Amid a national debate on highly processed foods and the rise of weight-loss drugs, the snack and beverage giant PepsiCo is responding by offering healthier versions of some snacks.
Early Tuesday, the company reported that revenue in the fourth quarter slipped modestly to $27.8 billion from $27.9 billion a year earlier, while net income rose to $1.5 billion from $1.3 billion. For the year, revenue climbed slightly to about $91.9 billion from $91.5 billion, while net income rose to about $9.6 billion from $9.1 billion a year earlier.
As some consumers have felt their wallets pinched by inflation, particularly higher prices for food in recent months, Wall Street analysts and investors have been closely watching sales volumes at leading food companies. For the quarter ending Dec. 28, volumes for PepsiCo’s Frito-Lay business in North America, which, at $7.3 billion, accounts for about a quarter of PepsiCo’s total revenues and is home to popular munchies like Doritos and Cheetos, fell 3 percent. Volumes for the Frito-Lay business have fallen for five consecutive quarters.
In early trading, PepsiCo’s share price was down 4 percent at $144.08.
Executives at PepsiCo attributed part of the declining volumes in the category to inflationary pressure felt by some consumers. In response, the company said it planned to offer more snacks at different price points, including smaller counts of its variety boxes.
“We are offering the consumer multiple choices,” Ramon Laguarta, the chief executive of PepsiCo, told Wall Street analysts and investors on a call early Tuesday. “At the beginning of the month, the consumer may go for an 18 count, but maybe by the end of the month, they want a six or eight count of chips, depending on their budget availability.”
But executives also said salty snack demand was down because consumers were focusing more broadly on health and wellness.
“This has been a multiyear evolution of the consumer,” Mr. Laguarta said. “We think there has been more conversation on social media about health and wellness, and we’re seeing some behaviors that have changed and an acceleration of that in the U.S.”
In response, PepsiCo said it was moving to offering smaller portions as well as snacks made with lower sodium and fat and fewer artificial ingredients.
Executives at the company downplayed the falling volumes in salty snacks on the rise of weight-loss drugs like Ozempic with ingredients that mimic the natural hormone called glucagon-like peptide-1, or GLP-1, that can curb hunger. “We continue to study GLP,” Mr. Laguarta said. “We see, because of the lower levels of adoption and people coming in and out of the treatment, we see very little impact on the business.”
Still, earlier this year, researchers at Cornell SC Johnson College of Business found that households with at least one person on a weight-loss drug spent 6 percent less in grocery stores, with “significantly larger decreases in purchases of calorie dense, processed items, including an 11 percent decline in savory snacks.”
Along with weight-loss drugs, there has been a much larger discussion around ultra-processed foods, and some studies that have found correlations to obesity, heart disease and other health concerns. Robert F. Kennedy Jr., President Donald J. Trump’s nominee for health secretary, has blamed ultra-processed foods for the chronic diseases plaguing many Americans.
The Senate Finance Committee voted on Tuesday to forward his nomination to the full Senate.
Besides offering healthier versions of some popular snacks, executives at PepsiCo said they were looking to adapt to changing consumer preferences by adding protein to various food and beverage products where they could. Its Quaker Oats division, for instance, now offers cereals with additional protein.
As another example of its push into healthier snacks, PepsiCo acquired the remaining 50 percent stake in Sabra Dipping Company, a manufacturer of hummus and other snacking dips, that it didn’t already own from its joint venture partner.
“There are consumers looking for more functionality in their snacks, from protein in their snacks and whole grains and other benefits, and we’re well positioned there,” Mr. Laguarta told analysts on the call.
Content Source: www.nytimes.com