PepsiCo is looking to further trim spending as it focuses on turning around its North American business, which continues to be a drag on profits despite recent improvements.
The Doritos and Gatorade maker is identifying cost cuts across its operations that address redundancies and curtail discretionary spending. The company plans to implement the initiatives in the coming months.
"We're going to look at every cost with aggressive lenses and with the lenses that everything that is not related to growth will not be part of the company," CEO Ramon Laguarta said on an earnings call Thursday.
North America “performed below our expectations and represents a meaningful opportunity for improvement,” Laguarta said in prepared remarks. The region represented about 56% of PepsiCo’s $25.27 billion in net revenue during the third quarter.
PepsiCo told analysts it also plans to raise prices on some chips as it deals with higher energy and agricultural costs. It's a sharp reversal after the company announced in February it was lowering prices up to 15% in a bid to reignite growth and win back inflation-wary consumers who have cut back on spending.
Laguarta said the cost cuts are needed to support investment opportunities throughout its business, including in functional foods and other better-for-you segments.
PepsiCo noted that organic revenue and volume trends improved sequentially in U.S. savory and salty categories for the third quarter and year-to-date.
Volumes in the U.S. salty category have grown for four consecutive quarters and “outperformed” the U.S. food and beverage category, the company said. While North American volumes were flat, PepsiCo gained share in the U.S. during the third quarter in potato chips, curls, rice snacks and flavored pasta.
The company plans to improve its business by launching more on-trend products, such as offerings with simpler ingredients, alternative oils and functional elements such as protein and fiber.
PepsiCo was “encouraged” by the performance of recent launches, including its NKD line, Doritos Protein and Lay’s baked with olive oil, as well as Gatorade lower sugar without artificial colors, flavors or sweeteners.
In beverages, PepsiCo reported improving organic volume trends, driven by strength in energy drinks, functional hydration, and zero-sugar and flavored soft drinks. North American volume was down 2% during the quarter.
Despite the improvements in North America, Laguarta said PepsiCo would continue “acting with urgency to sustainably improve our business.” PepsiCo lowered its organic revenue outlook to up about 3%, compared with a prior forecast of up 2% to up 4%.
