PepsiCo Targets Health Snacks and Zero-Sugar Beverages to Offset North America Volume Slump
PepsiCo's North America snack volumes fell, prompting focus on permissible snacks and zero-sugar beverages to revive growth. The company holds a $191 billion market cap, raised dividends for 53 years at a 7.4% 10-year growth rate, and saw revenue CAGR of 4.3% from $63.1 billion in 2015 to $91.9 billion in 2024.
1. North America Snack Volume Decline Continues
PepsiCo reported a 2.5% year-over-year decline in North America snack volume during the third quarter, driven by softer demand for flagship brands such as Lay’s and Doritos. The company attributed the drop to consumers trading down to private-label alternatives and reduced on-the-go consumption patterns. Management is responding by increasing promotional support on value packs and expanding its portfolio of better-for-you snack options, including baked and whole-grain varieties, which now account for 18% of total Frito-Lay U.S. revenue versus 14% a year ago.
2. Zero-Sugar Beverages Gain Traction
PepsiCo’s zero-sugar beverage segment delivered 6% organic revenue growth in Q3, outpacing the broader beverage portfolio. Pepsi Zero Sugar posted unit case volume growth of 8% globally, while Mountain Dew Zero Sugar grew 10% in the United States. The company plans to roll out two additional zero-sugar flavor extensions by mid-2025 and is accelerating marketing spend behind its Aquafina Pure Water program, which saw sales volume rise by 12% in the quarter.
3. Robust Revenue and Dividend Track Record
Over the past decade, PepsiCo grew annual revenues from $63.1 billion in fiscal 2015 to $91.9 billion in fiscal 2024, a compound annual growth rate of 4.3%. The company’s dividend has increased for 53 consecutive years, with a 10-year dividend growth rate of 7.4%. In the most recent payout, PepsiCo raised its quarterly dividend by 8%, representing the largest percentage increase in its history and reflecting strong free cash flow generation of $8.7 billion over the last twelve months.
4. Strategic Investments and Cost Management
To offset margin pressure from higher input costs, PepsiCo has implemented $2.2 billion in productivity savings year to date, through route optimization and packaging material redesigns. The company is investing $1 billion over the next two years in cold-drink equipment upgrades at major retail partners to drive increased in-store visibility and incremental volume. Additionally, PepsiCo plans to accelerate digital transformation initiatives—such as predictive demand forecasting—across its supply chain, targeting a 5% reduction in logistics costs by 2026.