The news: PepsiCo’s US momentum stalled in Q2 as consumers moderated spending on snacks and beverages in the face of rising economic pressures.

• North America organic revenues declined 0.5% YoY, missing internal expectations.
• Sales volumes in its snack business were flat YoY, while beverage volumes fell 4%.

Pepsi’s weak performance was especially notable given the company’s highly-publicized move earlier this year to lower suggested retail prices by as much as 15% for snacks like Doritos, Cheetos, and Lay’s, which was meant to revive growth following nine straight quarters of volume declines in Pepsi’s North America snack and beverages business. Instead, Pepsi struggled with a sharp pullback in sales at convenience stores and other channels where shoppers tend to make impulse purchases, which CEO Ramon Laguarta blamed on elevated gas prices.

The big picture: PepsiCo is not the only consumer packaged goods (CPG) manufacturer to flag pressure on the US consumer. High gas prices and reduced SNAP benefits are constraining budgets, driving more shoppers to buy only what they need when they need it.

• Nestlé has noticed a more pronounced strain on personal spending in the past few months, with shoppers increasingly opting for either value sizes or smaller packs, executives told The Wall Street Journal.
• Likewise, General Mills noted that shoppers are buying on promotion more often, and shifting what and where they buy to maximize value.

CPGs’ efforts to win back consumers are challenged by the fact that more shoppers have become accustomed to—and are seeking out—store brands. Roughly 1 in 3 US adults (35%) say that trading down to cheaper brands is their preferred way of reducing grocery spend, while 15% are switching to less expensive brands and stores to save money, according to an April Alvarez and Marsal survey.

• Store brand unit sales are up 0.2% YoY in the six months ended June 14, compared with a 0.5% decline for national brands, per the Private Label Manufacturers Association (PLMA) and Circana.
• Kroger’s Own Brands portfolio outpaced national brands by 175 basis points in the grocer’s fiscal Q1, and contributed strongly to the retailer’s comparable sales growth, CEO Greg Foran said.

Implications for CPGs: Consumers’ reluctance to spend on small indulgences like snacks and soda is a serious problem for CPGs, especially as renewed tensions between the US and Iran raise the possibility of another spike in gas prices.

While companies are making an effort to increase affordability with cheaper products and package sizes, those initiatives have—so far—delivered mixed results. For General Mills, price cuts helped it grow or maintain market share in roughly two-thirds of its 10 largest US categories in fiscal 2026. But for Pepsi, lower prices haven’t been enough to consistently drive sales; instead, the company is now fine-tuning its affordability strategy to better meet the needs of various selling channels and audiences, Laguarta said on its Q2 earnings call.

Leaning into functional benefits and ramping up innovation could also help keep shoppers from trading down. Pepsi noted that “permissible” products like its Simply brand of snacks and zero sugar beverages are performing well with consumers, giving it confidence to continue scaling that part of its portfolio. Such items can also enable foodmakers to stay relevant with GLP-1 users.