PepsiCo is reportedly cutting hundreds of corporate jobs at its North American snacks and beverage divisions, making it the latest on a growing list of big companies to slash its workforce as inflation remains elevated and the risk of recession persists.
Some of the nation’s largest employers in retail and technology, including Walmart, Amazon and Facebook parent Meta, have slashed thousands of positions in recent weeks. That’s on top of significant reductions in the media world, including at CNN and Gannett newspapers. (Amazon founder Jeff Bezos owns The Washington Post.)
But companies are increasingly targeting corporate and white-collar workers, keeping front-line and customer-facing staff intact. And though many large retailers hired heavily for the holiday shopping season, they still scaled back, attuned to rising labor costs.
The PepsiCo cuts may not be huge numerically — the company had about 129,000 employees in the United States at the end of last year — but what they signal is “more ominous,” according to retail analyst Neil Saunders.
“If a company performing well, with earnings and revenue up solidly in recent quarters, is reducing its workforce then it is likely others will be considering similar moves,” he said in an emailed statement.
The layoffs follow what company leaders say was a strong third quarter: Net revenue surged 8.8 percent during the three-month period and had grown 7.7 percent since the start of the year. The stock is up more than 4.5 percent in 2022.
PepsiCo, which produces snacks like Doritos and Lay’s chips and such beverages as Gatorade, Bubly, Aquafina and its namesake soft drinks, did not immediately respond to a request for comment from The Washington Post.
The company, which has a market cap of $252.3 billion, is simply signaling the head winds to come, said Tom Essaye, president of Sevens Report Research.
“This is really confirming so many other signs that we are headed toward a potentially pretty significant economic slowdown,” he said.
Even so, the labor market has shown remarkable resiliency as the Federal Reserve tightens interest rates in an effort to crush inflation. The U.S. economy added 263,000 jobs in November, the Bureau of Labor Statistics reported Friday — a slight drop from October but still above historic norms.
The puzzling economic picture has economists split on whether the United States will enter a recession sometime next year, especially as high-profile layoffs and hiring slowdowns continue to play out. Disney, AMC Networks and Cisco have all announced significant staff reductions. BuzzFeed said in a filing Tuesday that it would cut about 12 percent of its workforce. Amazon is expected to cut about 10,000 corporate workers, a big turnaround after the e-commerce giant’s years of massive growth. Meta said it would slash 11,000 staff members, and Google and others announced hiring slowdowns.
It is unclear whether the tech and media layoffs are a harbinger of recession, but the spread to other industries has some analysts and observers increasingly wary. Ford Motor Co., DoorDash and H&M have all announced deep cuts in recent months. On Tuesday, CNBC reported that the global investment bank Morgan Stanley eliminated about 2 percent of its workforce, affecting 1,600 people.
Large-scale hiring freezes and job cuts among white-collar workers began in earnest this summer, with tech companies hit especially hard. Several experts say these businesses arguably hired more than they needed during the past several years, when capital was freely available and the pandemic boosted many big tech firms’ bottom lines.
The tens of thousands of tech workers let go this year may mark the end of a historically strong decade for the industry, and economists say there could be spillover implications for other businesses as the economy shows signs of slowing.
The PepsiCo layoffs will target its beverage division in Purchase, N.Y., and its snacks and packaged-food business, headquartered both in Chicago and in Plano, Tex., according to the Journal.
A memo to staff explained that the layoffs were meant “to simplify the organization so we can operate more efficiently,” the Journal reported.
During its most recent quarterly earnings call, chief executive Ramon Laguarta said that the company’s brands were “being stretched to higher price points” and that consumers were following.
While inflation can sometimes bring in more money for companies, even as production costs increase, Essaye noted that higher prices will eventually constrict demand.
PepsiCo’s biggest competitor, Coca-Cola Co., said last month that it would offer voluntary buyouts to some workers, a tactic companies use to reduce their workforces.
“For now, a lot of firms are making small moves on labor as they wait to see how 2023 will shape up,” Saunders said in his statement. “However, if things deteriorate then the pace of layoffs could become more substantial. This, rather than inflation, could become the major economic problem in 2023.”