PepsiCo (PEP) is doubling down on its snacks business after years of declining volume growth.
On Thursday, before the market opened, the company beat Wall Street’s low earnings estimates in its third-quarter report. But the snack slowdown continued in the United States: North American food revenue fell 3% and units sold declined 4%.
PepsiCo CEO Ramon Laguarta told Yahoo Finance that a major overhaul is underway.
“The situation in the United States is accelerating income,” Laguarta said in a telephone interview. “We’re taking costs out of the system very aggressively, especially Frito-Lay… It’s been a very significant restructuring.”
This year, the company laid off 7,000 people from the Frito-Lay network, calling it “tough” but “something we had to do.” Laguarta said that beginning in May and continuing into the fourth quarter, investors can expect “some additional planned closures and warehouse closings.”
In September, activist investor Elliott Management disclosed a $4 billion stake in the company and called for a change of direction, especially in its snacks business.
The company also faces pressure from RFK Jr.’s Make America Healthy Again (MAHA) initiatives.
In the company’s prepared remarks, it shared plans to remove artificial flavors from snacks like Cheetos and Doritos. Additionally, it plans to expand the use of avocado oil and olive oil in its Lay’s brand, and focus on its healthier snack brands such as Simply, Sabra, Sun Chips and Siete Foods, which the company acquired earlier this year.
Additionally, new pack sizes are in the works, plus a Doritos protein chip and more fiber, whole grain and protein offerings from brands like Quaker, Sun Chips, PopCorners and Smartfood.
Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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