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6,100 | PEP | 3 | 2,024 | 2024-10-08 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, this year is a good example of how we're able to invest in Frito, whilst expanding PepsiCo margin, meaningfully and substantially. And I think that's the way you should think about the way we will run the business in the near future.
Operator: One moment for our next question. Our next question comes from Chris Carey with Wells Fargo. Your line is open.
Chris Carey: Hi. Good morning. Thank you for the question. I just wanted to ask a higher level question, then a follow-up on the line of questioning that Andrea was approaching. The higher level question, Ramon, as you begin to make pricing investments into this portfolio and other strategic investments as you had outlined for Frito-Lay, you'll be getting to see the sort of traction that you're getting or not. And I just wonder if your assessment of the slowdown that we're seeing is entirely cyclical, said another way. This is purely about value equations or are you seeing any consumption habits which may feel more structural or secular that are moving away from the business? I wonder if the Siete acquisition is a nod to how you see the direction of travel in this business over time. And if I could just one follow up on the line of questioning about total company margins, just from a productivity standpoint, are there any divisions where you feel better about your productivity initiatives? Clearly, Frito profit was under pressure this quarter despite you're going to be expanding programs. So, are the international and PBNA productivity programs -- is visibility there just quite good? And so anyway, just an expansion on your visibility on cost offsets for the investments that are coming in Frito. Thanks for entertaining both of those. |
6,101 | PEP | 3 | 2,024 | 2024-10-08 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes. Great questions both. Let me start with the margins and then I'll get back to the long-term growth of the food business. On the margins, we've declared very clearly that one of the strategic goals that we have is to keep improving the margins of our beverage business in the U.S. I think we're on track. Great performance by Ram and the team in improving the efficiency of the business, managing the portfolio towards high margin segments. And the business grew margin last year meaningfully and it will grow margin this year meaningfully and we see a good line of sight to our intentions of the mid-teens margins in a couple of years in PBNA. So that is working. The same internationally, you've seen the margin improvement international. That's driven by scale, but also by efficiency and productivity efforts by all our teams across our key markets, and that will continue. So those two are meaningful margin expansion opportunities for PepsiCo that we will continue to put our focus and deliver as we have a more balanced approach to the margins of the company. And we should be able to expand our margins, we're investing in the future of the company and providing value to consumers. So those three levers, we feel good about that. I didn't think about PBNA and international as the two contributors to how PepsiCo continues to expand its margins in a responsible way in the coming years. Now when it comes to the food business, your question on strategic transformation of the portfolio, we have been working for many, many years on evolving our portfolio with the trends of the markets. And these trends are different in different parts of the world, but clearly the consumer has been moving in some parts of the world towards looking for more permissible snacks or going into more unstructured meals. Those two are big levers of growth for us long term. One is, yes, we are providing consumers with better options to fulfill their needs for either a treat or any other occasion, a social gathering or whatever the |
6,102 | PEP | 3 | 2,024 | 2024-10-08 08:15:00 | PepsiCo, Inc. | 32,854 | with better options to fulfill their needs for either a treat or any other occasion, a social gathering or whatever the occasion is on the snacks, and we feel good about the way our R&D has improved, the way our portfolio offerings have improved in providing permissibility in the category. And we see that in the penetration of the category. We see it in the frequency. And we don't think that's going to be changing for the long term. The big opportunity we see, and that is very visible in developed markets, but also in some of the developing markets, is consumers are changing their eating habits and they're eating more calories in small portions throughout the day. The concept of mini meals, the concept of replacing a big meal with a smaller meal, you can think about a sabra hummus with a Tostitos and a banana. These kind of meals are becoming more and more popular. Especially if you think about Gen Z, they are using these mini meals much more than we used to have -- we used to use it in our equivalent age. So we see the positive trends for the category. We're leaning in with innovation there. We're going to be moving our brands more into those spaces because there are a lot of occasions that our brands belong in and that we'll be able to satisfy consumers in that space. So, yes, health and wellness and we're ready and we've been moving the portfolio in that direction. Yes, unstructured meals, mini meals, and we're moving the portfolio in that direction. Your assessment is right. The acquisition of Siete hopefully will give us another tool to capture both permissible occasions and entering to meals in a way that is sustainable long term. But there are many other brands in the portfolio that can play in both of those spaces. |
6,103 | PEP | 3 | 2,024 | 2024-10-08 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Robert Ottenstein with Evercore ISI. Your line is open.
