PepsiCo's Frito-Lay Doritos nacho cheese tortilla chips are displayed alongside packaged foods for sale at a warehouse grocery store in Hawthorne, California, on Dec. 2, 2025. The company is cutting prices on Doritos and other snacks in response to consumer backlash over inflation. Patrick T. Fallon, AFP Via Getty Images
PepsiCo Inc.’s chips prices had gotten too high. Walmart Inc. had been telling the maker of Doritos, Lay’s, Cheetos and many other beloved snacks that was the case for more than a year.
Executives at PepsiCo knew it, too. Sales at Frito-Lay, the company’s snacks powerhouse, were plunging. Some of its chips cost more than $7 a bag; at Walmart, Doritos prices had jumped nearly 50% from 2021, according to Attain, which tracks consumer spending data.
Yet, even when Walmart cut Frito-Lay’s shelf space — giving it to its own cheaper, in-house brand and competitors like Takis — price tags didn’t go down.
Finally, in February PepsiCo announced it would slash prices by up to 15% on some salty snacks. By then, Frito-Lay had missed internal revenue targets for two years in a row by over $1 billion, according to people familiar with the matter.
But now that a plan to bring prices down is in motion, new challenges have emerged that threaten to blunt its impact.
With the war in Iran sending oil prices soaring, consumers under even more economic pressure may not be lured back by PepsiCo shaving less than a dollar off a snack bag. And depending on how long the conflict lasts, higher food and packaging costs could eat into the company’s margins.
Before the war, the price cuts were “probably enough” to lure customers and boost PepsiCo’s revenues, said Nik Modi, co-head of global consumer and retail research at RBC Capital Markets. “But now what?”
A spokesperson for PepsiCo declined to comment on this story.
PepsiCo Chief Executive Officer Ramon Laguarta said at a conference in February that the company will know by this summer if the cuts are “enough.” Tests in select cities last year generated a “pretty good” boost in volume, he said on a separate call with investors that month. By agreeing to lower prices, the company secured, on average, a double-digit increase in shelf space at major retailers like Walmart, Costco and Target. It expects those changes to be in full force by the end of this month, Laguarta said.
The company will be monitoring how much it’s selling and how it’s doing against competitors, but hasn’t publicly disclosed specific targets.
Executives at PepsiCo had been debating what to do about the pricing issue since at least as far back as 2024, when Frito-Lay’s revenues turned negative, according to people familiar with the matter. Nobody wanted to be responsible for a short-term revenue blow dealt by slashing prices, according to the people, who asked not to be named discussing internal matters. So the company tried anything else that might lure customers: promotions, shrinkflation. None of it worked.
When Rachel Ferdinando took the helm of the company’s U.S. foods division at the start of 2025, she decided to do a deep dive into its business, according to a person familiar with the matter. Her findings were clear: Prices had to come down.
Meanwhile, pressures were mounting. Frito-Lay’s revenues, which had risen for 53 quarters in a row — or more than 13 years — were falling. PepsiCo was losing market share to cheaper private-label brands. And, other packaged food companies, like Conagra Brands Inc. and General Mills Inc. were already lowering their prices.
Meetings with retailers like Walmart, which wanted the snack maker to address concerns about affordability as soon as possible, became tense, according to people familiar with the matter.
At PepsiCo’s headquarters in New York, Laguarta’s mind was on other priorities too. Americans were increasingly choosing healthier options. Laguarta pushed the company to lean harder into more protein and fiber-rich foods, which tend to cost even more than chips. He was also working on opening a Lay’s-branded restaurant in Spain.
In September, with the company’s stock down more than 20% from a peak in 2023, Elliott Investment Management took a $4 billion stake in the company with a list of demands, including making its products more affordable.
By the year’s end, PepsiCo announced it planned to lower prices and in February it laid out how: Up to 15% off some snacks, with a focus on larger bag sizes for some of its most popular brands, including Doritos and Cheetos. Laguarta described the cuts as “very surgical.” It also underwent a series of cost-cutting measures, including layoffs.
With the company’s market value down more than $50 billion since 2023, lower prices started showing up in stores at the beginning of this year.
