PepsiCo struggles to reverse concerning customer behavior | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

PepsiCo (PEP) , which owns popular food and drink brands such as Pepsi, Lay’s, Gatorade, Quaker, Tostitos, and more, continues to suffer from a dramatic change in customer behavior, and it is making bold moves to address the problem.

In PepsiCo’s second-quarter earnings report for 2025, it revealed that U.S. revenue from its food brands declined by 2% year-over-year. Its convenient foods volume in the U.S. also dipped by 1%, while its beverages volume decreased by 2%.

💵💰Don’t miss the move: Subscribe to TheStreet’s free daily newsletter 💰💵

Despite low sales, the company’s net revenue increased by 1% year-over-year during the quarter.

In the earnings report, PepsiCo CEO Ramon Laguarta said the company is “effectively navigating through a challenging environment.”

PepsiCo is striving to engage health-conscious consumers.

Image source&colon; Bloomberg/Getty Images

PepsiCo announces major product changes to attract back customers

The decrease in sales comes during a time when consumers are watching their spending as they battle inflation and higher costs of living.

During an earnings call on July 11, Laguarta acknowledged that consumers have become more value-conscious and said that going forward, PepsiCo will address affordability with “more precision.”

Many Americans are also shifting more toward healthier food and beverage options as concerns over potential health risks associated with ingredients found in processed foods continue to erupt on social media, which is also impacting sales.

Amid this challenge, PepsiCo is making a huge effort to attract health-conscious consumers, which it hopes will help fix its struggling sales. Part of this effort includes gradually removing artificial colors and artificial flavors from its food and beverages.

“We’re following the consumer, and if the consumer is telling us that they prefer products that have sugar, and they prefer products that have natural ingredients, we will give the consumer products that have sugar and have natural ingredients,” said Laguarta during the call.

As part of this initiative, PepsiCo plans to soon “introduce extensions of Cheetos and Doritos” that will contain no artificial colors or flavors. The company is also relaunching its Lay’s and Tostitos brands to “elevate” their healthy ingredients and remove artificial ingredients from their products, starting during the fourth quarter of this year and the first quarter of next year.

In addition, PepsiCo is also decreasing its reliance on seed oils in its food products. These oils have recently faced scrutiny from consumers on social media for being overly processed and contributing to inflammation in the human body.

“We will expand the use of avocado or olive oil across certain brand platforms and enhance certain products with protein, fiber, and whole grains later this year and into next year within our Frito-Lay and Quaker portfolios,” said Laguarta and PepsiCo Chief Financial Officer Jamie Caulfield in prepared remarks.

The company will also focus on providing smaller portions of its food products to consumers by increasing multipack, variety pack, and single-serve options. It also plans to join the growing protein trend, in which consumers are focused on implementing more protein into their diets to improve health and wellness.

“I think protein is clearly a sub-segmenting in our food and beverages categories that is growing fast, consumers are adopting protein solutions in the diets at a pace that was not the case a few months back, a few years back,” said Laguarta. “So as we always do, we follow the consumer.”

PepsiCo faces pressure from consumers and the government

The increased focus on healthier food options comes after a survey by the International Food Information Council last year found that 79% of Americans consider whether a food product is processed when deciding to purchase it.

Also, 63% of Americans avoid processed foods, while over half follow a vegan, vegetarian, or plant-based diet to be healthier.

More Food + Dining:

Amid this trend, PepsiCo has acquired brands Siete Foods and Poppi, which both recently gained traction among consumers for their healthy ingredients.

U.S. Secretary of Health and Human Services Robert F. Kennedy Jr. has also been pressuring food companies to remove processed ingredients from their products. Recently, he announced his goal to phase out synthetic dyes in food and beverages, which has prompted some food companies to alter their ingredients.

“For too long, some food producers have been feeding Americans petroleum-based chemicals without their knowledge or consent,” said Kennedy in an April press release. “These poisonous compounds offer no nutritional benefit and pose real, measurable dangers to our children’s health and development. That era is coming to an end.”