PepsiCo Navigates Volume Declines Through Strategic Pricing and Investment

PepsiCo is navigating volume declines through strategic pricing, targeted value investments, and product innovation. The company has introduced a "dual-size" price-pack architecture with lower entry points and higher-value offerings. PepsiCo is also pursuing intelligent reinvestment strategies and portfolio transformation, with international markets showing resilience and driving mid- to high-single-digit growth. Competitors include Coca-Cola and Mondelez, both of whom compete in the beverage and snack categories with a focus on innovation, affordability, and international expansion.

PepsiCo, Inc. (PEP) is navigating volume declines in its Frito-Lay North America (FLNA) segment through a combination of strategic pricing, targeted value investments, and product innovation. The company has introduced a "dual-size" price-pack architecture, featuring lower entry price points (under $2) aimed at value-conscious shoppers and higher-value offerings for premium consumers. This strategy has shown meaningful improvements in unit volumes, particularly in single-serve and multi-pack formats attached to meal deals, which are gaining traction in convenience channels [1].

Simultaneously, PepsiCo is pursuing intelligent reinvestment strategies that balance affordability with profitability. Rather than indiscriminately slashing prices, management is leveraging data and advanced tools to optimize promotions and product sizes according to income cohorts and time-of-month spending behaviors. Smaller packs and value-priced options are being prioritized to maintain consumer frequency, while operational efficiencies, such as improved field execution, SAP-driven visibility, and cost-rightsizing, are being accelerated to free up funds for reinvestment [1].

PepsiCo’s broader strategy includes portfolio transformation and expansion into high-growth segments, especially internationally. While FLNA has seen subdued volume trends, international markets have shown resilience, helping to offset domestic pressure. The company expects mid- to high-single-digit growth from markets like India and Brazil, with incremental profitability and scale. This two-pronged approach is mitigating volume losses with pricing and strategic reinvestment. Meanwhile, leaning on international momentum positions PepsiCo to preserve margins and drive long-term sustainable growth despite near-term headwinds [1].

PepsiCo’s competitors, The Coca-Cola Company (KO) and Mondelez International, Inc. (MDLZ), are also navigating the market with strategic moves. Coca-Cola competes directly across carbonated soft drinks, bottled water, juices, and ready-to-drink teas, while Mondelez is a major competitor in the snack and convenience foods space, owning popular global brands like Oreo, Ritz, and Cadbury. Both companies are focused on innovation, affordability, and international expansion, vying for market share in snacking occasions [1].

Shares of PepsiCo have lost 11.6% year to date against the industry’s growth of 7%. From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 17.09X, below the industry’s average of 18.47X. The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 3.6%, whereas its 2026 earnings estimate suggests a year-over-year uptick of 5.3%. The estimates for 2025 and 2026 have been unchanged in the past seven days. PEP currently carries a Zacks Rank #4 (Sell) [1].

References:
[1] https://finviz.com/news/98001/how-is-pepsico-balancing-volume-declines-with-pricing-gains