Pepsi price hikes drive profits
Beverage giant says no more price increases on sodas and snacks
Pepsico smashes earnings expectations with salty snack surge
CFO and vice chairman Hugh Johnston details why business is booming
PepsiCo said it doesn't see further price increases for its sodas and snacks. Multiple rounds of price hikes last year helped the company post fourth-quarter profit and revenue ahead of analysts' estimates.
"Inflation hasn’t been able to flatten the soft drink maker’s profits either. Higher sales and improved cost management have helped Pepsi offset inflationary pressures over the last year," said Aarin Chiekrie, equity analyst, at Hargreaves Lansdown.
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Bottles of Pepsi are displayed in a grocery store, Ill., Feb. 10, 2022. PepsiCo reports its corporate results on Feb. 9, 2023. (AP Photo/Nam Y. Huh / AP Images)
The world's second-largest food and beverage company reported revenue of $28 billion, which is higher than the analyst estimate of $26.84 billion. Organic revenue was up 14.6%.
Net income fell to $518 million from $1.3 billion. However, an adjusted basis, PepsiCo earned $1.67 per share in the fourth quarter, beating estimates of $1.65, according to Refinitiv data.
The company also raised its annual dividend by 10% to $5.06 per share.
Full year revenue rose 8.7% to $86.39 billion. Net income was $8.98 billion, up from $7.62 billion.
Meanwhile, PepsiCo's North America beverages unit, which houses brands such as Mirinda and 7UP, posted organic revenue growth of 10% in the fourth quarter, as average prices jumped 16% and organic volume slipped 2%.
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Pepsi: Price increases for 2023 ‘Already in place’
PepsiCo Doritos brand chips for sale at a Dollar General department store in Simpsonville, Kentucky, U.S., on Thursday, Aug. 12, 2021. Dollar General Corp. is scheduled to release earnings figures on August 26. (Photographer: Luke Sharrett/Bloomberg via Getty Images / Getty Images)
In 2022, the New York-based company installed multiple rounds of price hikes to accommodate rising inflation, and while PepsiCo expects economic pressures to persist in 2023, it still sees consumer demand being resilient.
"We have most of our price increases for the year already in place," PepsiCo Chief Financial Officer Hugh Johnston told Reuters, adding that a big percentage of pricing in 2023 would just be a carryover of the actions taken last year.
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PepsiCo is in a "real sweet spot" in terms of consumers since they have enough money to buy themselves affordable treats, Johnston said.
For 2023, PepsiCo said it expects a 6% increase in organic revenue, an 8% spike in core constant currency earnings per share, core annual effective tax rate of 20%, and total cash returns to shareholders of approximately $7.7 billion, comprised of dividends of $6.7 billion and share repurchases of $1 billion.
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PepsiCo, Inc.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| PEP | PEPSICO INC. | 162.00 | +1.66 | +1.04% |
Reuters contributed to this report.