Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PepsiCo Inc (NASDAQ:PEP) is seeing growth in the salty and savory category, with consumers returning to the category, indicating a positive trend.
• The company is focusing on strategic investments in innovation and new spaces, such as away-from-home opportunities, which are expected to drive future growth.
• PepsiCo Inc (NASDAQ:PEP) has a strong international business, contributing significantly to its growth, with a $40 billion business that is accretive to the company.
• The company is committed to systematic productivity improvements through automation, digitalization, and simplifying operations, which are expected to enhance efficiency.
• PepsiCo Inc (NASDAQ:PEP) is focusing on consumer trends towards health and wellness, with investments in portion control, lower sodium, and lower fat products, aligning with evolving consumer preferences.

Negative Points

• Frito-Lay's volume growth has decelerated, raising concerns about the return on investment from recent reinvestments.
• The company's EPS guidance reflects less leverage compared to previous years, indicating potential challenges in achieving higher profitability.
• There is uncertainty in the global market, including geopolitical risks and potential government decisions, which could impact PepsiCo Inc (NASDAQ:PEP)'s performance.
• The North American market is experiencing a muted top-line growth environment, posing challenges for PepsiCo Inc (NASDAQ:PEP) to drive significant growth in this region.
• Currency fluctuations, particularly the strengthening of the dollar, are expected to be a headwind, impacting PepsiCo Inc (NASDAQ:PEP)'s financial performance.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with PEP.

Q: Can you discuss the reinvestment in the Frito business and its impact on volumes? A: James Caulfield, CFO, explained that the reinvestment aims to regain momentum in the Frito business and the salty and savory category. The investments, funded partly by non-operating gains, are intended to improve performance and set a strong foundation for 2025. Ramon Laguarta, CEO, added that the category is starting to grow again, and they are focusing on innovation and away-from-home opportunities.

Q: What are the drivers behind your EPS guidance for this year, and how do you plan to manage investments? A: Ramon Laguarta, CEO, stated that the company will continue with systematic productivity programs and reinvest in price partitions for Frito. They are cautious due to global volatility and aim to maintain flexibility in investments. James Caulfield, CFO, added that higher net interest expenses and pension costs are expected, impacting leverage from below-the-line items.

Q: Are the recent restructurings a prelude to splitting the beverage and snack businesses? A: Ramon Laguarta, CEO, clarified that the restructuring aims to focus on international growth opportunities and improve efficiency in the U.S. The goal is to have focused category teams while leveraging infrastructure and technology investments for future growth.

Q: How are you managing the business differently in 2025, given the muted top-line growth in North America? A: Ramon Laguarta, CEO, emphasized the focus on innovation, better price pack execution, and addressing consumer preferences for healthier options. The company is also investing in away-from-home opportunities and improving operational efficiency in both beverages and snacks.

Q: What is your perspective on the impact of GLP usage on the salty snacks category? A: Ramon Laguarta, CEO, noted that while GLP usage has not significantly impacted their business, there is a growing consumer awareness of health and wellness. PepsiCo is addressing this through portion control and evolving their portfolio with healthier options, including lower sodium and fat products.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.