Pepsi CEO issues pessimistic warning: US inflation is making a comeback, consumers are starting to cut spending

The latest earnings report and management comments from PepsiCo sent a clear signal: the resilience of U.S. consumer spending is once again being tested by a new wave of inflation, and growth previously driven by promotions is proving difficult to sustain.

On July 9, CEO Ramon Laguarta stated in the earnings release, input cost inflation in the United States will further accelerate in the second half of the year compared to the first half, consumer budgets will remain under pressure, and overall performance in food and beverage categories is slowing. This assessment was also reflected in the Q2 figures: revenue rose 6.4% year-over-year to $24.2 billion, exceeding market expectations, but North American snacks saw a significant slowdown in growth after the Super Bowl promotions faded, with organic growth momentum weakening.

Despite challenges in its core market, PepsiCo maintained its full-year guidance, mainly supported by growth in overseas markets and improved production efficiency. The company expects cost optimization and tariff refund applications to offset a substantial part of the rising cost pressures in the second half of the year.

Promotion Fades, Costs Mount, PepsiCo’s North America Business Falls Back into Weakness in Q2

The earnings report shows that PepsiCo’s North America snacks business (including brands like Lay’s and Doritos) saw sales flat quarter-on-quarter in Q2, with organic revenue down 2%, a clear contrast to Q1. Previously, the company relied on Super Bowl marketing to cut certain snack prices by up to 15%, temporarily driving a rebound in both sales and revenue. But as Q2 began, the stimulative effect of promotions waned quickly, and growth returned to sluggishness.

Meanwhile, retailers have also actively joined in price cuts. This week, Walmart announced price reductions on several food and grocery products, including 8-ounce Lay’s potato chips, 24-packs of Pepsi, Diet Pepsi, and Diet Mountain Dew. These retail price cuts further reflect weakening consumer demand.

Cost pressures are also rising. Recent tensions between the U.S. and Iran have pushed international oil prices to around $80 per barrel, bringing new upward pressure on packaging, transportation, and raw material costs and making PepsiCo more cautious about cost outlook for the second half of the year. On the demand side, the packaged food industry continues to face long-term structural challenges, including declining consumer interest in processed foods and the ongoing squeeze on snack and beverage consumption due to the spread of GLP-1 weight-loss drugs.

However, international markets continue to show steady growth, providing important support to PepsiCo’s above-expectation performance this quarter. Looking at the full year, the company maintains previous guidance, expecting organic revenue growth of 2%-4% and earnings per share growth of 4%-6% by 2026.

The message from management is unmistakably clear: U.S. consumers are once again feeling the impact of inflation, and spending is becoming more cautious. As the benefits of promotions fade, costs climb, and demand structure shifts, PepsiCo’s growth resilience will face a true test in the second half of the year.