Price hikes lifted PepsiCo’s profits in the third quarter, but the company says those increases are likely to moderate in the coming year.
Pepsi raised prices 11% in the July-September period, the seventh straight quarter that the Purchase, New York, company has increased prices by double-digits.
The higher prices took a toll on demand, with sales volumes down 2.5%.
PepsiCo said some of that volume decline is strategic.
The company said it has been shrinking package sizes to meet consumer demand for convenience and portion control.
Units are growing much faster than volume, PepsiCo Chairman and CEO Ramon Laguarta said Tuesday in a conference call with investors.
But there is also some consumer pushback on prices. Consumers are looking for value and, in some cases, are trading down to cheaper stores.
I do think that we see the consumer right now being more selective, PepsiCo’s Chief Financial Officer Hugh Johnston said Tuesday on a conference call with investors.
Still, Johnston said convenience store sales and food service sales, which usually weaken in times of high consumer stress, are strong.
Johnston said Pepsi continues to see higher prices for commodities like grain and cooking oil.
In 2024, Pepsi expects inflation to be slightly higher than the 2% to 3% it was accustomed to before the pandemic.
Consumers should expect to see price increases roughly in line with inflation, he said.
Pepsi is watching the growing use of weight loss drugs like Ozempic, but so far their impact on the business has been negligible, Laguarta said.
They could be outweighed by other trends, including rising incomes in many countries and the growing popularity of snacking in place of meals.
Were seeing a lot of tailwinds that will continue to drive our categories, he said.
Pepsi shares were up 1.5% in morning trading.
In the third quarter, Frito-Lay North America sales volumes dropped 0.5% during the July-September period as net prices rose 8%.
North American beverage sales volumes dropped 6% as prices rose 12%.
Sales volumes in Europe were flat. Sales volumes in Latin America dropped 5%.
Net pricing includes price hikes as well as changes in the mix of products sold and smaller package sizes.
In prepared remarks Tuesday, PepsiCo said consumers are gravitating toward smaller packages for convenience and portion control.
Net revenue was $23.4 billion, the company said Tuesday. That was in line with Wall Streets expectations, according to analysts polled by FactSet.
Net income for Pepsi rose 14% to $3.1 billion, or $2.24 per share.
That beat the $2.15 per share that analysts had forecast.
Pepsi now expects its full-year earnings per share to increase 13%, up from previous projections of 12%, due to the strength of its sales and cost-cutting efforts.
BBC chair Samir Shah has written a detailed letter to MPs following controversy over the editing of a speech by Donald Trump.
Following a backlash, both BBC director-general Tim Davie and BBC News chief executive Deborah Turness have both stepped down from their roles.
Mr Trump is also understood to have threatened the corporation with legal action over the editing together of two pieces of video from his speech on 6 January 2021 in the BBC’s flagship late-night news programme Panorama.
While the original programme received no complaints, Mr Shah confirmed in his letter that over 500 complaints had been received since a memo from former independent adviser to the BBC’s Editorial Guidelines and Standards Board, Michael Prescott, was leaked to The Daily Telegraph.
In his memo, Mr Prescott detailed what he called “worrying systemic issues with the BBC’s coverage”, also discussing other coverage, including trans issues, and the war in Gaza.
Mr Prescott specifically mentioned Ms Turness and deputy director of BBC News, Jonathan Munro in his memo, calling them “defensive”.
Image: File pic: AP
An apology – by denial of a cover-up
In his four-page letter of response to the Culture, Media and Sport Committee, Mr Shah said following “deliberation”, the board “accept that the way Mr Trump’s speech was edited did give the impression of a direct call for violent action”, calling it an “error of judgement”.
He also noted that some coverage of the memo leak, implied a list of stories and issues had been “uncovered”, which the BBC had sought to “bury”.
Mr Shah said that interpretation was “simply not true” and urged for a “sense of perspective” to be maintained when considering the “thousands of hours of outstanding journalism” the BBC produces each year.
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‘Trump is undermining the BBC ‘
Changes in leadership
The BBC chair also said the view that the BBC “has done nothing to tackle these problems” is “simply not true”.
Mr Shah admitted there were occasions “when the BBC gets things wrong” or “reporting requires more context or explanation”.
Raising the point that the information relied on by Mr Prescott for his memo was the very research commissioned by the BBC’s Editorial Guidelines and Standards Committee (EGSC), he said the memo “did not present a full picture of the discussions, decisions and actions that were taken”.
