Once considered a dependable and staple stock investment for consumers, PepsiCo is now struggling to stay relevant in a market shifting toward health-conscious foods and accountability.
PepsiCo's business model is built on convenience, and in today's market, analysts are wary about PepsiCo's economic outlook, per a Barron's report.
What's happening?
PepsiCo, the multinational giant behind Pepsi, Lay's, and Doritos, is underperforming — and analysts have taken notice.
Earlier this year, the company's stock dropped nearly 30% since its high in May 2024, according to Barron's, and it now lags behind the S&P 500 and its rival, Coca-Cola.
While PepsiCo's sales and revenues are holding up, this decline is largely due to cost increases, per the report. PepsiCo's sales volume in the U.S. is shrinking: 2024 beverage sales in North America fell by 3%, and its Frito-Lay snack sales dropped by 2.5%.
Why is Pepsi's performance important?
The decline in PepsiCo's performance reflects broader trends reshaping the food industry and consumer behavior.
Ultra-processed foods are increasingly less popular. A Purdue University report found that 30% of consumers regarded all ultra-processed foods as unhealthy and to be avoided.
Consumers are also becoming more critical of marketing strategies that promote small portion sizes while raising per-unit costs, which is a tactic PepsiCo has employed to preserve margins, according to the Barron's report.
With processed foods comes plastic packaging, and PepsiCo makes a lot of it, so much so that it has been ranked the third-worst plastic polluting company in the world in the recent Talking Trash report.
Consumer preferences push back on this kind of plastic pollution, with a McKinsey report, summarized by WhatTheyThink, noting that 52% of U.S. consumers say they are highly concerned about the environmental impact of packaging.
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The way it looks 😍 Some analysts view PepsiCo's downturn as a potential recession warning, as consumer pullback on purchases like branded snacks could signal broader economic distress.
As more shoppers buy fewer snacks in this inflationary market or avoid processed snacks for health reasons, PepsiCo's hold on aisles is loosening.
What is Pepsi doing about it?
While PepsiCo has announced an investment in regenerative agriculture and made sustainability commitments, it has also delayed key sustainable packaging goals and scaled back other initiatives.
PepsiCo's core operations depend on selling processed products in single-use plastic, with minimal shifts in accountability or transparency. For example, Talking Trash found that PepsiCo is part of at least seven trade groups that lobby against plastic pollution legislation.
Simultaneously, the company continues to tell consumers about its pilot reusability schemes rather than larger-scale and longer-term commitments, which suggests it may be employing greenwashing tactics.
Consumers can push for stronger action by learning about and calling out greenwashing, boycotting brands that don't align with their values, and investing in companies that prioritize people over profit.
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