Robert Ottenstein: Great. Thank you very much. First off, I was wondering if you can give us a report card on the Gatorade transition? And then related to that, perhaps if you could discuss the DSD system in general in PBNA, and whether through all the great work that you guys have been doing for the last couple of years, have you been able to re-engineer the system so that perhaps it's less volume dependent than it was in the past, and that is part of your path to the mid-teen margins in a few years. Thank you. |
6,104 | PEP | 3 | 2,024 | 2024-10-08 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Great question. So on Gatorade, we feel good about Gatorade. Clearly, we learned last year and we've executed better this year. I'm sure that if you ask our customers, they would still think that we have way to improve, and I would agree. So our service levels have improved meaningfully, but still opportunities will get better as we go. The output of that improvement, we've seen shares of -- share of market of Gatorade in the sport category going up and within is a sustainable share performance. So that on one side. Along with Gatorade, the one brand that is performing beautifully for us is Propel, and Propel is part of also this transformation. Propel is growing double digit, it's fulfilling some great spaces for consumers complementary to Gatorade and it is benefiting as well by the execution that we are putting in place. So we feel good about that. It is improving somehow the economics of our DSD system in some states where we had lower scale with our soft drinks and other parts of the portfolio. That's a good move overall. With regards to the productivity journey on PBNA, go-to-market is clearly an opportunity and we're optimizing a lot of variables both in our warehousing, our transportation, our delivery models that will be sources of productivity going forward. But not only, right? We're seeing that we can also be more efficient in many other parts in how we procure. We can be more efficient in how we invest in demand. We can be more efficient in many areas in the PB&A business. And that's why I said earlier, we feel good about the trajectory of the business. We feel good about profitable growth. We feel good about how this business can get to this platform of mid-teens operating margin that would be great for PepsiCo and it would be great for obviously our beverage business in North America as well.
Operator: Thank you. One moment for our next question. Our last question comes from Kevin Grundy with BNP Paribas. Your line is open. |
6,105 | PEP | 3 | 2,024 | 2024-10-08 08:15:00 | PepsiCo, Inc. | 32,854 | Kevin Grundy: Great. Thanks. Good morning, everyone. Thanks for the question. So Ramon, just sticking with North America beverages, maybe we can pivot and get an update on the energy drink category, where you brought in the portfolio strategy here in recent years, not lost on your course, like salty snacks in the US, the category remains surprisingly weak. So a couple questions please. One, maybe just some updated thoughts on the energy drinks category and what the recovery there may look like? And then two, perhaps just comment on the sharp slowdowns that we've seen with Celsius market share and your ability for that brand to regain its lost momentum in the Pepsi system? Thank you. |
6,106 | PEP | 3 | 2,024 | 2024-10-08 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Thank you, Kevin. Listen, I think the energy needs stayed by consumers in the US and everyone in the world will continue for the foreseeable future. I think everybody needs a bit of an energy boost throughout the day, and so that needs stayed will remain and I think it's going to be up to manufacturers or brand owners like us to satisfy those needs, whether it's through soft drinks, through coffee, through tea, through energy drinks. I think that opportunity remains and that opportunity will continue to be an opportunity for innovation and from brand investment. So on the short term and how different segments of the category play out, I think the energy category in the U.S. is clearly being impacted by the traffic inconvenience stores, and traffic inconvenience stores has gone down. It's been going down. I think it's part of the economic cycle that we're in. And that will reverse itself in the future once consumers feel better. So I wouldn't overplay the long-term of the energy category. With regards to Celsius, I'll say the same as I said in the past. We like the partnership. We are delivering on our part of the partnership, our distribution points are going up, our service levels keep going up, so we're executing our part of the partnership with discipline and high standards, and we remain optimistic on the partnership. So thank you very much everybody for the questions and the dialogue. And obviously, thank you for the confidence that you've placed with PepsiCo with your investment. We hope that you all stay safe and healthy and look forward to seeing you around. Thank you.
Operator: Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day. |
6,107 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Good morning, and welcome to PepsiCo’s 2024 Second Quarter Earnings question-and answer-session. Your lines have been placed on listen-only until it’s your turn to ask a question. Today's call is being recorded and will be archived at www.pepsico.com. It is now my pleasure to introduce Mr. Ravi Pamnani, Senior Vice President, Investor Relations. Mr. Pamnani, you may begin.
