Pepsi warns on US demand and cost inflation

US food and drink maker PepsiCo scaled back its full-year earnings forecasts on ongoing economic uncertainty yesterday.

Pepsi said performance in its North American drinks business was worse than expected, due to weakened consumer demand and intensifying competition, which has made it difficult to raise prices to offset soaring commodity costs.

“Of the three factors impacting North America beverages – inflation, consumer demand and pricing – the consumer demand picture is the most concerning to us at this point,” chief executive Indra Nooyi told analysts on a call.

PepsiCo now expects 2011 earnings to grow at a high single-digit rate, from the $4.13 per share it earned in 2010, reflecting greater uncertainty regarding macroeconomic and consumer trends for 2011, cost inflation and investment in emerging markets.

Its net income in its second quarter rose to $1.89bn (£1.2bn) or $1.17 per share from $1.6bn or 98 cents per share a year earlier.