Rising costs, tariff challenges prompt PepsiCo to adjust 2025 earnings forecast

NEW YORK, UNITED STATES: Facing tariff headwinds and White House pressure on some of its businesses, PepsiCo Inc. lowered its full-year profit outlook, as an unpredictable US trade policy and worsening consumer sentiment drive up costs and dent demand for the company’s snacks and soft drinks.

The owner of the Gatorade, Lipton and Quaker brands now expects 2025 earnings per share about even with 2024 based on constant currencies, versus an earlier view for growth in the mid single-digit percentage. The company continues to expect a low single-digit rise in organic revenue, which excludes some items, it said in a statement.

With a broad variety of consumables, from breakfast cereals and fruit juices to salty chips and sweet sodas, PepsiCo offers a glimpse at the state of consumers as policies instituted by President Donald Trump take hold. The company is also preparing to contend with rising supply-chain costs as new US tariffs increase the cost of ingredients.

“As we look ahead, we expect more volatility and uncertainty, particularly related to global trade developments,” Chief Executive Officer Ramon Laguarta said in a statement, adding that the company is working to lessen the impact of higher costs where possible.

The shares fell about 3 percent in New York. The stock has declines 6.4 percent this year through Wednesday’s close, less than the drop in the S&P 500 Index over the same period.

Health and Human Services Secretary Robert F. Kennedy Jr. this week announced plans to phase out the use of all petroleum-based synthetic food dyes, impacting many products produced by PepsiCo. He is also lobbying state governors to join his campaign to limit access to sugar sweets and drinks.

“In the next couple of years, we will have migrated all of the portfolio into natural colour,” Laguarta said.

PepsiCo Inc. reported a 1.8 percent drop in first-quarter sales to $17.9 billion. Organic sales, which exclude the effects of currency volatility and acquisitions, rose 1.2 percent. Core earnings came in at $1.48 a share, versus the $1.49 average estimate of analysts.

In the key North America market, PepsiCo’s volumes slipped 1 percent at its Frito-Lay snacks division, while they fell 3 percent for the beverage units. Executives have said in recent months that the company seeks to offer a greater variety of price points to lure shopper who are cutting back on spending.

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Laguarta said the company is working on “right sizing the cost” of its Frito-Lay products.

In a report to clients this week, TD Cowen analyst Robert Moslow predicted PepsiCo “will eventually resume aggressive promotional spending on salty snacks.”

PepsiCo is also contending with government efforts to prohibit low-income citizens from using federal food vouchers to purchase soda and candy. “Some of our categories could be exposed,” Laguarda said.

According to data from RBC Capital, nearly 6 percent of PepsiCo’s US sales come from SNAP, or Supplemental Nutrition Assistance Program, purchase.