Mr Shah detailed changes in leadership across the BBC Arabic team, as well as changes in World Service and BBC News – all of which he said would help tackle the issues raised.
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BBC boss ‘right to resign’
So what is being done?
At the end of the letter Mr Shah committed to three actions:
• “The board will commit to revisiting each and every item set out in Michael Prescott’s note and take further action where appropriate. We will be transparent about the conclusions we reach, and the actions taken.”
• “Where we have put in measures already, in response to the original EGSC research, we will repeat those internal reviews to check the changes made are making material improvements to the output.”
• “Where we have already accepted that items fall short of our editorial standards, we will ensure that amendments to the relevant online stories are made where this was deemed appropriate.”
Mr Shah concluded by saying the BBC would “champion impartiality”, which he said was “more necessary now than ever before”, calling it the “sacred job of the BBC”.
BBC director-general Tim Davie and the chief executive of BBC News, Deborah Turness, announced they had resigned on Sunday evening over questions about bias after a BBC Panorama special spliced Mr Trump’s 6 January 2021 speech so it appeared he had encouraged supporters to storm Capitol Hill.
Image: Pic: Reuters
In a post on his Truth Social social media platform after their resignations, Mr Trump accused Mr Davie and the “top people in the BBC” of being “very dishonest people who tried to step on the scales of a presidential election”.
Mr Trump’s lawyers have demanded the BBC retracts the “false” statements about him in the documentary or face legal action for $1bn (£760m) in damages.
Mr Farage told Sky News that people should “put yourself in Trump’s shoes” as he questioned how they would feel if they were the person making sure the UK had security guarantees, and you had been “stitched up on the eve of a national election”.
“What the BBC did was election interference,” Mr Farage said.
“If you put yourself into Trump’s shoes, he made his feelings to me in no uncertain terms – in no unquotable terms.”
Image: Tim Davie resigned on Sunday evening. Pic: PA
He said he could not reveal what words Mr Trump used “before the watershed”, adding the president was “very, very unhappy”.
The Reform leader said the BBC has been “institutionally biased for decades” – just moments after Ms Turness arrived at the BBC’s central London headquarters and admitted “mistakes are made” but said there is “no institutional bias”.
Tory leader Kemi Badenoch has echoed Mr Farage’s assertions, saying that she too believed the BBC was “institutionally biased”.
She told reporters on Monday: “I think this isn’t just about the latest doctoring of a documentary about Donald Trump. It’s about the way the BBC has continually covered issues of sex and gender.
“A lot of women out there believe that the BBC is institutionally biased against them. A lot of Jewish people believe that the BBC is institutionally biased against them, and so those are the people that I’m speaking out for.”
Ms Badenoch went on to say that the “complaining” about Mr Trump’s reaction was a “distraction”.
“I believe that the BBC is an institution that we need to treasure in our country, but the only way that we will be able to look after this institution is if it starts to have a little bit of humility and look at its own mistakes rather than have contempt and sneer at all of the people who are pointing out those mistakes,” she continued.
She added: “We need to remember it is paid for by license fee payers. If the BBC is sued by President Trump or anyone else, it is license fee payers who actually pay that cost. So we need to start by looking after them first.”
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Tim Davie ‘was right’ to resign
BBC chair Samir Shah sent a letter to parliament’s culture, media and sport committee on Monday accepting the way Mr Trump’s speech was edited “did give the impression of a direct call for violent action” and apologised “for that error of judgement”.
Lib Dem leader Sir Ed Davey has urged Mr Farage, Kemi Badenoch and Sir Keir Starmer to condemn Mr Trump’s attack on the BBC, calling it a “serious threat to our national interest”.
In an open letter to the three leaders, he said: “It should not be up to foreign powers to dictate where the British people get their news from.
“We must stand united to defend our democracy from foreign interference like this – even when it comes from a crucial ally.”
Image: Outgoing BBC News boss Deborah Turness spoke to the media on Monday. Pic: PA
Earlier, the chair of the culture, media and sport committee, Dame Caroline Dinenage, told Mornings with Ridge and Frostit is “really regrettable” Mr Davie had to step down but she thought “he was right to do so”.
Dame Caroline said the BBC was “very slow to react” to a leaked report by Michael Prescott, an independent adviser to the BBC’s editorial guidelines and standards board.
