PepsiCo CEO Ramon Laguarta has highlighted a “slowdown” in its US operations after seeing volumes slide in its convenient foods business.

The snacks and beverages giant is seeing a lag in demand in the North American market for both its food and beverages categories, Laguarta said during a call with analysts after releasing its Q4 and full-year 2023 results today (9 February).

Laguarta said: “Part of that has slowed down due to pricing and the disposable income situation. Part of that is also pivoting between in-home consumption and away-from-home consumption that we’re seeing in our business in the US. We think that might continue into next year.”

As a result, PepsiCo has lowered its full-year 2024 guidance for organic revenue growth to at least 4% and core constant currency earnings per share growth of at least 8%. The company previously forecast organic revenue growth on the high end of 4% to 6% and core constant currency earnings per share growth in the high single digits.

“We feel good about the consumer in 2024 in the US,” Laguarta added. “We feel good in the sense of very low unemployment, the fact that we’ve seen wages will go higher than inflation next year and we hope that by the summer, interest rates will go down and will create another source of oxygen for disposable income in households.”

Volume declines for the quarter were mainly due to recent price increases from PepsiCo which subsequently dented demand. At the start of January, French major retailer Carrefour pulled high-profile brands owned by PepsiCo – such as Doritos and Quaker – from its shelves in a clutch of European markets as a result of these price hikes.

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By GlobalData

The retailer has labelled the US giant’s requests “unacceptable” and is no longer selling its products in France, Spain, Italy, Belgium and Poland.

PepsiCo’s North American Quaker Foods division reported an 8% decline in volume for the fourth quarter, primarily due to a recall after a “food safety incident” in the US supply chain – which Lauren Lieberman, an analyst at Barclays, admitted was “far larger than we had realised”.

“[The recall] has impacted us in November and December and it will continue to impact I think for at least the first half of the year, until we recover our supply chain to normality,” Laguarta noted.

Meanwhile, Frito-Lay North America, which includes brands like Cheetos and Doritos, posted a 2% drop in volume compared to the final quarter of 2022.

However, Laguarta said he expects the Frito business to go back to “profitable volume growth” in 2024.

He added that “a combination of SunChips, PopCorners, the whole Simply line, Smart Foods” is “growing at almost three times the average of Frito.

“We’re putting a lot of emphasis on that particular part of the portfolio,” he said.

Despite some falling volumes in the final quarter, PepsiCo’s international business delivered 12% organic revenue growth in 2023 as Laguarta labelled it the “most remarkable and exciting opportunity that we have as a company”.

“Our international business is very scaled now. It’s almost $40bn between beverages and snacks, so that you compare it to some of the consumer goods companies, this is much bigger than many of the consumer goods companies. Well, this is clearly a big opportunity and we have just scratched the surface,” he said.

“So 2024, we continue to think that international will grow faster than the US business. We’re seeing, you know, good momentum as we started the year in many of our international businesses. Our position is of investment in those markets so we’re going aggressively with productivity and reinvestment for growth.”

For its full fiscal 2023, PepsiCo posted net sales of $91.5bn, delivering 9.5% organic growth year-on-year. For the fourth quarter, total revenue reached $27.85bn, down marginally from $28bn the previous year.

PepsiCo reported fourth-quarter operating profit of $1.68bn, up from $815m a year earlier. Full-year operating profit reached $11.99bn, up from $11.51bn in 2022.