PepsiCo forecasts weak annual profit as US snack, soda demand dips

Updates shares in paragraph 2 and adds investor comment in paragraph 12

By Ananya Mariam Rajesh

Feb 4 (Reuters) - PepsiCo PEP.O forecast annual profit below expectations and missed quarterly revenue estimates on Tuesday, as the Doritos maker battles weakening demand for its sodas and snacks such as Lay's in the United States, its largest market.

Shares of PepsiCo fell 2.5% in early trading.

Americans are still paring back spending on soft drinks and salty treats to save their dollars for essential purchases, forcing PepsiCo to tap promotions for volume growth after several quarters of slowdown wrought by price hikes.

The target is to offer multi-packs and mini canisters to bring back consumers leaning towards smaller pack sizes or cheaper alternatives from retail aisles.

PepsiCo also promised heavy investments into overhauling its existing products and introducing new items such as ethnic-inspired flavor offerings through its Sabritas, Marias and Natu Chip brands to spur demand.

"We expect our North America performance to gradually improve as the year progresses, and our commercial activities take hold," executives said in the company's prepared remarks.

PepsiCo's North America beverages and Frito-Lay North America, its two biggest segments, reported a 3% volume decline in the fourth quarter.

The company's total organic volume slipped 1% for the quarter ended Dec. 28, while average prices jumped 3%.

"Frito-Lay business is still finding its footing as elevated prices weigh on snacking trends ... beverage business also continues to lose share, and we believe PepsiCo is reaching its pain threshold," said RBC Capital Markets analyst Nik Modi.

PepsiCo expects a low-single-digit increase for fiscal 2025 core earnings per share, compared with analysts' estimates for a 4.73% rise to $8.53 per share, according to data compiled by LSEG.

Its quarterly net revenue fell 0.2% to $27.78 billion, missing estimates of $27.89 billion. Excluding items, PepsiCo earned $1.96 per share, above expectations of $1.94.

"They have undergone some pretty big investments in terms of increasing productivity and reducing costs, that certainly seems to play out in the growth of earnings ... but the top line revenue is definitely under pressure," said Brian Mulberry, client portfolio manager at Zacks Investment Management, which has a stake in PepsiCo.