Ravi Pamnani: Thank you, operator. Good morning, everyone. I hope everyone has had a chance this morning to review our press release and prepared remarks, both of which are available on our website. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans and updated 2024 guidance. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, July 11, 2024, and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to our second quarter 2024 earnings release and second quarter 2024 Form 10-Q available on pepsico.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. Joining me today are PepsiCo's Chairman and CEO, Ramon Laguarta; and PepsiCo's Executive Vice President and CFO, Jamie Caulfield. We ask that you please limit yourself to one question. And with that, I will turn it over to the operator for the first question.
Operator: Thank you. [Operator Instructions] Our first question comes from Dara Mohsenian with Morgan Stanley. Your line is open.
Dara Mohsenian: Hey, good morning, guys.
Ramon Laguarta: Good morning, Dara. |
6,108 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Dara Mohsenian: Hey, good morning, guys.
Ramon Laguarta: Good morning, Dara.
Dara Mohsenian: So, I just wanted to focus on the implied organic sales growth guidance in the back half of the year of mid-single digits to get to the approximate 4% guidance. You've obviously had a great longer term track record, Ramon, under your tenure, but in this softer U.S. consumer environment we've seen low single-digit growth in the last couple of quarters. So what gives you confidence at the corporate level you can get back there? And specifically. I wanted to dial down into Frito-Lay North America, which is presumably a piece of that. Obviously, a pretty soft volume result in Q2, you had taken some initial actions. So, help us understand the incremental actions from here. What gives you confidence you get a volume payback and a top line payback from that? And how sort of Frito-Lay North America fits into that -- that implied top line recovery also. |
6,109 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: That's great, Dara. So I think it's an important area to focus. When we're saying at least four, we were talking more about around five in our minds. Now we're talking around four, so that's the pivot we're making. There is an adjustment and it is related to specifically the consumer in the U.S., and we can talk a little more. Now, why do we feel good about our guidance? And it cannot be disconnected from our earnings performance, because I think the work we've been doing on our productivity and our cost reduction gives us the optionality to reinvest back in half two in a way that we feel much more comfortable about the performance. So, a couple of, I would say, elements that give us confidence. Now, one is Quaker. Quaker, you're all familiar with the situation. We're recovering the supply chain by Q4, will be in almost 100% supply and obviously the business at that point will be growing materially, because we're just refilling the shelves and pipeline. So that should be out of the picture and it will be a positive impact for us. The second is mathematical, but it's lapping, and we think it -- obviously, the laps are much better in second half, and that has a -- gives us confidence that we can get back to a mid-single digit type of growth in the second half. The third element is international. International is an area we've been investing for the last few years materially, and is delivering for us. So first half of the year 7%, within that -- we will continue that same level of growth in the second half of the year, pluses on minuses around the world. But the portfolio is diverse enough, scale enough, profitable enough around multiple parts of the world that we believe that we can deliver. And then now in the U.S. there is clearly a consumer that is more challenged, and is a consumer that is telling us that in particular parts of the portfolio -- of our portfolio, they want more value to stay with our brands. That is not for all the consumers, it is some consumers, that is not for not all |
6,110 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | they want more value to stay with our brands. That is not for all the consumers, it is some consumers, that is not for not all portfolio, it is some parts of the portfolio, and we have been working different tactics to give the consumer what they want, and we see that is working, and that's why we feel comfortable about -- given the oxygen that we have in the P&L that we'll be able to deploy in a very targeted way, thinking long-term about the category, making sure that has -- it has good ROI, that we'll be able to turn around the -- especially, what you were referring, the food business to positive volume, and with that, a higher level of net revenue. So that's how we're thinking about the second half. Again, we have green charts with some of the activities we've been executing. And July 4th has been very strong for us, and we feel good about the business. Now, the North America beverage business is also to be highlighted. It's a business that we said over time we want to stay with -- deliver profitable growth, make sure we compete well in the category, but at the same time improve our margins. We think we're executing the playbook well. Actually, we've been accelerating the profitable growth delivery of the business, and that it should continue in the second half. We're investing in advertising and marketing even more, in the platforms that are growing, and that's what, overall, if we put it all together, we feel good about the second half of the year and the momentum that we will start 2025 with that. |
6,111 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open.
