PepsiCo Inc (NASDAQ:PEP, ETR:PEP) is facing another difficult quarter due to continued sluggish topline results in North America as snacking volumes remain challenging, RBC Capital Markets analysts wrote in a note to clients on Thursday.
In “dissecting PepsiCo's Snack's problem one chip at a time,” the analysts believe the company’s Frito-Lay division has three main issues: price points; under indexed to growing parts of the snacking wheel; and lack of exposure to protein.
They noted that fixing these issues will take time, capital and or reinvestments that could dilute earnings per share (EPS) and/or investment returns, which has led them to lower their EPS estimates for 2026 to below consensus.
“The consumer has stagnated due to macro pressures, and we believe snacking price points are an issue,” the analysts wrote.
They added that Frito-Lay's biggest issue is one of affordability, especially for low/middle income consumers.
RBC analysts also believe PepsiCo's concentration in salty snacks has hindered growth as consumers shift to other areas of snacking, saying “consumers are increasingly looking for more protein in their diets and snacking is no exception”.
The analysts maintain a cautious outlook on the company and have a ‘Sector Perform’ rating on the stock with a $145 per share target price.
PepsiCo shares eased 0.2% to $142.85 in early trading on Thursday.