PepsiCo borrowed €1 billion from European bond investors on Friday, about $1.12 billion, one day after the company cut its 2026 profit forecast because of rising costs in its North American business. The deal is split into two equal pieces of €500 million each, one paid back in three years and the other in nine years.
In plain terms, PepsiCo is taking out a large loan by selling IOUs to investors in Europe. Buyers hand over cash today, and PepsiCo promises to pay them interest every year and return the full amount when each bond comes due. Borrowing in euros lets the company tap a different pool of lenders than it reaches at home. The shorter bond was being offered at an interest rate about 0.6 percentage point above a standard European borrowing benchmark, and the longer bond about 1.05 points above it, a gap investors demand for lending money over the longer stretch.
This is not PepsiCo’s first trip to that market this year. When the company sold euro bonds in February, it said the money would go toward general corporate needs, including paying off short-term commercial paper, which is the very short-term borrowing big companies use to cover day-to-day cash needs.
The timing is what caught Wall Street’s attention. On Thursday, PepsiCo lowered its full-year forecast for core earnings per share, which strips out one-time items, to growth of 2.5% to 3.5%. It had previously guided to the low end of 5% to 7% growth. On a constant-currency basis, which removes the effect of exchange rates, the company now expects earnings growth of just 1% to 2%, down from the low end of 4% to 6%. Put simply, PepsiCo now expects to grow profit at roughly half the pace it promised earlier.
The problem sits in North America, and especially in snacks. PepsiCo Foods North America, the unit behind brands like Lay’s, Doritos and Cheetos, saw its core operating profit fall 12% in the third quarter compared with a year earlier. Revenue in that unit was flat, as a small gain in the number of bags sold was offset by lower prices.
That price drop is the consumer story here. PepsiCo has been cutting into what shoppers pay for its North American snacks, with effective pricing in that business down about 1 point in the quarter. The company credited innovation and affordability efforts for helping it win back sales volume and market share in snacks this year, after shoppers pushed back against years of steep price increases on chips and dips.
At the same time, PepsiCo’s own costs keep climbing. Chairman and CEO Ramon Laguarta pointed to rising input cost inflation, meaning the price of ingredients, packaging, transportation and labor that go into every bag and bottle. When a company is charging customers less while paying more to make its products, profit gets squeezed from both sides.
The company as a whole still grew. Third-quarter net revenue rose 5.6% to $25.3 billion, and organic revenue, which strips out currency swings and acquisitions, rose 3.1%. Reported earnings were $2.23 per share, up 17%, while core earnings were $2.34 per share, up 2%. Most of the strength came from overseas, where every international segment posted strong revenue growth. Revenue rose 10% in Asia Pacific Foods and 14% in Latin America Foods on a reported basis.
PepsiCo’s North American beverage business was steadier. Its net revenue grew 5%, mainly because of companies it bought in 2025, while drink volumes in the region slipped 2%.
The fix PepsiCo laid out centers on cutting costs and spending more to win shoppers. Laguarta said the company is identifying additional structural cost reductions that it will put in place over the coming months. The savings are meant to pay for more product innovation, stronger brand marketing and better execution in stores, aimed at speeding up sales growth and offsetting rising costs.
Shareholders are not taking a hit on payouts. PepsiCo kept its plan to return $8.9 billion to investors this year, made up of $7.9 billion in dividends and $1 billion in stock buybacks.
The company carries a meaningful debt load. As of September 5, PepsiCo had $9.2 billion in short-term debt and $42.7 billion in long-term debt on its books, against $10.7 billion in cash. Swapping short-term borrowing for longer-term bonds locks in funding for years, which gives the company more breathing room while it works through the North American slowdown.
For shoppers, the takeaway is that the price war in the snack aisle is not over. PepsiCo is betting that keeping chips more affordable will bring buyers back, and it is borrowing and cutting costs elsewhere to cover the gap in the meantime.
JBizNews Desk | Wall Street
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