PepsiCo to Cut About 1,000 Jobs as North American Sales Lag

By Daniel Okafor

PepsiCo will cut about 1,000 jobs across North America as the company tries to reverse lagging sales in its home market. The reductions will occur over the next week, according to a Monday employee letter from Ram Krishnan, CEO of PepsiCo North America, obtained by CNBC.

PepsiCo said the layoffs will streamline operations and better connect teams across its North American business. The company is changing how its North American units work while demand remains under pressure.

Why is PepsiCo cutting now?

Krishnan wrote in the letter:

“We have a clear ambition for PepsiCo North America: to build a stronger, more future-fit business that delivers industry-leading growth. To do that, we need to be faster, more connected, and more capable, while continuing to invest in growth – behind our people, capabilities and brands.”

The statement links the cuts to speed, coordination and organizational capability. It does not frame the reduction as a retreat from brand investment. Instead, Krishnan said PepsiCo will continue investing behind its people, capabilities and brands.

The Wall Street Journal first reported the coming layoffs. CNBC then obtained Krishnan’s Monday letter, which set out the company’s rationale and timing.

How large is the workforce reduction?

PepsiCo employed about 306,000 people worldwide as of Dec. 27, according to a company filing. Roughly 125,000 of those employees worked in the United States. The planned reduction removes about 1,000 positions from that worldwide workforce.

CNBC’s report does not identify affected roles, locations or a North American headcount. The global and U.S. employment figures therefore provide the available scale markers. Because the cuts span North America, the filing’s roughly 125,000 U.S. employee count does not establish how many of the 1,000 jobs are in the United States.

Where is the pressure showing?

PepsiCo cut its full-year earnings outlook in October, citing struggles in its home market. During the third quarter, North American volume results diverged:

• North American beverage volume: down 2%.
• North American food volume: flat.

A 2% decline means beverage volume contracted, while flat food volume means the unit did not expand. CNBC’s report provides no pricing, revenue or product-mix data for either division, so it does not show whether food offset beverage weakness in dollar sales.

PepsiCo had already tried to boost sales by cutting prices and investing in marketing. The restructuring now adds job cuts and stronger team links to those demand measures.

CFO Steve Schmitt said on the company’s earnings conference call: “the turnaround is taking longer than expected.” Schmitt’s assessment indicates that those measures had not produced a quick recovery, leaving management to reorganize its North American structure while continuing commercial investment.

The job cuts therefore follow a performance reset rather than precede it. PepsiCo reported third-quarter unit weakness and cut its full-year earnings outlook in October. The layoff announcement is the company’s latest attempt to change the execution behind those results.

What does the market reaction show?

CNBC reported that shares of PepsiCo rose slightly in afternoon trading. The session move did not change the broader performance gap. PepsiCo’s stock had fallen nearly 1% this year, compared with gains of nearly 11% for the S&P 500 over the same period.

The company enters the restructuring with its stock trailing the broad index. Its market performance has lagged even as management attempts to reverse weak North American demand.

The next test is whether faster, better-connected North American teams can reverse the 2% beverage-volume decline while holding food volume steady and sustaining brand investment. PepsiCo’s next North American volume disclosures will show whether the smaller organization closes the gap.