PepsiCo Downgraded by Morgan Stanley Amid Volume Pressures and Shifting Consumer Behaviors
PepsiCo has been downgraded by Morgan Stanley, with its stock rating reduced from “Overweight” to “Equal-weight” and its price target lowered from $190 to $180. This downgrade comes as analysts signal caution over slower volume growth and potential structural challenges facing the beverage and snack giant.
Morgan Stanley pointed to “semipermanent shifts in elasticities and volumes” as consumers continue to respond to persistent inflationary pressures. While PepsiCo’s premium pricing strategy has driven revenue gains in recent years, it has also placed a strain on consumer demand, particularly in developed markets. Growth has leaned heavily on pricing rather than volume, raising concerns about the long-term sustainability of such an approach.
Earlier this year, the company revised its 2024 volume expectations down, anticipating flat performance across its beverage and snacks portfolio. Although PepsiCo maintains a bullish long-term outlook, including a forecast for 4% organic revenue growth and 8% core EPS growth through 2025, recent trends could challenge those targets.
According to Morgan Stanley, PepsiCo’s total volumes were down by around 2% in 2023, following a 1% drop the year prior. These declines signal continued resistance to higher prices among consumers and underline potential category fatigue. Moreover, there’s concern that the company may be reaching the limits of its pricing power—a key lever for driving recent revenue gains.
Industry peers are facing similar headwinds, but PepsiCo’s global exposure, reliance on North American sales, and heavyweight presence in both beverages and snacks bring added complexity. Any prolonged volume stagnation could compress margins and disrupt innovation pipelines, especially in an environment where emerging brands are gaining traction with more affordable or functional alternatives.
Despite ongoing investments in brand building and portfolio expansion, the FMCG sector is watching PepsiCo closely for signs of a mid-term volume rebound. With pricing fatigue becoming increasingly evident, future growth may hinge on operational efficiencies, product innovation, and strategic adaptation to evolving consumer behavior.