Newsletter · · Ashutosh Agarwal

PepsiCo Price Cuts Lift Frito-Lay Volume but Profit Forecast Still Falls - Food: Brands, Private Label & Grocery - Week of October 8, 2026

Food: Brands, Private Label & Grocery for the week of October 8, 2026. Podcast synthesis on PepsiCo's price cuts lifting Frito-Lay volume while its profit outlook fell, GLP-1 snacking shifts, McCormick's slow organic growth, cocoa and El Niño cost risks, stubborn beef prices, Kroger's retail media numbers, Maryland's ban on grocery dynamic pricing, and Costco's September sales.

Food: Brands, Private Label & Grocery

Week of October 8, 2026: PepsiCo Price Cuts Lift Frito-Lay Volume but Profit Forecast Still Falls

For two years, Big Food has told one story: shoppers are buying less because prices went up too much. So this year PepsiCo tried the obvious fix. It cut prices on Lay's and Doritos.

And it worked. Sort of. Frito-Lay's volumes in North America went from shrinking to growing. Then, on Thursday, PepsiCo cut its profit forecast anyway, and the company now says it may have to raise prices again. Its cost hedges are running out, diesel is expensive, and the commodities that go into a bag of chips aren't getting cheaper.

That is the week in one paragraph. Lower prices bring shoppers back, but the brands can't afford to keep prices low. Meanwhile grocers like Kroger are taking brands off the shelf rather than accept their price hikes. Brands are stuck in the middle.

TL;DR

  • PepsiCo is the clearest proof yet that price cuts bring back volume, and the clearest proof that they're hard to sustain. CEO Ramon Laguarta says the price cuts moved Frito-Lay from "negative low single digit volume to positive low single digit." But the full-year EPS growth outlook fell to 2.5–3.5% from 5–7%. Bloomberg Intelligence says North America food margins fell "pretty significantly" as commodity hedges roll off.
  • "It's not that consumers are not snacking. They're snacking differently." Laguarta's line on GLP-1 is the best one-sentence summary yet of what the industry thinks. Portion control, protein and fiber are where growth is.
  • McCormick shows the knock-on effect. Organic growth was just 1.9%. The CEO says shoppers paying more for beef and seafood buy fewer spices to go with them.
  • The cost of cheap chocolate is still working its way through. Cocoa is about half its 2024 peak (about $6,000/t). But a chocolate maker explained on BBC's Business Daily why shelf prices lag by about a year. Meanwhile, S&P Global now sees a near-certain El Niño lasting through the first quarter, adding to food inflation into 2027.
  • Beef import relief isn't reaching shoppers. Imports now cover about 17% of US production, versus a normal 7–9%. A rancher-analyst says 70–80% of his customers report no price drop at retail.
  • Kroger's retail-media arm finally spoke in detail. 95% of Kroger sales are tied to its loyalty card, and 11 million people shop there daily. Separately, a Kroger study found AI can predict which ads will turn into sales with 81% accuracy.
  • Brands are rationing retail-media budgets. Liquid Death will put "over 50%" of 2027 spend into retail media, but "I cannot deal with 20 retail media networks." McDonald's is launching an ad network anyway.
  • Regulators moved on grocery "surge pricing." Maryland became the first state to ban dynamic pricing in grocery stores, as Walmart finishes putting digital price tags in every store.
  • Costco's September sales were up 13%. Podcast commentators split on whether the stock's bounce off about $880 is real.

What's new

1. PepsiCo: the price-cut experiment, graded

The most important food company interview of the week came from Ramon Laguarta, PepsiCo's CEO, on Squawk on the Street, "10AM Hour: Pepsi CEO on Earnings…" (Oct 8). (Operator.)

The setup: earlier this year PepsiCo cut prices on some of its biggest snack brands, partly under pressure from activist investor Elliott. This was the quarter to see whether that worked.

Laguarta's answer was yes, for volume:

"The investments we made in price have helped us to go from a negative low single digit volume to positive low single digit volume growth. So that's a big pivot in that business."