The dossier, sent to the BBC board and leaked to The Daily Telegraph, accused the Panorama special on Donald Trump, released a week before the 2024 US election, of being “neither balanced nor impartial – it seemed to be taking a distinctly anti-Trump stance”.
Mr Prescott also raised bias concerns about the BBC’s coverage of trans issues and the war in Gaza.
Dame Caroline accused the BBC of failing to take his report seriously “until it was too late”.
She said the situation “has to influence the BBC charter decisions”.
The BBC’s Royal Charter outlines the corporation’s mission, public purposes and governance, along with specific obligations and how it is funded.
It is up for renewal in 2027, with the government currently carrying out a review to determine the BBC’s future, including its funding model and mission.
The UK’s jobless rate has risen to a level not seen since late 2020, according to official figures released ahead of the budget.
The Office for National Statistics (ONS) reported a figure of 5% covering the three months to September – up from 4.8% reported last month. It was a larger leap than economists had predicted, and the ONS said that men were worst affected by the shift.
It leaves the jobless rate at its highest level since December 2020-February 2021.
It had stood at 4.1% when Labour took office last year.
There was no better news for Chancellor Rachel Reeves in wider, experimental, HMRC data released by the ONS, which showed a 32,000 decline in payrolled employment during October.
That suggested a pause to a more recent trend of declines slowing since sharp falls first witnessed in the spring of this year.
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It was April when measures introduced in Ms Reeves’s first budget came into effect, with hikes in minimum pay and employer national insurance contributions hammering employment and investment sentiment in the private sector.
It also coincided with peak US trade war uncertainty as Donald Trump ramped up his tariffs.
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Where Reeves stands on tax rises
ONS director of economic statistics Liz McKeown said of the data: “Taken together these figures point to a weakening labour market.
“The number of people on payroll is falling, with revised tax data now showing falls in most of the last 12 months.
“Meanwhile the unemployment rate is up in the latest quarter to a post pandemic high. The number of job vacancies, however, remains broadly unchanged.
“Wage growth in the private sector slowed further, but we continue to see stronger public sector pay growth, reflecting some pay rises being awarded earlier than they were last year.”
In good news, the overall slowing in the pace of wage growth and weakening jobs market should help bolster the case for an interest rate cut by the Bank of England next month, assuming inflationary pressures continue to ease after last week’s rate hold.
The ONS figures were released as the clock ticks down to the chancellor’s second budget due on 26 November.
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The state of UK economy ahead of budget
Ms Reeves used an event in Downing Street last week to prepare the ground for a painful series of measures that are expected to be only partly offset by some announcements to keep Labour MPs onside, as she stares down a black hole in the public finances believed to be in the region of £30bn.
She has signalled a break from Labour’s manifesto tax pledge not to raise income tax, national insurance or VAT, on the grounds that the world has changed since that promise was made.
The chancellor’s gripes include Brexit and the effects of the US trade war.
Nevertheless, a spending priority would appear to be the lifting of the two-child benefit cap. That would take an estimated 350,000 children out of poverty, according to the Child Poverty Action Group.
Liberal Democrat Treasury spokesperson, Daisy Cooper, said of the employment data: “Surely the writing is on the wall now for the chancellor’s jobs tax.
“Everyone except Rachel Reeves seems to have woken up to the fact that forcing small businesses to pay more in tax for giving people jobs would damage job opportunities. Now the proof is staring her in the face.
“The government must reverse their damaging national insurance hike at the budget, and commit to saving the small businesses who employ millions in Britain and are at risk of collapse, if they’re to have any hope of reversing today’s concerning trend.”
The Conservatives accused Ms Reeves of presiding over a “high-tax, anti-business” agenda.
Secretary of State for Work and Pensions, Pat McFadden, said: “Over 329,000 more people have moved into work this year already, but today’s figures are exactly why we’re stepping up our plan to Get Britain Working.
“We’ve introduced the most ambitious employment reforms in a generation to modernise jobcentres, expand youth hubs and tackle ill-health through stronger partnerships with employers.
“And this week we’re going further by launching an independent investigation that will bolster our drive to ensure all young people are earning or learning.
“We’re backing businesses to grow and create jobs by cutting red tape, signing trade deals and securing hundreds of billions in investment, which helped make the UK the fastest growing economy in the G7 in the first half of this year.”