PepsiCo, Inc. Q3 FY2025 earnings call

• Basic Performance Focus: Emphasize brilliant basics like right price points, service levels, execution, and customer plans. - Brand Relaunches: Relaunching top brands (Pepsi, Lace, Tostitos, Gatorade) in the US and globally to drive core business growth. - Accelerating Platforms: Focus on away from home, permissible snacks, and functional hydration (e.g., Propel) as growing platforms. - Innovation Pipeline: Strong innovation in protein, clean labels, higher fiber, new oils, and non-artificial products. - Cost Structure and Productivity: Rightsizing manufacturing nodes, warehouse infrastructure, and go-to-market labor; productivity per FTE improving, with continued interventions in 2026. - North America Testing: Testing 1 North America model in Texas for warehouse and distribution efficiency.

Beverages: Grew volume in the quarter; larger brands like Pepsi saw volume, net revenue, and share growth. Foods: Changed promo strategy in summer to focus on everyday low value, impacting volume but better revenue realization; close to flat this quarter but grew in the last four weeks. International: Had a weaker summer due to weather and other elements, but September was strong, with international back to mid-single digit to high mid-single digits performance in the last month.

• Expect acceleration in PBNA net revenue, with both beverage and food businesses optimistic about top-line growth. - See a line of sight to returning to long-term net revenue growth target during 2026, with progress expected throughout the year through basics, brand relaunches, and innovation. - Margin improvement expected in total company, driven by international scaling, PV&A margin expansion, and Frito Lay cost structure adjustments.

• Consumer stress and choiceful decisions globally impacting sales in some markets. - Weather and competitive pressures in certain regions (e.g., Latin America, Asia Pacific, India) affecting international performance. - Potential challenges in balancing innovation costs with margin improvement and brand support for relaunches.

Q: Bonnie Herzog with Goldman Sachs asked about volume pressures, pivot to smaller pack sizes, and volume growth moving forward.

A: Ravi Pamnani responded on beverage volume growth, food promo strategy impact, and optimism for future growth with innovation and improved service levels.

Q: Dara Mohsenian with Morgan Stanley inquired about areas impacting revenue growth in 2026 and when material progress would start.

A: Ramon Laguarta discussed basics, brand relaunches, accelerating platforms, innovation pipeline, and acquisitions/divestments as key drivers.

Q: Lauren Lieberman with Barclays asked about costs of innovations and margin structure.

A: Ramon Laguarta spoke on margin improvement, cost structure attacks, and reallocating funds for growth.

Q: Steve Powers with Deutsche Bank asked about productivity interventions in Frito Lay and 1 North America.

A: Ramon Laguarta and Jamie Caulfield detailed manufacturing node rationalization, warehouse optimization, and 1 North America testing in Texas.

Q: Filippo Falorni with Citi asked about international business health and consumer confidence.

A: Ramon Laguarta discussed international market variations, consumer stress, and positive signs in regions like India and Brazil.

Q: Michael Lavery with Piper Sandler asked about Pepsi brand momentum, marketing spend, and efficiency.

A: Ramon Laguarta talked about Pepsi brand success, drivers like zero sugar and flavors, and continued investment in the brand.

Q: Andrea Teixeira with JPMorgan asked about SKU rationalization impact on organic growth and price reinvestments.

A: Jamie Caulfield and Ramon Laguarta addressed SKU rationalization benefits and price tag architecture for core brands.

Q: Peter Galbo with Bank of America asked about protein innovation via in-house brands vs. acquisitions.

A: Ramon Laguarta explained leveraging in-house platforms like Muscle Milk and Propel for innovation, while using acquisitions for tuck-in opportunities.

Q: Robert Ottenstein with Evercore ISI asked about cost structure rightsizing and CFO transition.

A: Ramon Laguarta discussed portfolio transformation, cost transformation, and welcome of new CFO Steve.

Q: Kaumil Gajrawala with Jefferies asked about franchising operations for beverage growth.

A: Ramon Laguarta spoke on considering all ideas for shareholder value, focusing on future demand, technology, and optimized P&L.

Q: Chris Carey with Wells Fargo Securities asked about cyclical vs. structural consumer behavior by geography.

A: Ramon Laguarta discussed global trends in digital purchasing, clean labels, and affordability impacting consumer behavior worldwide.

Q: Robert Moskow with TD Cowen asked about engaging with activist investor and margin target for Frito Lay.

A: Ramon Laguarta talked about constructive engagement with Elliott, alignment on creating shareholder value, and strategy 2030 aligning with activist ideas.