After facing a recent slump in sales for a number of its products, PepsiCo (PEP) is switching gears in an attempt to win back customers who are fed up with the company for engaging in a controversial practice in retail.
Amid harsh criticism from consumers, PepsiCo has decided to scale back on "shrinkflation" (i.e., when a product’s size is reduced but the price stays the same) for a number of its products during a critical season in American sports.
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Bags of PepsiCo’s Tostitos and Ruffles chip brands are getting a boost in size in the midst of football season. During a recent earnings call, PepsiCo CEO Ramon Laguarta announced that both brands will contain 20% more chips in their bags for no additional cost to consumers.
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“It's the football season,” said Laguarta during the call. “There's a lot of gatherings, and those brands belong very well in those gatherings.”
PepsiCo is also adding roughly two to three “bonus packs” to its multipacks, which have also seen a dip in sales, partially due to consumers being more strict about budgeting. The company will also start offering 10-count multipacks, which will be a cheaper option than its 18-count and 24-count bags.
“This will be all additional value that I think will have a positive impact in the business in the coming months,” said Laguarta.
Consumers restrict their spending on PepsiCo products amid shrinkflation
The changes from PepsiCo come after consumers, in recent years, have criticized the company’s brands for shrinking in size and increasing in price.
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As a result, consumers have been fighting back with their wallets. PepsiCo revealed in its third-quarter earnings report for 2024 that in the U.S., Frito Lay faced a 1% year-over-year decline in revenue during the quarter, while volume for its convenient foods shrunk by 1.5%.
Quaker Foods, which is also owned by PepsiCo, faced a 13% year-over-year decrease in revenue, and a 13% decline in convenient foods volume during the quarter.
Lawmakers demand answers from PepsiCo about shrinkflation
PepsiCo’s decision to add more chips to its Tostitos and Ruffles chip brands also follows a recent letter that U.S. Sen. Elizabeth Warren and Rep. Madeleine Dean sent to the company’s CEO on Oct. 6 demanding answers on its shrinkflation practices.
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Both lawmakers accused PepsiCo of price-gouging and “dodging taxes on those price-gouging profits.”
"PepsiCo is sticking the American people with the bill twice over, with American families (1) paying higher prices for smaller packages of food, and (2) paying their taxes while big corporations like PepsiCo avoid chipping in their fair share to run our country. We are requesting additional information about PepsiCo’s shrinkflation practices and tax liability to more clearly understand the consequences for consumers," reads the letter.
PepsiCo is one of the three companies that both lawmakers are demanding answers for regarding their controversial retail practices. The companies have drawn complaints from consumers across the country who are battling widespread inflation.
“Shrinking the size of a product in order to gouge consumers on the price per ounce is not innovation, it is exploitation,” wrote the lawmakers in the letter. “Unfortunately, this price gouging is a widespread problem, with corporate profits driving over half of inflation.”
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