The Purchase, New York-based soft drink maker said elevated raw ingredient, labor and freight costs have already begun to eat into its margins and will become more of a problem later this year.
We are experiencing "ongoing inflation pressure," said PepsiCo CFO Hugh Johnson on the company’s second-quarter conference call.
"We insulate ourselves to some degree based on our forward buying program, and that has actually helped us clearly this year," he added. "There'll be a bit more pressure in the back half."
In order to protect its balance sheet from those pricing pressures, PepsiCo has two options, according to CEO Ramon Laguarta.
He said the company can navigate the environment through a "combination of net revenue management initiatives and increased productivity."
Revenue management initiatives include things like raising prices, a strategy that others in the industry have already implemented.
|GIS||GENERAL MILLS, INC.||59.55||+0.23||+0.39%|
|STZ||CONSTELLATION BRANDS, INC.||226.36||+1.54||+0.69%|
|CAG||CONAGRA BRANDS, INC.||34.22||-0.03||-0.09%|
Cereal maker General Mills has already hiked prices in its Foodservice business, which it says will kick in during the current quarter and produce stronger margins in the second half of this year. Constellation Brands and ConAgra Brands also echoed similar comments signaling rising prices.
PepsiCo on Thursday reported second-quarter net sales surged 21% from a year ago to $19.22 billion as the reopening of restaurants fueled increased soft drink demand. The company earned $2.36 billion, or an adjusted $1.72 a share.
The results topped the $17.96 billion in revenue and $1.53 a share in earnings that analysts surveyed by Refinitiv were expecting.
The company expects its strong momentum to carry though for the remainder of the year, raising its full-year profit forecast to 11% growth in constant currency terms, up from its prior forecast of high single-digit growth.
PepsiCo shares were up 0.81% this year through Monday, underperforming the S&P 500’s 17% gain.