Pepsi Is Preparing for Financial Fallout Related to Tariffs

PepsiCo anticipates significant financial challenges in fiscal 2025 due to impending tariff-related cost increases. Recognizing the potential economic impact and demonstrating a forward-thinking approach, the beverage and snack giant is proactively developing a strategic response to mitigate potential financial strain.

Pepsi gets the majority of its soda concentrate from Ireland, which means the ingredient will be subject to a 10% tariff. In addition, the aluminum needed to manufacture beverage cans could be hit with a 25% tariff.

“We’ve factored in what we know about tariffs today, and we factored in mitigation plans,” said CFO Jamie Caulfield in a conference call, per AP News. “Some of those will be able to execute more quickly. Some of those will take more time to execute.”

The executive did not offer any specific details about the “plans.” Yet, the company could implement some options to potentially cut down on tariff fees.

For one, Pepsi could shift drink packaging away from aluminum cans and toward plastic bottles. Secondly, the company could move more of its soda concentrate production from Ireland. It already has a Texas-based production plant that makes concentrate for beverages.

Pepsi’s Earnings and Outlook

The company’s most recent quarter income fell almost 2%, coming in at $17.9 billion. Pepsi reported net profit of $1.8 billion, a 10% year-over-year drop.

The company’s beverage sales fell 3% in North America. Led by its Frito-Lay snacks division, food sales declined 1%.

Bracing for the uncertainties related to tariffs, PepsiCo projects zero growth in fiscal 2025. Even though previous forecasts hinted at single-digit percentage upward momentum, the beverage company has backtracked, now anticipating earnings growth will remain flat for the year.

“We expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs,” CEO Ramon Laguarta said, per Barron’s. 

Pepsi may get a boost in soda sales as customers flock toward more natural, healthy sodas. Last month, the food and beverage conglomerate purchased functional soda brand Poppi, which offers low-calorie, low-sugar drinks for health-conscious consumers. Pepsi is shelling out over $1.6 billion to acquire the company.