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Higher prices, smaller packages — how Pepsi profits

PepsiCo on Tuesday reported better-than-expected earnings and raised its outlook for the year.

That’s good news for shareholders. Not so much for consumers.

The reason? Pepsi’s good fortune depended in large part on raising prices and shrinking package sizes.

Which is to say, you paid more for less of a wide variety of popular products, including Doritos chips and Gatorade sports drinks.

And the company says it’ll keep putting the squeeze on customers.

PepsiCo’s chief executive, Ramon Laguarta, said in a statement that the company is employing “mix and assortment solutions.”

That’s a bland way of saying the company is pulling stunts like including smaller sizes in variety packs and reducing the number of chips in a bag.

“We are facing inflation like everyone else, and we think that is going to persist for a while, but we are taking enough pricing to be able to manage the inflation, and our focus is really much more on how do we drive costs out of the business,” Hugh Johnston, PepsiCo’s chief financial officer, told CNBC.

To be sure, Pepsi is by no means alone in weaponizing shrinkage as a way of managing the highest consumer prices in 40 years.

But the trend highlights how customer satisfaction is quickly sacrificed on the altar of shareholder value.

Pepsi reported second-quarter net income of $1.43 billion, down from $2.36 billion a year ago.

That’s still more than a billion dollars in profit over three months.

Anyone want to speculate on whether the company will restore all those missing chips down the road …?

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