The news: PepsiCo’s focus on value and innovation helped drive 2% YoY volume growth in its North American food business, its first increase in more than two years.

• The company began cutting prices on snacks like Cheetos, Doritos, and Lay’s by as much as 15% in February, which helped it gain more shelf space.
• It has also expanded its "better for you” lineup with protein- and fiber-enhanced products such as SunChips Fiber, Doritos Protein, and a “Naked” platform featuring classic snacks free of artificial colors or flavors.

The downside: The company’s beverage business lagged, with volumes down 2.5%. Even so, it sees opportunity in similarly leaning into the “better for you” trend.

• Sales of its prebiotic soda brand Poppi are accelerating in Q2, and no-sugar Pepsi is outpacing competitors.
• The company is also overhauling the Gatorade brand by removing artificial colors from its powdered and ready-to-drink products, with plans to roll out new lines such as Gatorlyte Longer Lasting, which will contain more electrolytes than existing offerings.

The numbers:

• Adjusted earnings per share were $1.61, up 9% and ahead of the $1.55 expected.
• Revenues reached $19.44 billion, up 8.5% and above the expected $18.94 billion, driven in part by the acquisition of Poppi and the divestiture of Rockstar.
• Organic revenues increased 2.6%.

Pepsi reiterated its full-year forecast, expecting organic revenue growth of 2% to 4% and core constant-currency EPS growth of 4% to 6%. It noted that conflicts in the Middle East have injected significant uncertainty into the global economy.

Implications for consumer packaged goods brands: PepsiCo’s results show it’s better to adapt late than not at all. While it was far from the first CPG company to respond to growing demand for “better for you” products, its ability to embrace that shift—while also adjusting pricing—helped it deliver better-than-expected results.

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