The news: PepsiCo is lowering suggested retail prices for certain snacks—including Lay’s, Doritos, Cheetos, and Tostitos—by up to 15% ahead of the Super Bowl as it tries to address persistent customer concerns around value.

• Prices could be even lower at select retailers, per a company statement, although PepsiCo did not specify where.
• The rollout will be accompanied by new packaging that emphasizes lower prices for the same-size products.

Why it matters: PepsiCo’s decision to roll back prices comes after consistent—and sustained—feedback from customers that its products have become increasingly unaffordable. The company has been inundated with emails and voicemalls from shoppers who said that rising prices were discouraging purchases, according to The Wall Street Journal. That sentiment was evident in PepsiCo’s sales: The company reported its ninth straight quarter of volume declines in its North America snack and beverages businesses in Q4, with volumes down 1% YoY and 4%, respectively.

The new pricing architecture is expected to increase purchase frequency and help the company stay competitive amid growing pressure on national brands. Crucially, PepsiCo expects the cuts to result in a double-digit increase in shelf space, on average, at its top retail partners, making its products—and their lower prices—more visible and accessible to shoppers. By increasing its store presence and narrowing the price gap, PepsiCo will be better positioned to fend off private labels, whose primary appeal to shoppers is affordability (80%) and shelf availability (70%), per a survey by Alvarez & Marsal.

Zoom out: PepsiCo understands that pricing alone won’t persuade reluctant consumers to open their wallets—which is why it is also pushing hard into wellness. The company is using its Super Bowl ad spend to promote “better for you” brands and products including Pepsi Zero Sugar, Poppi, and Sabra, while also supporting its Lay’s brand refresh.

PepsiCo is also stepping up efforts to make its portfolio more attractive to health-minded shoppers.

• The company is relying on innovations like “naked” versions of Cheetos and Doritos to give consumers “excuses” to buy its snacks, CEO Ramon Laguarta said on the company’s earnings call.
• PepsiCo will relaunch its Tostitos, Gatorade, and Quaker brands this year to shift consumer perceptions around ingredient quality.

Implications for retailers: Pepsi’s decision to lower prices puts immediate pressure on its CPG competitors to do the same—especially from a PR perspective.

• With over half (54%) of consumers rating grocery prices as a major stressor—including roughly two-thirds of adults with incomes of less than $50,000, per an AP-NORC poll—any company that makes a public effort to ease the strain on customers would garner goodwill.
• Lower prices could also help national brands seize momentum from private labels by taking back shelf space and reducing the latter’s appeal.