The skyrocketing prices of Doritos, Lay’s and Cheetos drove away cash-strapped consumers and cost Frito billions. The company is certainly cutting prices to do right, but its efforts may be too slow.
Ahead of the Super Bowl, PepsiCo subsidiary Frito-Lay began cutting prices on its portfolio of chips products such as Lay’s, Doritos, Cheetos and Tostitos by 15% as consumers sought cheaper alternatives. The rapid pivot in chip prices comes after years of price hikes that have shaved $50 billion from the company’s market value since its peak in 2023.
“People don’t have to choose between great taste and staying within their budget,” PepsiCo US Foods CEO Rachel Ferdinand said in a statement before the price drop.
In the beverage business, Pepsi’s products come second only to Coca-Cola, but thanks to the dominance of Frito-Lay, which owns about 60% of the US salty snack market, it has some pricing power that has helped make it Pepsi’s moneymaker. In 2024, Frito made up about 27% of the company’s revenue.
Yet this force combined with a pandemic-era push to accommodate higher supply-chain costs sent prices skyrocketing. Over four years, the price of a 14.5 ounce “party size” Doritos bag at Walmart rose from $3.98 to $5.94 in 2021 — a nearly 50% increase, Bloomberg reported, citing data from Atain, which tracks consumer spending metrics. Some chip prices have reportedly even exceeded $7.
PepsiCo did not immediately respond fateRequest for comment.
Initially, the shopkeepers did not object to the price hike. Due in part to higher prices, Frito-Lay’s net revenue fell 13% between 2020 and 2021 and another 9% between 2021 and 2022, according to filings with the Securities and Exchange Commission. These gains exceeded the company’s guiding mantra of “Frito-lay Five Forever” by which the company grew its revenue by 5% every year for decades.
“The Frito business is the jewel of PepsiCo,” PepsiCo CEO Ramon LaGuarta said during an investor call in 2023 at the height of the company’s success, talking about what he described as Frito-Lay’s huge margins. “Whatever the consumer has, we’ll be the preferred choice, I think.”
The problem is that Frito-La chip prices never came down, despite Walmart allegedly pressuring the company to lower its prices and then cutting its shelf space, Bloomberg reported. Instead, the company implemented alternatives such as cheaper multi-packs with fewer bags; New version of breakfast without artificial colors; and snacks high in protein and fiber, the outlet reported.