He also said the company's overall growth rate "crossed the 3%," the best in almost two and a half years. But the gains came mostly from outside the US. On North America, he didn't hedge: soft drinks are where the company is struggling, and that performance is "not acceptable." Coca-Cola has been taking share. His fixes are more money behind Pepsi, Mountain Dew and Poppi, better execution, and openness to new arrangements with its bottlers. He firmly ruled out splitting snacks from beverages: "No, that's not what we're thinking about."

Why it matters: The volume recovery is real but small. And the price of buying it is now showing up in profits. Three other podcasts filled in the numbers:

  • The Rundown, "Paramount-Warner Deal Closes…, Pepsi Cuts Its Outlook" (Oct 8). Zaid Admani of Public.com (analyst): revenue rose 5.6% to $25.3 billion and adjusted EPS was $2.34, both beats. But the company now expects earnings to grow "just 2.5% to 3.5%, down from the 5% to 7%" it had guided. His blunt read on the price cuts: they "didn't seem to work according to the numbers. So now the company's planning to raise prices because their own costs keep climbing." The stock is down 13% this year while the S&P 500 is up 14%.
  • Bloomberg Intelligence, episode of Oct 8. Ken Shea, BI's food analyst (analyst), gave the most useful detail. International is now 45% of the business and grew 8% organically. But in North American food, about a third of the company, "margins were down pretty significantly." Investors are worried that "a lot of these hedges to a lot of these commodity costs are rolling off." (A hedge is a contract that locks in an ingredient price for a while. When it expires, the company pays the current, higher market price.) PepsiCo Foods North America volume was up only 0.5%, "nothing to write home about." His summary of the bind: "costs are rising and they don't want to raise prices, but they feel they may have to going forward." He also flagged PepsiCo's direct-store-delivery truck network as a diesel-cost weak spot. On the earnings call, someone asked about refranchising parts of it.
  • Squawk on the Street, "9AM HOUR…" (Oct 8). Jim Cramer (pundit) took the other side. At "14 times" earnings and a 4.75% dividend yield, with new Frito-Lay protein and olive-oil products, "I'll buy it. I'll take the risk." He contrasted it with Coca-Cola at "26 times," which he called "fully priced."

The read-through: Cutting prices does bring shoppers back. Holding prices down doesn't work once your cost protection expires. That pattern matters well beyond PepsiCo. Any packaged-food company that hedged ingredients through the first half of fiscal 2026 now faces the same choice in the coming quarters.

2. GLP-1: "snacking differently," not "not snacking"

Asked directly whether Frito-Lay's problem is a GLP-1 story, Laguarta answered:

"It's not that consumers are not snacking. They're snacking differently. And we need to evolve with a sense of urgency, our portfolio."

He pointed to portion control, "permissible" snacks and products built around protein and fiber.

The best data of the week came from Schwab Network, "MichaelAaron Flicker on How GLP-1s Change Food Industry & Household Dynamics" (Oct 5). Flicker is founder of Method1 and XenoSci Ventures (analyst/investor):

  • About 1 in 8 Americans use a GLP-1, and 1 in 5 households has a user. Because the user often does the household shopping, the effect spreads to non-users too.
  • A William Blair study of 300 users (end of September) found monthly restaurant visits dropped by 50%.
  • Food companies are designing around it without saying so. Campbell's new can is marketed as "20 grams of protein in every can of soup," not as GLP-1 soup.
  • BCG research suggests snack and candy consumption bounces back after people stop the drug. The extra protein and vegetables tend to stick.

The takeaway for investors: the GLP-1 hit is less "people stop buying" and more "people buy smaller, higher-protein versions." That favors companies that can reformulate and resize quickly, and hurts those selling big bags of indulgence.

3. McCormick: the spice rack as a stress gauge

The CPG Guys, "Commerce Riff with Sri & PVSB, October 6, 2026": hosts PVSB and Sri Rajagopalan (analysts, relaying management) read past McCormick's headline:

  • Sales jumped 17% to $2.02 billion. But most of that was from taking control of McCormick de Mexico. Organic growth was just 1.9%, and only 1% in the consumer segment.
  • Net income fell to $97.6 million ($0.36/share) from $225.5 million ($0.84) on higher input and freight costs. Adjusted EPS of $0.86 beat the $0.76 estimate.
  • CEO Brendan Foley says shoppers are "incredibly conscious of value." When they pay more for seafood and beef, they buy fewer spices and seasonings to go with them.
  • The stock is down nearly a third this year. The planned combination with Unilever's food business is "on track."

