Lay’s and Doritos maker to raise prices on small bags of chips

PepsiCo — the company behind snack and beverage brands including Pepsi, Lay’s, Doritos, Gatorade and Quaker Oats — said it’s raising prices on some of its smaller chip bags just weeks after executives touted the success of earlier price cuts aimed at winning back cost-conscious shoppers.

On the company’s earnings call last month, CFO Stephen Schmitt said PepsiCo was “investing in value,” while CEO Ramon Laguarta said lower prices on larger take-home snack bags sold in grocery stores were helping bring shoppers back into the category.

Now, that pricing strategy is being tested.

On Wednesday, the company confirmed it plans to raise prices on select single-serve snack bags, typically sold at convenience stores and checkout aisles, beginning in late June. A source familiar with the matter said the increases will amount to roughly 10 to 20 cents per bag. The changes are not tied to disruptions caused by the Iran war, but rather longer-running cost pressures across the company’s business, the source added.

The move marks a notable split in PepsiCo’s pricing strategy. Earlier this year, the company lowered prices on many larger take-home snack bags by up to 15% in an effort to boost demand from cost-conscious consumers and families. Those reductions, which will remain in place, helped drive nearly 9% revenue growth in the company’s latest quarter.

“Our commitment to affordability hasn’t changed,” a PepsiCo Foods U.S. spokesperson said in a statement to NBC News, adding the company “held the line” on its smallest chip bags “for nearly 15 years” and that “most will still ring up under $3 and many under $2.”

The company also sought to prevent allegations of “shrinkflation,” saying pack sizes and product quality will remain unchanged despite the modest price increases.

Any new price hikes come at a precarious moment for the U.S. consumer, as rising energy prices stemming from the Iran war continue to ripple through transportation, grocery and household costs at a time when many consumers are already stretched thin.

That dynamic has further exposed what economists describe as a “K-shaped” economy — one in which spending by wealthier households accounts for an outsized share of overall consumer spending while lower-income families struggle.

According to a new report from Bank of America, lower- and middle-income consumers were increasingly pulling back on discretionary spending categories like dining and entertainment last month, while wealthier households — boosted by strong stock market gains and rising home equity values — continued to spend at a healthy pace.

And with inflation running at 3.8% in April, above the 3.6% pace of wage growth that month, some economists warn financial pressure on lower-income consumers could intensify in the months ahead.