PepsiCo spent February cutting prices. Lay’s, Doritos, Cheetos, and Tostitos are all down 15%. The company needed American shoppers to start buying snacks again, and cheaper prices seemed like the obvious way to get them back.It didn’t really work. And when CEO Ramon Laguarta got on the Q2 earnings call on July 9, he had a pretty specific explanation for why. It wasn’t the prices. It was the gas pump.What PepsiCo CEO Ramon Laguarta said about gas prices, consumer spending”I think the consumer is worse than what we had anticipated, and it’s driven mainly by gas prices,” Laguarta told analysts, CNBC confirmed.Gas hit a four-year high of $4.56 a gallon in late May because of the oil disruptions from the U.S.-Iran conflict, according to Yahoo Finance. People filling up their tanks were spending a lot more than usual. And when that happens, the $4 bag of Doritos starts to feel like something you can skip.North American food volumes were flat in the quarter. Beverage volumes in North America fell 4%. The price cuts didn’t move the needle.More Oil & Gas:Chevron CFO reveals why gas prices are stuckJPMorgan resets oil price target for rest of 2026Goldman Sachs sees an oil glut coming, but don’t expect much relief at the pumpLaguarta was specific about where it hurt most. “Probably some channels, more the impulse channels, have been impacted, where there is more of a correlation with the price of gas,” he said. “Certain convenience stores… we’re seeing a slowdown of the conversion of traffic into purchases.”Why gas prices cut into convenience-storesnack and beverage sales Here’s how that actually works. Someone pulls into a gas station to fill up. While they’re there, they used to grab a Gatorade or a bag of chips. That’s an impulse buy. Nobody plans it. It just happens when you feel like you have a few bucks to spare.When gas is expensive, that feeling goes away. People are still stopping at gas stations. They’re just filling up and leaving. PepsiCo sells a huge amount of product through exactly these locations, so when the grab-and-go behavior stops, it shows up right away in their numbers.CFO Steve Schmitt put it plainly. “We need to see some improvement in the convenience and gas channel, and hopefully we’ll get some tailwinds from gas prices to do that,” he said on the call, according to CNBC.The company is essentially waiting for gas to get cheaper before it expects things to turn around at home. That’s a pretty candid admission from a company that just cut prices across its biggest snack brands and still didn’t see the recovery it had hoped for.PepsiCo North America snack, beverage volumes fall while growing internationallyThe split in PepsiCo’s results this quarter was pretty stark. Overseas, things are going well. Global food volumes were up 3%, beverage volumes up 2%, the strongest growth since 2022. Europe, Asia Pacific, the Middle East, and Africa are all showing gains.In the U.S., the opposite is happening. North American organic revenue fell about 0.5%. Even the zero-sugar products, Pepsi Zero Sugar and Mountain Dew Zero Sugar, which had been doing well, weren’t enough to offset the broader domestic weakness.”Our North America business was softer than we anticipated in the second quarter, and we now expect a more gradual improvement in performance trends for the balance of this year,” Schmitt said, as CNBC reported.PepsiCo held its full-year guidance. Still expecting organic revenue growth of 2% to 4% and core constant currency EPS growth of 4% to 6%. The company is leaning on its international business and internal cost savings to get there while North America recovers, whenever that happens.
PepsiCo is essentially waiting for gas to get cheaper before it expects things to turn around at home.Patrick/Getty Images
What analysts say about PepsiCo after consumer spending warningRBC Capital Markets analyst Nik Modi wasn’t buying the recovery story. “While there have been some signs of progress, rate of improvement has stalled given the inflationary pressures, challenging consumer’s value equations,” he wrote in a note cited by Transport Topics. He also said PepsiCo would likely keep losing beverage share to Coca-Cola and Keurig Dr Pepper.Activist investor Elliott Investment Management has been pushing PepsiCo to cut prices further on some products and bring in cheaper pack sizes. The February cuts were already a significant move. Cutting prices 15% on flagship brands and still not getting volume back raises questions about whether price is even the main problem right now.When gas is taking a bigger piece of the household budget, people aren’t doing the math on whether Doritos are worth $3.50 versus $4.00. They’re just buying less of everything that isn’t essential. That’s a tougher environment for price cuts to fix.What PepsiCo’s warning says about American consumer spending right nowPepsiCo moves product through every major retail format in the country, at every price point, selling to essentially every income group. The data Laguarta is drawing on when he says the consumer is worse than anticipated is real transaction data from millions of purchases across thousands of locations.The convenience-store and gas-channel slowdown is a pretty good read on how people feel day-to-day. These are $3 and $4 decisions made on instinct. When people stop making them, it usually means they’re watching every dollar pretty carefully.Gas prices have started coming off their late May peak. If that continues into the summer, PepsiCo’s domestic picture should improve. If it doesn’t, the gradual recovery Schmitt described gets pushed out further, and what PepsiCo is seeing in its numbers right now may serve as a preview of what many other consumer-facing companies report when their own Q2 calls come around.Related: As consumers struggle, Costco sets a troubling record