Source: Fortune.com
Summary
PepsiCo’s Frito-Lay, which owns nearly 60% of the U.S. salty snacks market, has seen its market value drop by $50 billion since 2023 due to skyrocketing prices of its products, such as Doritos, Lay’s, and Cheetos. The company has started cutting prices by 15% to course correct, but its efforts may be too little too late. The price increases, which were implemented to accommodate higher supply-chain costs, led to a 50% increase in the price of a 14.5 ounce “party size” Doritos bag at Walmart. The company’s revenue turned negative in 2024 for the first time in over a decade, and its stock has fallen by nearly 22% from its May 2023 peak.
Our Reading
The numbers tell one story.
Frito-Lay’s pricing power, which helped make it PepsiCo’s moneymaker, has become a liability. The company’s decision to implement alternatives like cheaper multi-packs and new versions of snacks without artificial colors has not been enough to offset the negative impact of high prices. The 15% price cut may not be enough to win back price-sensitive consumers. Ramon Laguarta’s statement that “no matter what happens with the consumer, we’re going to be, I think, the preferred choice” now sounds like a warning sign. The company’s slow pace of growth in its North American food segment remains constrained due to affordability concerns and competitive pressures.
The announcement sounds familiar: a company’s efforts to course correct may be too little too late.
