PepsiCo's PFNA Struggles: Can Permissible Snacks Revive Volumes?

PepsiCo, Inc.’s PEP PFNA (PepsiCo Foods North America) continues to face a challenging operating environment as pressured consumer spending and shifting preferences weigh on traditional snack demand. While pricing and cost actions have helped stabilize profitability, volume growth has remained uneven, reflecting heightened value sensitivity and promotional intensity across packaged foods. Against this backdrop, PepsiCo is increasingly turning to its permissible snack portfolio, products positioned as better-for-you with cleaner ingredients and functional benefits, as a potential catalyst to reinvigorate volumes and restore momentum within PFNA.

The company has been expanding its presence in permissible snacks through brands such as Simply, Sun Chips, Stacy’s, Quaker Rice Cakes, Siete and Sabra. These offerings emphasize attributes like whole grains, baked formats, fewer artificial ingredients and portion control, aligning closely with evolving consumer priorities. Several of these brands are delivering solid growth, with Sun Chips ranking as the No. 1 permissible salty snack brand and expected to generate more than $700 million in annual sales. PepsiCo is also refreshing major legacy brands, such as Lay’s and Tostitos, by removing artificial colors and flavors, helping bridge the gap between indulgence and health-forward snacking.

However, the key question is whether permissible snacks can meaningfully offset softness in core categories and drive sustained volume recovery. Success will depend on balancing affordability, taste and health credentials while executing effectively on price-pack architecture and distribution. PepsiCo’s broader PFNA reset, combining innovation, sharper promotions and aggressive cost reductions, provides a supportive framework. If permissible snacks continue to scale and resonate with value-conscious consumers, these could play a critical role in stabilizing volumes and positioning PFNA for a more durable rebound.

How KO & KDP Are Adopting a “Permissible” Strategy

Both The Coca-Cola Company KO and Keurig Dr Pepper Inc. KDP are adapting to changing consumer preferences by emphasizing “permissible,” better-for-you beverage options to support everyday consumption and defend volumes.

While Coca-Cola does not operate in snacks, it is pursuing a similar “permissible” strategy within beverages by shifting toward better-for-you and everyday consumption options. The company is expanding zero- and low-sugar offerings, functional hydration and smaller portion sizes to stay relevant with health-conscious consumers. Brands like Coca-Cola Zero Sugar, enhanced waters and sports drinks allow KO to protect volumes while aligning with wellness trends, much like permissible snacks aim to do in food. This focus helps Coca-Cola defend demand in a value-sensitive environment without sacrificing brand strength.

Keurig Dr Pepper is also applying a permissible mindset across its beverage portfolio, emphasizing lower-sugar drinks, functional refreshment and portion control, especially in cold beverages and coffee. The company is innovating around better-for-you hydration, zero-sugar sodas and functional coffee formats that consumers can enjoy more frequently without guilt. Similar to permissible snacks, these offerings are designed to support steady consumption while responding to health and affordability concerns. This approach is helping KDP stabilize volumes and remain competitive as consumer preferences continue to shift toward moderation and wellness.

PEP’s Price Performance, Valuation & Estimates

Shares of PepsiCo have lost 6.1% in the past three months against the industry’s growth of 3.8%.

From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 16.33X, slightly below the industry’s average of 18.00X.

The Zacks Consensus Estimate for PEP’s 2025 earnings implies a year-over-year decline of 0.5%, whereas the same for 2026 earnings indicates growth of 5.4%. The company’s EPS estimates for 2025 and 2026 have remained stable in the past seven days.

PEP stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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