PepsiCo is slashing prices on Lay’s, Doritos, Cheetos and Tostitos chips this year to try and win back customers furious over years of price hikes.
PepsiCo has leaned on price increases as the cost of packaging, ingredients and transportation rose, but it’s cost the company in volume.
In the fourth quarter, PepsiCo hiked prices by 4.5% globally. Prices for PepsiCo beverages rose 7% in North America, while prices for the company’s snacks ticked up 1%.
That has pumped up revenue, including in the most recent quarter, which rose 5.6% to $29.3 billion in the October-December period, it reported Tuesday.
That was higher than the $28.9 billion Wall Street was expecting, according to analysts polled by FactSet.
But the price hikes have also weakened demand, and consumers have begun swapping out brands they are familiar with for cheaper versions, or they’re cutting back.
Volumes for PepsiCo snacks like Doritos and Cheetos fell 1% in the most recent quarter. North American beverage volumes dropped 4%. Globally, PepsiCo said beverage volumes rose 1% while food volumes fell 2%.
PepsiCo said in December that it planned to cut prices and trim nearly 20% of its product offerings as part of a deal with activist investor Elliott Investment Management.
Elliott, which took a $4 billion stake in PepsiCo in September, has been prodding the company’s board to make changes, saying PepsiCo was being hurt by slowing growth and lower profits in its North American food and beverage business.
In addition to price cuts, PepsiCo plans to accelerate the introduction of new offerings with simpler and more functional ingredients, including Gatorade Lower Sugar and Simply NKD Cheetos and Doritos, which contain no artificial flavors or colors.
The company also recently introduced Pepsi Prebiotic, which it said sold out within 30 hours after its introduction on Black Friday. PepsiCo said the soda will soon be available across the U.S.
Adjusted for one-time items, PepsiCo earned $2.26 per share in the fourth quarter. That was also higher than analysts expected. Net income attributable to the company of $2.54 billion, or $1.85 per share, is up from $1.52 billion, or $1.11 per share, during the same period last year.
Shares fell slightly before the market opened Tuesday.