PepsiCo Inc. lowered its earnings forecast as it suffered from weak consumer demand for its products during the first quarter.
PepsiCo, owner of Lay’s, Tostitos and more, saw its net revenue decline almost 2% and faced a 1% decrease in North American revenue.
President Donald Trump’s universal 10% tariff will affect Pepsi, as the concentrate of the sugary drink is made in Ireland, from which Pepsi would source due to the country’s low corporate tax rate.
PepsiCo has now lowered its estimated earnings forecast to a 3% decline.
“As we look ahead, we expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs,” PepsiCo CEO Ramon Laguarta said in a statement.
The 10% tariff also affected PepsiCo’s Mexico operations, where it has two food plants.
The global 25% tariff on aluminum will also affect PepsiCo.
“We probably aren’t feeling as good about the consumer now as we were a few months ago,” Jamie Caulfield, PepsiCo finance chief, told The Wall Street Journal.
Executives from PepsiCo said they do have a plan for the tariffs but didn’t share exact details.
However, the company has started to sell items of different sizes and prices, which would allow consumers to still buy products that fit in their budget.
PepsiCo prices increased by 3% at the end of March and the organic volume declined by 2%.
“Price hikes are doing the heavy lifting, with volume growth across its beloved brands like Pepsi, Gatorade, Lay’s and Doritos struggling to gain momentum,” Aarin Chiekrie, an equity analyst at British financial services company Hargreaves Lansdown, told Reuters.
PepsiCo now faces a new challenge with the newly enforced tariffs and will soon have to decide what steps it will take from here.