PepsiCo, Inc. Q4 FY2025 earnings call

• Acceleration of affordability initiatives in PFNA during the first half, with surgical investments in specific brands, consumers, and channels. • Productivity gains in the fourth quarter expected to fund commercial plans. • Innovation efforts including restaging large brands like Lay's, Gatorade, and Quaker with focus on simplicity, ingredients, and functionality. • Double-digit space gains in Frito-Lay from March/April as partners reset layouts. • Integration of acquisitions like poppi and Siete into organic growth, with Siete flipping to organic in March and poppi in July. • Response to GLP-1 adoption with focus on portion control, hydration, fiber, and protein innovations. • Testing of food and beverage distribution integration in Texas and Florida, with plans to scale solutions considering regional nuances.

Discussions centered on Frito-Lay North America (PFNA) with mentions of volume growth, net revenue, and double-digit space gains in the main aisle and perimeter. Beverages North America (PBNA) and International segments were also touched upon, with International expected to have mid-single digit growth. PFNA operating margins are expected to expand this year with a combination of affordability initiatives, space gains, and productivity.

• Expect sales to strengthen in the second half as initiatives gain traction and acquisitions move into organic growth. • EPS expected to be balanced between first and second halves. • Organic sales acceleration in the second half driven by North America businesses, beverage business acceleration, and M&A integrations turning into organic growth. • Continued focus on improving margins in the beverage business in North America towards target margins.

• Macro-economic pressures on middle- and low-income consumers affecting affordability. • Competitive pressures in various markets. • Execution challenges in distribution integration, though optimistic about potential value creation. • Uncertainties in macro conditions in key markets like Western Europe and Brazil impacting guidance.

Q: Bonnie Herzog from Goldman Sachs asked about PFNA's affordability initiatives, how they're working, price points, and balancing growth and profitability.

A: Steve Schmitt and Ramon Laguarta discussed surgical affordability investments, productivity funding, space gains, and balanced use of productivity to drive sales growth.

Q: Andrea Teixeira from JPMorgan inquired about pricing reinvestment, volume trajectory, and cadence of quarters.

A: Ramon Laguarta and Steve Schmitt talked about surgical price investments, double-digit space gains, and sales strengthening in the second half as initiatives gain traction.

Q: Dara Mohsenian from Morgan Stanley asked about focus on affordability and price investments.

A: Ramon Laguarta elaborated on surgical, tested affordability investments with good ROI and volume return.

Q: Lauren Lieberman from Barclays asked about advertising decline in 2025 and 2026 plans.

A: Steve Schmitt mentioned efficiency in 2025 and growth-minded advertising investment in 2026.

Q: Filippo Falorni from Citi asked about organic sales guidance acceleration drivers.

A: Ramon Laguarta discussed International mid-single digit growth, North America business acceleration, beverage business acceleration, and M&A integrations contributing to organic growth.

Q: Peter Grom from UBS asked about innovation and its impact on North America.

A: Ramon Laguarta talked about core brand restaging, category-building innovation, and portion control as levers for growth.

Q: Kevin Grundy from BNP Paribas asked about GLP-1 adoption implications.

A: Ramon Laguarta discussed portion control, hydration, fiber, protein innovations, and single-serve investments to address GLP-1 impact.

Q: Steve Powers from Deutsche Bank asked about PBNA growth, energy portfolio, and CELSIUS/Alani integration.

A: Ramon Laguarta talked about PBNA margin improvement, energy portfolio growth, CELSIUS brand growth, and Alani integration progress.

Q: Peter Galbo from Bank of America asked about M&A lapping into organic growth.

A: Steve Schmitt mentioned Siete flipping to organic in March and poppi in July, with more acceleration expected.

Q: Chris Carey from Wells Fargo Securities asked about Pepsi and Mountain Dew performance.

A: Ramon Laguarta discussed Pepsi's improvement with no-sugar products and advertising, and Mountain Dew's progress with local marketing and innovation.

Q: Robert Moskow from TD Cowen asked about Texas/Florida distribution tests.

A: Ramon Laguarta talked about integrated delivery, inventory points, and plans to scale solutions considering regional nuances.

Q: Robert Ottenstein from Evercore ISI asked about macro backdrop and its impact on guidance.

A: Ramon Laguarta discussed continuistic guidance based on Q4 data, consumer trends, and market-specific conditions in major markets.