This is a neat example of how inflation in one aisle hits another. Pricey beef doesn't just hurt the meat case. It eats into the budget for everything that goes on the plate with it.

4. Chocolate: why shelf prices haven't followed cocoa down

BBC Business Daily, "Follow the Money: Why does chocolate cost so much?" (Oct 5), was the most useful cocoa episode of the week. It was built almost entirely on operators along the supply chain.

  • Cocoa hit more than $12,000 a tonne in 2024 and is now around $6,000. But supermarket chocolate prices are up 25–30% over three years and haven't come back down.
  • Why the lag: Kuhn Swart, cocoa category manager at Dutch supplier Do It Organic, explained the mechanics. Supermarkets sign contracts with producers "maybe one year ahead," and producers bought their raw materials "long before that... So you see normally quite a big delay." That's the hedge-lag point in plain English. Brands are still selling chocolate made with cocoa bought near the highs.
  • Other costs are rising. Swart said freight from the Caribbean and Africa went from about $1,500 to $3,000–5,000 because of Middle East disruptions. "Packaging materials are up, energy prices are up."
  • Who absorbed what: Ben Greensmith of Tony's Chocolonely said the company passed on "about a 15% increase" in the cost of a bar and "absorbed a lot of the additional cost ourselves." Ecuadorian maker Susana Cardenas went from paying $200–220 a sack to $530.
  • The weather risk is back. The host noted the UN warns the current El Niño "could be the most severe in 70 years." West Africa grows more than 60% of the world's cocoa. A Ghanaian farmer described losing over half his farm to disease after the last one.

Separately, Grain Markets and Other Stuff, "Harvest Pace Slips Below the Five-Year Average…" (Oct 6) (analyst) noted Cargill's first-quarter profit fell to $927 million from $1.94 billion. Part of the reason was cocoa beans "climbing more than 70% between June and the end of August."

5. El Niño is now a 2027 inflation story

The Decisive Podcast (S&P Global), "Super El Niño: How Weather Shocks Ripple Through the Global Economy" (Oct 3), featured five S&P Global economists (analysts):

  • The World Meteorological Organization sees a "nearly 100% likelihood" El Niño conditions persist through the first quarter of 2027.
  • S&P's scenario: world GDP growth 0.5 percentage points below baseline in 2027, with global consumer prices "well above the baseline driven by higher agricultural prices and core food price inflation."
  • Effects take two to three quarters to reach the economy and linger "into early 2028." So the shock at the farm today shows up on grocery shelves in mid-to-late 2027.
  • Rice, cocoa and wheat are named as especially exposed. Latin America (Colombia and Peru first, then Chile and Brazil) faces "a multi-sector supply shock."

On AgriTalk PM, "AgriTalk-October 1, 2026 PM", grain analyst Brie Botts of Terrane (analyst) made it concrete. In past El Niños, Brazil's yields fell "almost 20%" (2015) and "10%" (2023). "What USDA has penciled in for a new crop yield reduction for Brazil is only 3%." Global corn stocks are the "tightest we've seen in the past 14 years." Rail fuel surcharges have "doubled almost year over year."

And on BBC Farming Today, "07/10/26 Sugar beet, flagstone walls, dairy show" (Oct 7), two UK farmers (operators) added a few details. NFU sugar beet chair Kit Papworth noted sugar prices "going up significantly over the last couple of months," even as growers accepted a lower beet price (£28.50/t, down from £30/t). Dairy farmer David Cotton said "there's a massive demand for protein and protein comes from whey," which is pushing milk prices back up. That's the same protein boom behind Laguarta's and Campbell's product bets.

6. Beef: imports surged, prices didn't fall

Two livestock podcasts explained why burger prices aren't coming down.