Bonnie Herzog: All right. Thank you. Good morning, everyone. I actually had a question on PBNA. Ramon, I know you just touched on a bit, but I'd be curious to hear. If you're satisfied with some of the progress you might be making to reinvigorate the business, and maybe what green shoots you are seeing within PBNA? And then, I guess, I'm hoping for some color on the initiatives you highlighted in terms of the disciplined commercial investments, should we assume this will also mean a potential step up in promos for PBNA? And do you maybe see a need for some brand repositioning? Are there structural opportunities? Essentially, what will be the drivers to reaccelerate growth at PBNA? Thanks. |
6,112 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, it's good. Bonnie, I'll give you a couple of data points that I think are relevant. Gatorade, for example, has been gaining share. This year, year-to-date meaningfully is accelerating. That's a core part of our portfolio and a very profitable part of our portfolio. So that's one data point. We've been investing in Gatorade. Not so much on, as you were saying, promos and discount, but more on innovation, execution and branding. And that's paying back. The same with Propel. So all that functional hydration space, I think it's a focus for us. It's always been a focus, but now I think that part of the portfolio is working well. I think some of the G2DSD challenges that we had last year are behind us. I don't think we're all the way to perfection there, but much better service levels in this early part of the summer, which obviously -- that's when the category peaks and where we have to be ready for perfection. So that part is clear. If you think about the other brand, we've been talking for some time, Mountain Dew. Mountain Dew is on growth. Now it's back to growth. I think we made this strategic decision to have multiple flavors driving the brand and made Baja a structural part of the portfolio versus yes, an LTO, that's driving consumers into the brand, incremental consumers. And again, better levels of execution. So just some example. All the Zero part of the portfolio is booming, right? If you think about consumer trends, clearly we know where they're going, we know that internationally, and we know that's going to eventually happen here in the U.S. So Zero not only on colas, not only on soft drinks, but also on Gatorade, on cheese, on coffees, we're seeing that consumers are growing. And then the last part is our food service business is becoming stronger and we're being better at where the profitability is, which is on the fragmented restaurant, local restaurant, and where consumers have a lot of interaction every day. And that part of the portfolio, we've been investing. We're getting |
6,113 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | and where consumers have a lot of interaction every day. And that part of the portfolio, we've been investing. We're getting additional distribution. We know we're becoming a better execution company in that particular channel, and we're feeling good about that. |
6,114 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Lauren Lieberman with Barclays. Your line is open.
Lauren Lieberman: Great. Thanks so much. Ramon, I wanted to go back to Frito, if I may. Because you commented on some consumers, and being more value to stay with our brands. But one thing we've been doing a lot in trying to parse through the data that's available to us, and it looks like it’s the category -- the salty snack category as a whole is really pressured. It's not just your brands, and I know given your share, there's sort of one in the same, but it looks like there's a broader category issue. Again, some of the data we've looked at, it feels like the category is not proving terribly responsive to promotion. So I just was hoping you could comment on that, if that is or isn't consistent with what you're seeing? And how what you're going to be doing will be different? Because, again, what we've seen so far, it doesn't look like there's a lot of response and it feels like the category is proving more discretionary. So just love your thoughts on that? Thanks. |
6,115 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes. I think -- we feel that the issue is an issue of value, is not an issue of anything else. And we have a lot of data, obviously now how do you address that value gap versus what consumers want to do. I think it's the -- it's where the know-how will come. And the sweet spot for us is not to promote, but is to promote to who needs it, in the products that need it versus a blanket approach to promotion. So that's where we're investing a lot of time. I think we're much more capable from the insights and diagnostic point of view and also from our ability to execute more granularly all these interventions, be it digital, be it with particular channels or customers. To give you an example. We feel that the unsalted part of our portfolio, right? If you think about potato chips or tortilla chips, that needs some value reset and value intervention for some consumers. When we think about flavor potato chips or other parts of our portfolio. No, I mean consumers are staying in the category, are staying in our brands, and they're buying with pretty high frequency as in the past. There are other parts of the portfolio that are growing, growing very fast, especially the permissible part of what we call permissible portfolio positive choices, this is a -- when you think about brands like SunChips, PopCorners, Smartfood, or the Simply range of the Eaten Path, those brands are growing. And there it’s not about value, there I think it's more about and the way we're going to approach it’s more marketing, investment, awareness, execution, availability. So there's different tools that we'll be using to drive the category growth. To your point on, is it the category? Is it PepsiCo brands? I think given our massive participation in the category through many multiple brands, I think it's our responsibility to manage this category for the long-term, providing value to consumers in different ways and continue to have the savory snacks category growing above food structurally as we have done in the past. Now, there is |
6,116 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | ways and continue to have the savory snacks category growing above food structurally as we have done in the past. Now, there is nothing in terms of consumer -- long-term trends that tells us that that's not possible. I think it's a small adjustments in value and in execution and in investment in new innovation areas that will drive it, and we feel very strong about our ability to do that, not in the long-term, but actually in the short-term, in Q3 and Q4. And that's why our guidance reflects a little bit that inflection because we're already testing and executing some of these levers and we see the returns it has in volume and net revenue. |
6,117 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Bryan Spillane with BofA. Your line is open.
