‘Treat culture’ is helping PepsiCo in a world of inflation: ‘I’m going to fill up my car with gas, and I’m going to treat myself to a Mountain Dew’

This post was originally published on this site

But it’s not stopping them from picking up a pack of chips on the way home.

PepsiCo, the owner of brands like Pepsi, Mountain Dew and Lay’s, reported expectations-beating revenue and profit on Thursday, with executives citing a continued interest in the company’s products despite price hikes.

Consumers “want that affordable luxury because they still have some money in their pockets,” PepsiCo CFO Hugh Johnston told the Wall Street Journal. “I’m going to fill my car up with gas, and I’m going to treat myself to a Mountain Dew and a bag of Lay’s.”

PepsiCo increased prices of its products by around 15% on average throughout the quarter, and Johnston said the hikes were needed to keep up with rising commodity prices. Yet most consumers were willing to pay those higher prices, even though sales volumes fell across several parts of the company, including its packaged-food business in North America. 

PepsiCo generated $22.3 billion in revenue in the quarter ending June 17, a 10.4% year-on-year jump. The company earned $2.7 billion in net income, almost double what it earned this time last year. 

Inflation in the U.S. has cooled significantly. The consumer price index rose by 3% in June, significantly lower than the 9.1% increase reported the year before. 

PepsiCo also raised its full-year guidance for both revenue and profit. Shares rose by 2.4% on Thursday.

‘Treat culture‘

The earnings of PepsiCo and other snack companies could be lifted by new tastes among the younger U.S. consumers, who increasingly adhere to “treat culture,” or the idea of buying a small luxury to get through the day.  

In the face of tough macroeconomic conditions, more tiring working conditions and increasing cost-of-living, millennial and Gen-Z consumers are turning to smaller purchases, like snacks, escapist entertainment and clothes. 

Younger consumers are also just snacking more in general. Half of U.S. consumers, and primarily millennials and Gen-Z, now have three or more snacks a day, according to the Circana Group, a market research firm. That’s led to booming snack sales, which rose by 11% to hit $181 billion in 2022 per Circana Group data. 

Mondelez International, the owner of brands like Oreo and Toblerone, generated $9.2 billion in revenue in its most recent quarter, an 18.1% increase year-on-year. Like PepsiCo, Mondelez said it experienced little consumer blowback from increased prices. 

It’s not just U.S. consumers buying small luxuries for themselves to get through the day. In China—a country struggling with record youth unemployment—some social media users have taken to calling themselves the “moonlight clan,” spending money on small treats rather than saving up for an unattainable standard of living.