that sort of cash in three hours flat.

Originally posted as part of the Finimize daily email.

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