PepsiCo Inc.’s chips prices had gotten too high. Walmart Inc. had been telling the maker of Doritos, Lay’s, Cheetos and many other beloved snacks that was the case for more than a year.
Executives at PepsiCo knew it, too. Sales at Frito-Lay, the company’s snacks powerhouse, were plunging. Some of its chips cost more than $7 a bag; at Walmart, Doritos prices had jumped nearly 50% from 2021, according to Attain, which tracks consumer spending data.
Yet, even when Walmart cut Frito-Lay’s shelf space — giving it to its own cheaper, in-house brand and competitors like Takis — price tags didn’t go down.
Finally, in February PepsiCo announced it would slash prices by up to 15% on some salty snacks. By then, Frito-Lay had missed internal revenue targets for two years in a row by over a billion dollars, according to people familiar with the matter.
PepsiCo Chief Executive Officer Ramon Laguarta said at a conference in February that the company will know by this summer if the cuts are “enough.” Tests in select cities last year generated a “pretty good” boost in volume, he said on a separate call with investors that month. By agreeing to lower prices, the company secured, on average, a double digit increase in shelf space at major retailers like Walmart, Costco and Target. It expects those changes to be in full force by the end of this month, Laguarta said.
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