Updated version 3 - PepsiCo will raise prices for some potato chips due to intensifying pressure from rising raw material costs.

Updated content: Wording changes, added PepsiCo comments

Reuters, Sept 24 - A spokesperson for PepsiCo (PEP.O), the maker of Lay's chips, said the company plans to raise the prices of some chips to cope with inflation while striving to boost U.S. market sales.

PepsiCo is facing a shift in consumer preferences toward healthier snacks, as well as subdued household demand affected by rising fuel prices and higher commodity costs this year.

In February this year, following strong objections from consumers over previous rounds of price hikes, PepsiCo (link) lowered prices of products including Lay's and Doritos by up to 15%.

A PepsiCo spokesperson told Reuters the new round of price increases will target certain chip brands, with hikes in the low to mid-single digit range, in line with inflation levels.

The spokesperson added that the new prices will remain below the levels prior to this year's earlier reductions, and the company is seeking to keep prices as low as possible within its control.

According to Bloomberg, products including supermarket-sized bags of Doritos, Ruffles and some carbonated drinks are expected to see price increases by the end of this year or early 2027. Bloomberg first reported the news, citing sources familiar with the matter.

Activist investor Elliott Investment Management disclosed last year that it held about $4 billion worth of PepsiCo shares and has been urging (link) the company to revitalize its carbonated drinks business, boost its stock price, and explore selling non-core food assets.

Elliott has not yet responded to a Reuters request for comment.

PepsiCo's share price has fallen nearly 10% year-to-date, and dropped around 1% in early trading.

With oil prices remaining high due to the Iran war, many food and beverage companies are facing rising packaging and logistics costs.

PepsiCo reported in its latest earnings (link) that commodity costs will rise further in the second half of the year, and North America food sales for the second quarter fell 2%, though the company kept its full-year outlook unchanged.

The company also stated in July that the impact of high oil prices on consumer demand was beyond expectations.

Although PepsiCo implemented price cuts and CEO Ramon Laguarta announced a review of its North America supply chain in December last year, sales in its North America business have remained negative so far this year.

BNP Paribas analyst Kevin Grundy said in a report Wednesday that despite PepsiCo’s efforts, a turnaround in North America this year is unlikely, and “for Elliott, everything could become a ‘bargaining chip’ to heighten activism.”

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