PepsiCo is set to report third quarter earnings on Thursday before markets open, with RBC Capital Markets managing director Nik Modi telling Yahoo Finance he expects the company's challenges to persist. Modi said gas price inflation since the last quarter squeezes consumers in the convenience store channel, where Frito Lay, the majority of PepsiCo's food business, is heavily exposed, making an already tough situation tougher. He argued that PepsiCo's decisions, including plans to raise prices for Doritos and Ruffles by the end of 2026 and 2027 after cutting those prices by 15% earlier this year, are margin and earnings centric and will only make the company's problems worse by pressuring volumes. Modi said PepsiCo needs to offer more value to consumers and lacks a real anchor in protein, where consumer demand is migrating, and that earnings must come down so the company can reinvest in marketing, price gaps, innovation and possibly M&A. He added that consumer staples broadly face tough choices over the next six to 12 months, and that management teams and boards resisting those decisions by waiting it out is not a plausible scenario.
PepsiCo IncRBC's Nik Modi warns PepsiCo's planned price hikes on Doritos and Ruffles will worsen volume declines and pressure earnings.
Royal Bank of Canada