  • Professional Ag Marketing Podcast, "Cattle Cycle Insights" (Oct 2). Jace, a cattle-market trader (operator): the US is now importing "about 17% of our production," versus a normal "7%, 8%, 9%." That is "offsetting our domestic reduction by almost perfectly." In other words, imports are only keeping supply flat, not adding to it. Mexican feeder-cattle imports are maybe "a couple hundred thousand this year," against 1.2 million in 2024. Ribs are "almost a luxury," and poultry consumption is "just skyrocketing." His near-term call is that cattle prices fade and "rallies need to be sold."
  • The Futures Rundown 93, "Consumable Futures Are Going Crazy" (Oct 1). Kevin Green, Schwab Network analyst who also raises cattle (analyst with a small operator's view): since the import announcements, "about 70 to 80 percent of my clients" say "prices are not going down. Ground beef is staying where it is right now. Steaks are still costing you $23, $24 a pound." Lean beef trim futures are down 51% this year and nonfat dry milk is up 60%.

For grocers and restaurants, that means protein inflation is stickier than futures prices suggest. For brands, it means less leftover budget in the cart (see McCormick).

7. Kroger's ad business opens up, and brands push back on everyone else's

Last week Albertsons spoke. This week it was Kroger's turn.

RETHINK RETAIL, "Amazon vs. Meta: Who Controls the AI Shopper?" (Oct 2), featured a Kroger Precision Marketing executive (operator) at GroceryShop. KPM is Kroger's advertising arm, which sells brands ad space using Kroger's shopper data.

  • "11 million people shop at Kroger every day." The average basket holds about 15 items.
  • "95% of Kroger sales are connected to our loyalty program," which is what lets brands target specific households.
  • When Kroger launched its AI shopping assistant, KPM had sponsored product ads inside it "right out of the gate."
  • The pitch to brands is that "there's only a few national retailers that can really be a good partner for CPGs because you do need to have a big footprint."

Kroger also had a measurement win. On The CPG Guys Commerce Riff (Oct 6), the hosts reported that a Kroger study with creative firm Vidmob and trade group MMA Global used AI to score more than 1,900 ads. It predicted which would lead to purchases with 81% accuracy. Ads that followed the recommendations converted about four times better, and shifting spend to higher-scoring ads could produce "more than twice as many conversions from the same budget." The same episode reported that Albertsons folded its Media Collective into its marketing team and that its head, Brian Monahan, has left.

The brand side is saying "enough networks."

  • The CPG Guys, "Liquid Death's Benoit Vatere – Brand Disruption in the Agentic Age" (Oct 7). Liquid Death's chief media officer (operator): 2027 "looks heavy on retail media… definitely majority of the spend is over 50%." But "I cannot deal with 20 retail media networks. I can't." He's concentrating on the biggest four or so. He also named a real flaw: on display ads, networks don't automatically stop serving ads when the product is out of stock. Because his drinks go through distributors' trucks rather than retailer warehouses, inventory is "a guessing game." Every out-of-stock is a wasted ad dollar.
  • Retail Media Breakfast Club, "Does the World Need More Retail Media Networks? It Depends." (Oct 7). Kiri Masters, with Matthew Fantazier of The Trade Desk (analysts): McDonald's is testing ads from other brands on its menu boards, kiosks and app, with about 14,000 US locations and 26 million daily customers. Simon Property, Delta and Aldi are also entering. Yet one large CPG company's retail-media lead said they "would absolutely not spend with 10 more retail media networks, even if every one of them could meet their standards."
  • Retail Media Breakfast Club, "RMNs Are Launching MTA. Do Brands Want It? (Part 1)" (Oct 1). Masters (analyst) on the measurement mess: when brands add up the sales every retailer claims credit for, "somehow, the total comes out bigger than their actual sales." Albertsons launched multi-touch attribution with LiveRamp, piloted by PepsiCo, to split credit across ads. Brands she asked weren't clamoring for it. Retail media still mostly runs on last-click attribution.

Why it matters: Retail media is now the biggest profit lever for thin-margin grocers. The money is flowing to the largest networks: Kroger, Walmart, Amazon, Albertsons, Instacart. Smaller networks get squeezed out. That's good for KR and ACI's ad income, and it's a quiet scale advantage for the biggest grocers.

