Retail PepsiCo growth defies Middle East boycott of Western brands By Megha Merani July 16, 2024, 9:30 AM Shutterstock A takeaway food stall in Saudi Arabia. While local version of Western soft drinks are increasingly popular, PepsiCo Inc's profits in the region are soaring Double-digit growth in Egypt Gaza-related boycott ineffective Local brands’ popularity rises PepsiCo Inc has reported robust growth in the Middle East, defying the boycotts that have battered other Western brands in the region. The food and beverage giant posted double-digit organic revenue growth in Egypt for the second consecutive quarter, even though it has been the subject of a backlash linked to perceived US support for Israel in the Gaza conflict. In comparison, international developed markets such as Australia and the UK each delivered low-single-digit organic revenue growth for the same quarter, it said in its latest earnings report. NewsletterGet the Best of AGBI delivered straight to your inbox every week PepsiCo’s performance contrasts with struggles faced by US brands such as Starbucks, Coca-Cola and McDonalds, which have recorded declines as a result of to consumer boycotts. Kuwait’s Alshaya – which has franchises for Shake Shack, Chipotle and global coffee chain Starbucks – said in March it was cutting staff at Starbucks branches across the region due to a Gaza-linked fall in sales. In February, McDonalds missed its first quarterly sales target in nearly four years on weak sales, partly due to the conflict in the Middle East. The company said the war had “meaningfully impacted” performance in some overseas markets. Americana Restaurants International – the Saudi-UAE company that owns the franchises for KFC, Pizza Hut and Hardee’s – has reported that net profit fell in the first quarter of this year by 51 percent to $28 million. UAE diners eat local as global fast food faces boycott Kuwait’s Alshaya in talks to sell Starbucks stake Arab states must raise intra-trade to buffer against food shocks Pepsi sparked ire in Egypt earlier this year for a ‘Stay Thirsty’ ad campaign, which featured Amr Diab and Mohamed Salah. Consumers on social media called the campaign insensitive due to the situation in Gaza. AGBI reported last month that some outlets in the Gulf have stopped stocking Western soft drinks and are replacing them with Saudi versions that have shot up in popularity, such as Kinza and Stream. “Habibi, no Cola,” said one shop-owner in Muscat, the Omani capital, who had ample stock of the Saudi brands, adding: “We stopped selling it because of Gaza.” Global geopolitics is increasingly playing a role in consumer choice. According to Edelman’s latest Trust Barometer, nearly eight out of 10 consumers in Saudi Arabia now prefer home brands over foreign brands. PepsiCo has also reported holding or gaining market share in savory snacks in Egypt and Saudi Arabia, among the largest markets in the region. For the full year, developing and emerging markets such as Egypt and Turkey also each recorded double-digit organic revenue growth, while Saudi Arabia saw high-single-digit growth. In its second-quarter report, PepsiCo said that it expects international organic revenue growth to exceed North America’s and that performance should “remain resilient” despite geopolitical tensions and macroeconomic volatility. However the company acknowledged that disruptions from ongoing conflicts in certain international markets may persist.
