PepsiCo reported first-quarter revenue that exceeded expectations, driven by strong international demand for its snack and beverage brands. The Purchase, New York-based company said revenue for the January–April period rose 2% to USD 18.3 billion, topping the USD 18.0 billion forecast compiled by FactSet. Alongside the quarterly results, PepsiCo reaffirmed its 2024 financial guidance, maintaining an outlook that includes 4% organic revenue growth as the company anticipates a return to more typical growth rates after several years of inflation-driven price adjustments.
Revenue growth slowing
While the results beat consensus estimates, the pace of growth signals a deceleration from the stronger expansion seen in the prior year. Investors accustomed to faster gains were disappointed by the moderation: organic revenue grew 9.5% in the previous year, compared with the more modest growth this quarter. PepsiCo’s shares fell more than 2.5% in morning trading following the report.
Performance varied by region and business segment. In North America, Frito-Lay recorded a 2% sales increase and Pepsi beverage sales rose 1%. However, the quarter included a significant drag from a product recall early in the period: a recall of Quaker Oats cereal, bars and snacks over potential salmonella contamination led to a 24% decline in Quaker Foods sales for the quarter. By contrast, international markets delivered much stronger gains, with Asia Pacific sales up 11% and Europe sales up 10% year over year, highlighting the continued strength of PepsiCo’s global footprint.
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Consumer demand, employment still strong
PepsiCo Chairman and CEO Ramon Laguarta expressed confidence that consumer demand will remain resilient throughout the year, both in the United States and in international markets. On a conference call with investors, Laguarta pointed to supportive labor market conditions and rising wages as key factors underpinning consumer spending patterns. He stated that, overall, consumers remain resilient, supported by low unemployment levels and wage growth in many of the countries where PepsiCo operates.
The company highlighted several specific regional dynamics. In Europe, robust demand in Eastern European markets helped drive the continent’s double-digit organic revenue growth. Western Europe experienced some temporary disruption: Carrefour, one of the region’s largest supermarket chains, removed PepsiCo products from stores in France, Belgium, Spain and Italy in January amid a dispute over pricing. That dispute was resolved, and Carrefour began restocking PepsiCo items in early April. Beyond Europe and North America, PepsiCo reported double-digit organic revenue expansion in a number of individual countries, including Mexico, Brazil, Egypt, Pakistan, China and Australia.
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Overall, PepsiCo’s latest quarter underscores the company’s mixed picture: resilient end-consumer demand and strong growth across many international markets, offset in part by modest North American volume gains and discrete challenges such as the Quaker recall and temporary retail disruptions. Management’s reaffirmed guidance signals confidence in the company’s ability to navigate these headwinds and return to more normalized growth levels as pricing tails off from the high-inflation environment of recent years. Investors will likely continue to watch regional performance, recall resolutions and retail relationships in the coming quarters to assess how these factors influence the company’s path to the 4% organic revenue growth the company expects for 2024.