8. Grocery "surge pricing" hits a wall in Maryland

Morning Brew Daily, "Walmart Rolls Out Digital Price Tags & Does AI Feel Pain?" (Oct 2), with hosts Neil Freiman and Toby Howell (pundits):

  • Walmart is replacing "all of its paper labels with digital ones by the end of the year," with about 90% of store sections already done. The labels can change every 10 seconds.
  • CEO John Furner has promised Walmart will "price the product, not the person."
  • Maryland just became the first state to ban dynamic pricing in grocery stores. Prices must stay fixed for at least one business day, and grocers and delivery services can't use private customer data to set prices. New Jersey's Fair Price Protection Act already bans "surveillance pricing."

This builds on the Instacart pricing story from recent weeks. The rules explicitly name delivery services, so Instacart and DoorDash are in scope. It's a cap on one future profit lever, not a hit to today's numbers.

9. Costco: September sales reaccelerate, and the stock divides opinion

  • Schwab Network, "Retail Winners Emerge as Consumers Spend Carefully" (Oct 8). Fast Market host Tom White (analyst): September sales were "up $30 billion, 13% year-over-year… So we've seen a reacceleration." Gas sales bring "more shopping in-store." The stock was around $940, still "12%, 13% off of its record highs at about 1,096" in May. Retail consultant Jan Rogers Kniffen (analyst) named Walmart and Costco among "the five best retailers in the country." His view of shoppers: "Your price is a little too high, they don't buy from you. But they're spending the money."
  • Schwab Network, "The Big 3: GLD, COST, USO" (Oct 7) (analysts), disagreed with each other on air. One called the bounce off about $880 "nothing more than a tactical bounce" and expects a retest of $900. The other pointed to improving momentum signals.

Note that last week's issue flagged about 2.5 points of Costco's comparable sales as coming from fuel prices. Part of September's acceleration is likely fuel too.

The debate

The bull case: volume comes back when price comes down

This week's evidence for the "volumes recover" camp is better than it has been in months:

  • PepsiCo proved shoppers respond to price. Frito-Lay went from shrinking to growing after price cuts (Laguarta, Squawk on the Street). Shoppers didn't leave the category, they left the price point.
  • GLP-1 looks like a mix shift, not a collapse. Smaller packs and protein versions can capture the change (Laguarta; Flicker on Schwab Network). BCG data says snacking rebounds after people stop the drug.
  • Some staples look cheap. Cramer would buy PepsiCo at about 14x earnings with a 4.75% yield.
  • The big grocers' ad businesses are getting more valuable, with better measurement (Kroger's 81% prediction study) and money concentrating in fewer, larger networks.

The bear case: you can buy volume, but you can't afford it

The bears had the more operator-backed argument again:

  • The hedge cliff is real. BI's Ken Shea says PepsiCo's hedges are "rolling off" and North America food margins fell "pretty significantly." Business Daily's cocoa operators explained the year-long contract lag in plain terms. Costs bought at the highs are still flowing through.
  • Price cuts have to be reversed. The Rundown's Admani: the cuts "didn't seem to work," and PepsiCo now plans to raise prices. If the best-resourced company in snacks can't hold lower prices, smaller players can't either.
  • Inflation in one aisle cannibalizes another. McCormick's organic consumer growth was 1%, because beef and seafood ate the spice budget.
  • Weather is the next shock. S&P's near-certain El Niño shows up in food prices two to three quarters out, right when the bulls expected relief. Beef imports aren't lowering retail prices (Professional Ag Marketing; Futures Rundown).
  • Retailers keep winning the shelf fight. On CPG Week by BevNET & Nosh, "Recess Staffs Up & Inflation Keeps Pressure On Grocery" (Oct 1), trade journalists (analysts) recapped Kroger dropping Red Bull from its energy-drink section and possibly replacing Boar's Head at some deli counters with store brand. They quoted CEO Greg Foran saying he is "not in the game of using inflation as a way of generating extra sales," and added: "that kind of appears to be exactly what he's doing." The same episode cited August grocery inflation of 2.2% and a Food Industry Association forecast of about 2.7% for the year on fuel costs. It also reported convenience-store traffic down 2% in August (Jefferies/NielsenIQ), with performance-nutrition shakes up 13.5%.

