PepsiCo is focusing on cost discipline and international growth as its North American business faces stagnation. The company’s third-quarter earnings for fiscal 2026 revealed a 5% net revenue growth in its North American beverage segment, but executives are not satisfied with the overall U.S. performance.
CEO Ramon Laguarta and CFO Stephen Schmitt emphasized the need for faster and more efficient growth in North America during a recent earnings call. Schmitt highlighted their commitment to fueling international business and maintaining cost discipline.
Cost-cutting measures and guidance update
PepsiCo is identifying areas for structural cost reduction, aiming to curtail discretionary spending and improve financial performance in North America. This includes reducing corporate costs and reallocating resources away from non-growth initiatives.
The company has lowered its earnings guidance for fiscal 2026, now expecting earnings per share growth between 2.5% and 3.5%, down from the previous range of 5% to 7%. This adjustment reflects cost pressures and margin challenges in North America.
North American challenges and consumer trends
PepsiCo’s North American business has faced higher costs, increased competition, and shifting consumer preferences. Rising food prices and changing snacking habits are also impacting the market.
Read Also: Basware CFO Urges Ambitious AI Upskilling for Finance Leaders
A Deloitte survey found that 40% of consumers now prioritize value, making cost-driven choices and sacrificing convenience. PepsiCo aims to address these trends through its 2019 Productivity Plan, focusing on cost management and productivity gains.
The company’s pricing investments in North America have improved snack segment volume, providing flexibility to absorb inflationary pressures. PepsiCo plans to use revenue management tools to mitigate margin pressures in the upcoming quarter, with benefits expected in the next calendar year.
Beverage Segment Performance and Margin Pressures
PepsiCo’s North American beverage segment reported net revenue of $7.7 billion for the quarter ended Sept. 5. However, the company experienced declines in both beverage volume and margins. The core operating margin for this segment decreased by 15 basis points, influenced by volume and channel mix pressures, as well as increased advertising and marketing investments.
Additionally, the company noted that food prices, including non-alcoholic beverages, rose in August, with a 3.7% increase in the price index for beverages over the 12-month period. PepsiCo anticipates using a mix of net revenue management tactics, which may impact pricing, to address these challenges.
International momentum and future strategies
While North America presents challenges, PepsiCo’s international business continues to show momentum. The company will allocate resources to support this growth while maintaining cost discipline.