Bryan Spillane: Hey. Thanks, operator. Good morning, Ramon. Good morning, Jamie.
Ramon Laguarta: Hey, Bryan.
Bryan Spillane: Just wanted to circle back on Frito. And I guess stepping back, you're able to sort of reset the margins and fund it with just drilling deeper into some of the reservoirs of productivity other places in the organization. So I guess just if you can comment on two things related to that. One, given that you're tapping more productivity this year, does it -- how does that affect next year? Does that affect maybe not having as much productivity to flow through, or is that reservoir very deep. And then the second is, as we are thinking about Frito margins stepping back in the back half of the year, should we be thinking about that now as the new base to maybe grow off of gradually, or is that a major step down, and then you'd expect Frito to have another maybe step change up in the future? |
6,118 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes. So, Bryan, let me tell you, I think we've talked about this in the past. We're managing total PepsiCo operating margin and as you've seen, we keep improving the margin. This quarter was almost 100 bps of operating margin improvement, and it's been consistent for the last few years. We feel good about our productivity pipeline, it’s not tactical, it's super strategic and it's multiyear and it's based on automation, it's based on digitalization, simplification of the company, standardization, different service models to the business. So there is a whole portfolio of productivity ideas that are multiyear in nature and we don't think that we will slow down our productivity in the coming years. Now, as you think about our overall margin, international has continued to grow its margin. PBNA has been very vocal from our side that we want to have that business going -- moving into mid-teens, and we're delivered on that. And we've always said that the big value of Frito for us is not so much whether it's a 26 or 26.5 or 27.5, that is very relevant, I would say. It's always tremendous acquitted for us long-term, and the biggest value creation for Frito is to make sure that it grows at a 4% or 5% levels, and that is going to be our -- continues to be our strategic focus. How do we get Frito to continue to grow above the category, make the category very healthy in terms of growth, keep bringing consumers occasions and channel -- new opportunities for channel expansion to Frito, and that will continue to be our focus. We'll keep investing until we get it right. We're going to -- we feel good about getting it right rather soon. And that's the way we'll keep managing the overall profitability of the company. And Frito, PBNA, and international, in particular, with different sub-strategies, and obviously that triggers down to every market around the world when you talk about international, but we have very good playbook for every country and every line of business in every country, expectations on |
6,119 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | international, but we have very good playbook for every country and every line of business in every country, expectations on profitability and roadmaps to deliver that kind of growth. |
6,120 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Kaumil Gajrawala with Jefferies. Your line is open.
Kaumil Gajrawala: Hi. Good morning, everybody. Do you believe that the prices at Frito are too high, given the increases over recent years?
Ramon Laguarta: Do you think Kaumil? I think I kind of touched on the point earlier, but some parts of the portfolio need value adjustments, some parts of the portfolio don't. Some parts of the portfolio need to be -- for particular consumers we need some new entry price points and probably some new promotional kind of mechanics that don't spec for the consumer to invest so much cash in a purchase of salty, so there's adjustments that we have to make to -- for certain consumers some parts of the portfolio. I don't think the overall portfolio is -- needs a reset. I think this is going to be about granularity, it's going to be about good execution of that granularity, and that's what I think we're well prepared to do throughout the full value chain. So, yes, there is some value to be given back to consumers after three or four years of a lot of inflation. Our cost allows us to do that wherever we choose to do. And that will be one of the interventions that we'll be making in the second half, but not the only one. I mean, there's going to be investments in marketing. There's going to be investments in better execution. That overall will drive the business -- the business growth to where we think it will be structurally in the coming years.
Operator: Thank you. One moment for our next question. Our next question comes from Peter Grom with UBS. Your line is open. |
6,121 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Peter Grom with UBS. Your line is open.
Peter Grom: Thanks, operator. Good morning, everyone. So I was hoping to get some color on Latin America. Organic revenue was the weakest we've seen in some time here, and I think in the prepared remarks Brazil and Mexico seems solid. So just curious, kind of what drove the weakness in the quarter? And then, Ramon, just as we look ahead, you mentioned you still expect strong growth from international in the back half of the year. How does Latin America fit into that equation? Would you anticipate improvement, or should we expect more muted performance to continue? Thanks.
