Tastes like a comeback

Today we’re talking about chips—and no, not the kind that train large language models.

If your favorite snacks have felt expensive for a while, you’re not imagining it. PepsiCo, the parent of snack giant Frito-Lay—itself the parent of brands like Doritos, Tostitos, and Cheetos—has spent the past few years raising prices to offset higher pandemic-era costs. The result is that the chips you used to grab without thinking are now a small splurge: A single bag of Doritos costs $7 in some places, 50% higher than in 2021.

Consumers strained by higher inflation and lured by healthier options have revolted, while stores like Walmart have cut the shelf space dedicated to PepsiCo products. The result: PepsiCo’s revenue turned negative back in 2024 for the first time in over 13 years, and it has missed revenue targets by over $1 billion across the last two years.

A bite of good news

But there’s finally some good news for all the Lay’s and Ruffles loyalists out there: After activist investor Elliott Investment Management took a $4 billion stake in the company and applied pressure, PepsiCo agreed to cut some snack prices by about 15% in February. The results are already showing up in earnings.

Earlier today, the company announced that it beat both top and bottom line expectations in Q1, with net sales up 8.5%. North American food volumes grew for the first time in two years, signaling that consumers are coming back. At the same time, there was a boost from its acquisition of Poppi, a prebiotic soda company, whose organic revenue grew 2.6% this quarter.

Looking ahead, PepsiCo reiterated guidance for 2% to 4% organic revenue growth and 4% to 6% EPS growth, but flagged increased uncertainty as geopolitical tensions make the outlook harder to predict.

Shares of the snack food giant gained 2.28% today.

Cracks in the crunch

For now, the company seems unfazed by that volatility. In fact, CEO Ramon Laguarta said the Iran war is boosting sales in certain markets in the near term, as PepsiCo’s supply chain has held up better than competitors.

That said, challenges are piling up. Competition is intensifying from packaged food giants like Conagra Brands and General Mills, while consumers continue shifting toward healthier options—which cost more for PepsiCo to produce, while simultaneously pressuring demand for its traditional salty snacks.

Ultimately, just like how silicon chips quietly power the AI world, Frito-Lay is also the backbone of PepsiCo. While its beverage segment still trails Coca-Cola in global dominance, the snack unit commands nearly 60% of the US snack market. But if today’s results are any indication, pricing adjustments and steady demand could help anchor PepsiCo’s broader performance—even as pressures build elsewhere.—SY