Key Points

  • PepsiCo is preparing forrising inflationary pressureseven as the company relies on hedging and pricing actions to absorb potential headwinds and maintain its full-year profit outlook. Chief Financial Officer Steve Schmitt said this on Thursday.
  • During PepsiCo's first-quarter 2026 earnings call, an analyst asked whether the Iran conflict could affect "cost assumptions" or create pressure points for the company, and Schmitt responded.
  • "Our assumption is that inflation is coming," Schmitt said. "The magnitude is still something we're working through, and I think a lot of the details are yet to be determined."

Deeper Dive

The Middle East conflict is increasingly a concern, and if it persists, it could trigger broader economic turmoil.

Federal Reserve Vice Chair John Williams said Thursday that the war is exacerbating "a significant disruption to energy prices, which has already pushed up overall inflation." However, he said monetary policy "is well positioned to balance the risks to our goals of maximum employment and price stability."

Meanwhile, Dan Letter, CEO of real estate investment trust Prologis, said on Thursday's earnings call that the conflict "introduces yet another source of economic uncertainty, most directly through higher energy prices and renewed pressure on inflation and interest rates."

"The conflict has been ongoing for seven weeks, and most Prologis customers are actively monitoring the situation, telling us their 2026 business plans have not changed," he said. "The risk is that uncertainty could slow customer decision-making. So far, we have not seen clear evidence of that."

John Doyle, president and CEO of risk management firm Marsh McLennan, warned Thursday that a prolonged conflict in the region would "bring more uncertainty and risk to the global economy."

"Marsh broadly advises clients on how to build greater resilience into their business planning, and we help them address supply chain issues, review cyber risk exposure, and advise on investment decisions," he said.

Schmitt said PepsiCo is not currently seeing significant disruptions in its operations, noting that the scale of its supply chain and its procurement capabilities are key strengths in managing volatility. He also said the company relies on a systematic hedging program that typically provides six to twelve months of visibility into key input costs.

PepsiCo reported first-quarter 2026net revenue of $19.4 billion, up 8.5% year over year.

Despite its cautious stance on costs, the company reaffirmed its full-year guidance, indicating that its outlook already incorporates the ability to mitigate expected headwinds.