The names in play

  • PepsiCo (PEP). The central name. Volume is recovering on price cuts. Margins are falling as hedges roll off, with a guidance cut and talk of raising prices again. Cramer thinks it's cheap at about 14x; Admani doesn't "see a turnaround in the near future." Watch whether PepsiCo actually raises Frito-Lay prices again, and whether volume holds if it does. Any bottler restructuring is a separate catalyst.
  • McCormick (MKC). Organic growth of 1.9% is the clearest read that inflation in protein squeezes everything else in the cart. The Unilever food combination is the bigger story.
  • Kroger (KR) / Albertsons (ACI). Kroger's ad arm made its strongest public case yet: 95% loyalty-linked sales, ads built into its AI assistant, and a predictive-creative study. Albertsons is restructuring its media group after the head's departure.
  • Costco (COST). September sales +13%, but the stock is stuck between "tactical bounce" and "primary uptrend." Earnings are in early December.
  • Walmart (WMT). Digital labels everywhere, plus a promise not to use them for personalized pricing, just as Maryland outlaws it.
  • Hershey (HSY) / Mondelez (MDLZ), read-through. The BBC cocoa operators' one-year contract lag implies that 2026 costs reflect cocoa bought well above today's roughly $6,000/t. Meanwhile El Niño threatens the next West African crop.

Read-throughs

  • Grocers and private-label co-manufacturers. Kroger keeps replacing brands that raise prices with its own labels. Brand price hikes driven by rolling-off hedges (PepsiCo) set up more of those fights in 2027. Co-manufacturers stand to benefit.
  • Commodity producers and origin economies. S&P names Colombia and Peru (then Chile and Brazil) as most exposed to El Niño, and rice, cocoa and wheat as the crops at risk. Brazil's next crop has downside versus USDA's 3% haircut. Ghana's roughly 800,000 cocoa farmers remain tied to a government-set price (BBC).
  • Confectioners and packaged coffee. Shelf prices lag cocoa by about a year (BBC). Coffee rose again in late September on El Niño weather premiums (Futures Rundown).
  • Freight and fuel. Diesel is hitting PepsiCo's delivery network (BI), rail surcharges have roughly doubled (AgriTalk), and ocean freight on cocoa routes is up 2–3x (BBC). Logistics is now a margin issue on its own.
  • Away-from-home / foodservice. A 50% drop in restaurant visits among GLP-1 users (William Blair via Flicker) is the starkest number yet for restaurants. McDonald's starting an ad network is a bid for revenue that doesn't depend on traffic.
  • Gig delivery and regulation. Maryland's ban explicitly covers delivery services using personal data to set prices. That is a direct constraint on Instacart and DoorDash pricing tools.
  • Retail-media budgets. Brand budgets are moving toward retail media (Liquid Death, "over 50%") but concentrating in the top four or five networks. That's good for KR, WMT, AMZN, ACI and CART. Sub-scale networks get crowded out.
  • Online grocery and AI shopping assistants. Consultants at GroceryShop on Unpacking the Digital Shelf, "Bonus Episode: GroceryShop Themes & Recap…" (Oct 2) (analysts) again rated Instacart's Clementine assistant best: "add my usuals… it's already in my cart." Kroger's took "several steps," and "it would have been just faster if I'd done it myself." DoorDash is building a cross-retailer assistant.

What changed vs. last week

  • The elasticity debate got its best test case. Last week Conagra's CFO said a 1% price increase cost about 2% of volume in frozen. This week PepsiCo ran the experiment in reverse: prices down, volume up. Then it found it couldn't afford to keep going. Price sensitivity is now confirmed in both directions. The open question has shifted from "will shoppers come back?" to "can brands afford to bring them back?"
  • Hedge roll-off moved from theory to guidance. Earlier weeks flagged hedge lag as a risk. This week it was cited as a reason for an actual guidance cut (PepsiCo, per Bloomberg Intelligence).
  • Kroger's ad business: 95% loyalty-linked sales, 11 million shoppers a day, ads inside the AI assistant from launch.
  • Personalized pricing went from controversy to law. Last week the FTC statement and state bills had no enforcement behind them. Now Maryland has passed an actual ban that covers delivery services.
  • El Niño got an economic price tag. It moved from "strongest on record" (last week) to an S&P scenario of 0.5 points off 2027 world GDP, with food inflation peaking two to three quarters out.
  • Cocoa: still roughly $6,000/t. The focus moved from futures to why retail chocolate prices aren't falling (contract lag).