PepsiCo slashes forecast, deepens cost cuts as N.America recovery drags

PepsiCo is facing challenges in North America as rising costs and weak consumer demand hinder its growth and profitability. The company's recovery in the region is not progressing as fast as anticipated, with its core operating margin remaining under pressure. PepsiCo has announced additional cost-cutting measures to cope with the situation, hoping these will help fund investments aimed at boosting sales growth and mitigating the impact of higher input costs.

However, the company's North American business continues to struggle, with food volumes flat and beverage volumes declining in the third quarter. Analysts suggest that PepsiCo might need to reconsider its beverage business strategy, potentially refranchising more control to independent operators to regain market share. Despite some price reductions earlier this year, PepsiCo is now considering price increases to counteract inflationary pressure on input costs.

The company's struggles are not isolated; other major packaged-food companies are also grappling with similar issues, such as General Mills and Conagra Brands, which are investing in promotions and affordability measures. PepsiCo's North American turnaround has been slower than expected, with the company cutting costs and adjusting prices, but still facing flat food volumes and declining beverage sales.