PepsiCo cuts 1,000 jobs as North American sales keep lagging

PepsiCo will cut about 1,000 jobs across North America as the company tries to turn around lagging sales in its home market, CNBC reported.

Ram Krishnan, CEO of PepsiCo North America, told employees in a letter obtained by CNBC that the company needs to be “faster, more connected, and more capable” to deliver industry-leading growth. The cuts will take place over the next week as PepsiCo streamlines operations and consolidates teams across its North American business. The Wall Street Journal first reported the layoffs.

The job cuts follow a weak third quarter. PepsiCo lowered its full-year earnings outlook in October, citing struggles in its home market. North American beverage volume fell 2% during the quarter, and food volume was flat. The company has tried cutting prices and increasing marketing spend, but Chief Financial Officer Steve Schmitt said on the earnings call that the turnaround is taking longer than expected.

PepsiCo employs about 306,000 people worldwide, including roughly 125,000 in the United States, according to a company filing as of Dec. 27. A cut of 1,000 jobs is less than 1% of the global workforce, but it is concentrated in North America, where the performance problem is. The reduction targets the corporate and operational layers that Krishnan’s letter described as needing to be “more connected,” which typically means consolidating redundant functions across divisions that were built up during periods of growth.

The volume numbers tell the story. Beverage volume down 2% means Pepsi is selling fewer cans and bottles of Pepsi, Mountain Dew, and Gatorade in North America than it did a year ago. Food volume flat means Frito-Lay is selling roughly the same number of bags of Lay’s, Doritos, and Cheetos. In a market that grows with population, flat is a contraction in real terms. PepsiCo is losing share or the category is shrinking, and either way the fix is not more headcount.

The pricing wall is the root cause. PepsiCo raised prices aggressively in 2023 and 2024, passing through inflation in ingredients, labor, and transportation. The strategy worked while inflation was the headline story and consumers accepted that everything cost more. It stopped working when inflation cooled and consumers noticed that a bag of Doritos cost $5.50 instead of $3.50. Coca-Cola, PepsiCo’s primary competitor, has maintained volume better by pricing more cautiously and investing in smaller package sizes that keep the per-unit price accessible.

The stock market has noticed. PepsiCo shares are down nearly 1% this year, while the S&P 500 is up nearly 11% over the same period. An investor who bought PepsiCo at the start of the year has lost money while the broad market returned double digits. The underperformance reflects a judgment that the pricing power PepsiCo demonstrated in 2023 and 2024 was temporary, and that the company now needs to find a different path to growth.

Private label competition is squeezing both ends. Store-brand sodas and chips, sold by Walmart, Kroger, and other grocers, are priced 20% to 40% below the branded equivalents and have improved in quality. A consumer who switches from Diet Pepsi to Diet Dr. Thunder saves $2 per 12-pack and notices no difference in taste. The switch is permanent, and PepsiCo’s marketing budget is not large enough to win back a customer who has decided the brand is not worth the premium.

What I think

The 1,000 job cuts are a down payment on a larger problem. PepsiCo built its North American cost structure for a world where it could raise prices 5% to 8% a year and consumers would pay. That world is over. Beverage volume is down 2% and food volume is flat, and the company cannot cut its way to growth. It can cut its way to margin, which is what the layoffs are designed to do, but margin without volume is a shrinking business.

Krishnan’s letter is corporate code for “we have too many managers.” When a CEO says the organization needs to be “faster, more connected, and more capable,” he is saying that decisions take too long, teams do not talk to each other, and the structure built for growth is now carrying costs that growth cannot cover. The 1,000 cuts will hit middle management and operational support harder than factory workers or truck drivers, because those are the layers where consolidation happens. PepsiCo still needs to make Pepsi and deliver it to stores. It needs fewer people coordinating the making and delivering.

The real challenge is the product. PepsiCo’s portfolio is soda and snacks, and both categories are in structural decline in North America. Per-capita soda consumption has been falling for 20 years. Snack consumption is flat to down as consumers shift toward protein bars, yogurt, and fresh food. Gatorade is growing, but it is a smaller part of the portfolio than Pepsi and Mountain Dew. Quaker Oats is a mature business with limited growth potential. The company has tried to diversify with healthier options, but the volume is still in the classic brands, and the classic brands are not growing.

Coca-Cola has the same problem but has managed it better. Coke’s portfolio is more focused on beverages, where it has stronger brand loyalty, and it has been more disciplined on pricing. PepsiCo’s food business, Frito-Lay, is more exposed to private label competition because chips are easier to replicate than cola. A store-brand cola is close but not identical to Coke. A store-brand tortilla chip is indistinguishable from a Tostito. The brand premium erodes faster in food than in beverage, and PepsiCo is half a food company.

The layoffs will improve the income statement next quarter. Cutting 1,000 jobs at an average loaded cost of $100,000 to $150,000 per person saves $100 million to $150 million annually, which flows to operating profit. The stock may get a short-term bump. But the volume problem remains, and no amount of organizational restructuring will make people buy more soda. PepsiCo needs a product that consumers want to buy more of, and it has not found one. The 1,000 cuts are necessary but not sufficient, and the next round of restructuring will come if volume does not turn by the second quarter of 2027.