After years of continuous price rises, PepsiCo have publicly stated that consumers are spending less on all goods.
This comes as PepsiCo release lower than expected sales figures, which led to a drop in their share value. However, sales of some surprising products have remained popular.
Sales Drop
PepsiCo have reported a 1% increase in total revenue but a lower sales volume in the most recent quarter.
They experienced a 2% drop in global sales volume, while their North American Frito-Lays division experienced a larger 4% drop in sales.
Cheaper Goods Lag
The CFO of PepsiCo, Jamie Caulfield, suggests that the drop in sales volume is due to a particular phenomenon in consumer spending.
Consumers who were previously making cut-backs in more expensive goods and services such as nights out and travel are now reducing spending on everyday goods such as snacks.
Deal Hunters
Consumers are now searching for better deals to cope with inflation in recent years.
Caulfield explains: “There is a cohort of consumers that have become more price conscious. They’re looking for more deals to get more for their money.”
Sales Drop Worse Than Expected
The sales drop for PepsiCo was worse than many expected on Wall Street.
This led to a marked drop in Pepsi share prices early on Thursday after markets opened.
Cumulative Effect
The drop in sales has been attributed to a year-on-year increase in prices, especially by larger brands.
This has finally led to customers more substantially turning away from big brands such as McDonald’s, Chips Ahoy and Starbucks.
Conagra Shares Also Dropped
Shares in Conagra Brands notably also dropped in Thursday trading after they reported their sales number and outlook.
The snack maker reported lower sales for the last quarter and a poor prognosis for the coming financial year.
Demand May Recover With New “Reference Prices”
Sean Connolly, Conagra’s Chief Executive, offered a hopeful statement about the possible gradual recovery.
He said that, “as consumers adapt and establish new reference prices,” demand will return.
Single Item Prices
Caulfield suggests that consumers are becoming more interested in lower prices for single items, as opposed to multi-buy deals such as buy-one-get-one-free.
He says that better value packages, such as the 10-item variety pack, are selling well.
Healthier Options Still Popular
Despite the decline in sales overall for snack brands such as PepsiCo, healthier snacks are still selling.
Caulfield says that PepsiCo will increase marketing on healthier products such as Pepsi Zero Sugar and their Simply snacks range.