At a Walmart in Washington, D.C., in late March, bags of Cheetos Simply NKD were stacked in a primo spot at the end of the aisle, where more people walk by. A large, red sign advertised their “rollback” price: $3.97 down from $4.43.
Retired D.C. resident Lee Jones said she doesn’t buy chips often, but put a bag of organic blue corn Tostitos in her cart at Walmart because they were on sale and labeled organic. “Price does matter,” she said.
All sorts of Frito-Lay brand chips were marked down at El Caribe Liquor Market in El Monte, California. As of March, Amar Singh, its owner, said he hadn’t yet noticed an increase in sales. There, a large bag of Ruffles was selling for $5.49, down 80 cents.
“Sales have been down a lot since last year,” he said, attributing it not just to high prices but immigration raids and other fears. “People are just spending less money.”
The guiding mantra at PepsiCo’s snacks division had been “Frito-Lay Five Forever.” The goal was to grow Frito-Lay’s revenue by 5% year after year and, for decades, that’s about how the snack-maker did.
Frito-Lay was PepsiCo’s cash cow, generating money for the beverage division to spend, employees said. Unlike PepsiCo’s soda brands, which have to contend with Coca-Cola’s dominance, Frito-Lay owns the land of salty snacks. It controls nearly 60% of the U.S. market, according to RBC Capital Markets, which gives it more power to set pricing.
During the pandemic — like all food companies — PepsiCo raised prices to manage costs associated with supply chain and labor issues. At first, consumers, flush with stimulus dollars and with little more to do than sit at home and snack, didn’t blink. But what started as modest increases turned into double-digit jumps. By the third quarter of 2022, net pricing was up 20% from a year earlier.
Frito-Lay Five Forever was no more: Revenue growth skyrocketed into the double digits for the next two years. Internally, bonuses were flowing, according to people familiar with the matter.
“The Frito business is the jewel of PepsiCo,” Laguarta said on an investor call in early 2023, noting it had the highest margins of any unit within the company. “No matter what happens with the consumer, we're going to be, I think, the preferred choice.”
But out in the world, shoppers started balking at the cost of a bag of chips.
“I pulled back somewhat,” said Denton Malcom, a business consultant living in Washington, D.C., who enjoys Doritos, Tostitos and Ruffles — but not at any cost.
When sales started slipping in 2023, some employees raised concerns about prices getting too high and hikes happening too often. But even when revenue started falling, senior managers made clear they didn’t want to go backward on prices, according to people familiar with the matter
Instead, PepsiCo tried other tactics to keep costs down and lure shoppers back. It put fewer chips in bags and offered short-term deals. It unveiled cheaper multi-packs with fewer bags. It also rolled out new versions of snacks without artificial colors, as well as higher-protein and fiber options, hoping to win over the health-conscious crowd.
In both 2023 and 2024, Laguarta predicted Frito-Lay’s volumes would rebound.
“We have been working different tactics to give the consumer what they want and we see that it’s working,” he said on a call in mid-2024.
That year, revenue at Frito-Lay turned negative for the first time in over a decade. By then, the company wasn’t just losing customers but shelf space in stores, including the most coveted displays at the end of aisles. Internally, some employees winced as the prices of some chips surpassed $7.
A year later, in 2025, Ferdinando’s review made clear that PepsiCo had to cut prices. In the second half of the year, the company tested the move in some markets. The broader rollout started in early 2026 and is still underway.
Seeing its volume declines, the company should’ve cut prices earlier, said Nicholas Fereday, a food industry analyst. “PepsiCo, like many, assumed consumers would suffer the rises and only now appreciates how important ‘affordability’ is to the typical consumer.”
Now, the message from executives is that PepsiCo is all in on value.
“Consumers have been clear: Affordability has never mattered more,” Ferdinando, the head of PepsiCo’s U.S. Foods division, said at a conference in March. “Trust is built when consumers feel that companies, and big companies especially, understand their reality.”
At a Safeway supermarket in Washington, D.C., family-size bags of Doritos and Tostitos in April were selling for as low as $2.49, if bought in multiples of three.
A party-size bag of restaurant-style Tostitos was still sitting on the shelf for $7.29.
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