Cramer Warns of PepsiCo’s Frito-Lay Struggles While Praising Procter & Gamble

Jim Cramer recently highlighted concerns about PepsiCo’s (PEP) struggles with its Frito-Lay division during a segment of Mad Money. Cramer mentioned that while he considered taking a position in PepsiCo when it reached a 5% decline, the stock’s 10% yearly drop and weak performance of Frito-Lay made him hesitant. He contrasted PepsiCo’s challenges with Procter & Gamble’s (PG) stronger position, noting that P&G benefits from not being tied to the food sector.

PepsiCo’s second-quarter earnings revealed a 2% decline in revenue for PepsiCo Foods North America, driven by lower pricing. Core constant-currency operating profit in this segment fell 8%. The company has been adjusting its pricing strategy, recently announcing low- to mid-single-digit price increases on some chip brands after steep cuts earlier in the year. PepsiCo is set to report third-quarter results on October 8.

Procter & Gamble, meanwhile, reported modest growth in fiscal 2026, with net sales increasing 3% to $87 billion and organic sales remaining flat. The company expects fiscal 2027 organic sales growth of 1% to 3% and core EPS between $6.89 and $7.11. CEO Shailesh Jejurikar emphasized P&G’s focus on consumer-first strategies and productivity despite market volatility. P&G will release its first-quarter fiscal 2027 results on October 22.

Both companies face distinct risks. PepsiCo’s downside risk centers on continued weakness in Frito-Lay and uncertainty around pricing changes. P&G’s challenges include limited earnings growth and rising costs, with an expected $1 billion after-tax headwind from higher input costs. Hedge fund positioning shows 68 holders for PepsiCo, down from 72 in the previous quarter, while P&G saw an increase to 83 holders. Short interest stands at 1.90% for PepsiCo and 1.04% for P&G.