Executives at PepsiCo waited too long to slash prices on its $7-a-bag snacks — including Doritos, Cheetos and Lay’s — costing the company billions, according to a report.
The company announced in February that it would cut prices on some of its best-selling junk food after years of hikes that pushed costs up nearly 50% since 2021, according to data cited by Bloomberg News.
But the move came only after PepsiCo had already missed internal revenue targets by more than $1 billion for two straight years — even as retailers such as Walmart warned that sales were slipping, the report said.
Executives had been debating price cuts internally since at least 2024 as sales at its Frito-Lay division slid — but resisted taking the short-term hit to revenue, according to the report.
As executives stalled, retailers like Walmart began cutting shelf space for Frito-Lay products in favor of cheaper alternatives, squeezing sales even further, the report said.
By the time PepsiCo finally moved to cut prices, the damage was already done, with sales and market share already under pressure, the report said.
Instead of cutting prices, PepsiCo leaned on promotions, smaller portions and other tactics to lure shoppers back — but none of it worked, according to the report.
Government data shows snack prices surged in recent years, with the average cost of a 16-ounce bag of potato chips jumping roughly 27% between 2021 and 2024 — including double-digit increases in 2022 and 2023 before leveling off last year.
But branded snacks appear to have climbed even higher, with some large bags rising close to 50% over the same period and topping $7 at major retailers, according to the report — a price point that ultimately proved too steep for many shoppers.
Frito-Lay had long been PepsiCo’s cash cow, generating steady growth for more than a decade and controlling a dominant share of the US salty snacks market, according to analysts.
That dominance gave the company unusual pricing power — allowing it to push through steep increases during the pandemic as consumers continued to spend.
From 2021 through 2023, Frito-Lay leaned heavily on price hikes to fuel growth, with “effective net pricing” jumping as much as 17% in 2022 even as volumes flatlined, according to company filings.
By 2023, volumes had already started slipping — down 1% — even as prices kept climbing.
That strategy began to unravel in 2024, when pricing power faded and volume declines accelerated to 2.5%, pushing revenue slightly negative and sending operating profit down sharply.
The shift marked a turning point for the snack giant, as years of price-driven gains gave way to weakening demand and margin pressure.
But what began as modest hikes to offset higher costs ballooned into double-digit increases, with net pricing up roughly 20% by late 2022, the report said.
Shoppers eventually pushed back, with some balking at paying more than $7 for a bag of chips and cutting back purchases as inflation squeezed household budgets.
By 2024, Frito-Lay’s revenue had turned negative for the first time in more than a decade — a stark reversal for a business that had posted growth for 53 consecutive quarters.
The Post has sought comment from PepsiCo and Walmart.
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