PepsiCo CFO: Inflation could last years; protected margins with cost cuts, price hikes
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In the wake of Street-beating quarterly results, PepsiCo CFO Hugh Johnston predicted Tuesday that inflationary pressures will continue into the foreseeable future, but the company will work to combat them with a combination of cost cuts and higher prices.
"I think we'll be in an inflationary environment for a period of time, maybe a couple of years," the vice chairman and chief financial officer of PepsiCo (NASDAQ:PEP) told CNBC.
He added: "It's going to be hard to drive inflation out. ... We tend to be better protected against inflation than other people are."
Johnston's comments followed the release of PEP's latest quarterly results. The beverage and snack maker beat expectations on its top and bottom lines.
With costs rising due to inflation, the company also took steps to protect its margins. While gross margins contracted during the quarter, core operating margin performance improved.
Johnston reported that PEP took steps to reduce costs, such as leveraging automation and digital technology. Meanwhile, the firm also raised prices by 12% in the quarter.
"Whenever we're faced with inflation, the first thing we do is focus on the rest of the cost structure," he said.
Johnston added that the supply chain situation is "better but not all the way there yet." He noted that on a scale from one to 10, "if we were a six or seven before, we're probably an eight or an eight-and-a-half now. We'd like to get to 10, which is where we were prior to 2020."

Following the release of the quarterly results, PEP rose about 1% in premarket trading. Going into the earnings report, Seeking Alpha contributor Valuentum predicted that the company could struggle through the remainder of 2022.