- Pepsi’s fourth-quarter revenue grew organically by 4.5% to $27.9bn
- Underlying operating profit rose 10% to $1.7bn, ignoring currency impacts
- Net debt rose from $33.7bn to $34.1bn
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“It was a weak finish to the year for Pepsi, only managing to push out mid-single-digit revenue growth in the final quarter. Softening demand for the group’s famous fizzy drinks meant that full-year revenue growth came in at 9%. That’s below the group’s twice upgraded guidance, which had been nudged up from 6% to 10% earlier in 2023. Missing your own targets isn’t a good thing, and this surprise on the downside has seen the shares fall in pre-market trading. Unlike major rival Coca-Cola, the group doesn’t limit itself to just soft drinks. Pepsi sells snack favourites like Walkers crisps, Doritos and Cheetos to help customers work up a thirst. But these have also shown signs of struggle over the second half.
Ultimately, it’s the slowing rate of sales growth is what’s causing concern among investors. Pepsi has a diverse portfolio of strong brands, but constant price hikes have taken their toll and had a negative impact on both drink and food volumes. Cost-cutting initiatives have continued at pace, helping to offset some of the impacts of slightly lower volumes and keep profits growing at double-digit rates. But cost cuts are more like a plaster than a longer-term treatment. Heading into the new year, as cost inflation eases, price hikes should also slow. Investors will hope this breathes life back into demand and allows growth to come from a healthier and more sustainable mix between price and volume.”
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