Ramon Laguarta: No, I think -- again, I would look at LatAm and all the international business in like six months rather than a three months and three months. There's a lot of moving pieces between first quarter, second quarter, Chinese New Year. In particular, the LatAm situation in our case is related to Mexico. And Mexico because of the elections there have been some changes in disposable income given to the families by the government that created some, I would say some abnormalities in the way those funds were distributed, and that's impacted demand in Mexico in the last -- what we're seeing in the last three weeks in Mexico that as those funds have been given back to consumers again, that the demand has come back to our categories. So we don't foresee any issue in LatAm. LatAm, again, I mean, value continues to be a factor as it's always been in LatAm. We'll see plus and minuses between the different countries. But as a region, LatAm continues to be a high performing region for us, where we keep developing the categories and we keep expanding our margins and building scale businesses not only in Mexico and Brazil, but across multiple markets.
Operator: Thank you. One moment for our next question. Our next question comes from Filippo Falorni with Citi. Your line is open. |
6,122 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Filippo Falorni: Hey. Good morning, everyone. So just staying on the international business. Ramon, you sounded pretty confident on the growth in international. Maybe you can talk more about, like what regions do you see the greater growth potential in that business? And going back to the question on guidance on top line for the second half, is the improvement in organic sales mainly driven by an improvement in North America or an acceleration in international? If you can give some color there would be helpful.
Ramon Laguarta: Yes, Filippo. Hi. You should assume that most of the incremental acceleration of the business comes from mostly North America, right? And the two factors I mentioned, Quaker will get back to growth, the laps get better for North America, and then some of the interventions we're making both in value and in additional A&M should drive additional volume. Those are the three factors. Internationally, we're assuming that the rate of growth for the first half will continue in the second half. And again, we're seeing parts of the portfolio -- accelerating parts of the portfolio kind of stabilizing, some of them being a little bit softer. But overall the portfolio at this point is broad enough. We have enough scale across multiple markets that we're kind of hedged geographically. So that's what we're assuming and what we're seeing that per caps growth of the category will continue. We continue to invest meaningfully incremental funds to both execution and brand development, and we don't see any reason why not. Of course, it could be big geopolitical reasons why we change our mind later in the year. But with the information we have today about geopolitics and stability of countries, that's our best guess today.
Operator: Thank you. One moment for our next question. Our next question comes from Robert Moskow with TD Cowen. Your line is open. |
6,123 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Robert Moskow: Hi, thanks. A couple of questions. One is, I was hoping you'd give a little more color on the energy drinks category, growth has slowed dramatically in the U.S. And just wanted to get your perspective and ask like, do you think that the consumer there are making a value decision as well? There's a lot of premium price drinks there. Do you see any evidence of trading down to maybe higher caffeine carbonated drinks? Thanks.
Ramon Laguarta: Listen, I think fundamentally the energy category continues to provide long-term good prospects for our industry. I think it's a consumer need that will continue to be there and whether we are able to satisfy that through multiple options, that will continue to grow. There's always small ups and downs of subcategories within LRB that you could argue. Is it because of channel dynamics? Is it because it's very hard and people are moving to other parts of the portfolio? Like we're seeing, for example, in our case in the recent six weeks a massive growth in our hydration portfolio because, obviously, it's been very hot in the U.S. So I guess there is some cannibalization between energy and hydration for some consumers, and they prefer to do that. So, I wouldn't overread into the short-term of the category. I would try to think about this as a consumer needs energy, if we're able to provide energy in a consumer friendly way, including price, probably as you mentioned, but I would say functionality, clean labels, I mean like a lot of the things that I think the categories been working on, there should be a good runway for that segment of the category, and it's been value creating for a lot of us that participate in it, including the retailer partners and the brand owners.
Operator: Thank you. One moment for our next question. Our next question comes from Andrea Teixeira with J.P. Morgan. Your line is open. |
6,124 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Andrea Teixeira: Thank you. Good morning, everyone, Ramon, Jamie. My question is on the bridge to the mid-single digit organic sales growth in the second half. Assuming international, Ramon you just mentioned it grows the same kind of mid-single digits into the second half. And, of course, understanding the easy comps for Quaker. It still implies a good inflection into Frito and PBNA. How do you think, like we should be thinking about the progress? And perhaps related to that, from a channel perspective the away from home for you growing from what it seems to be like a distribution, what is the like-for-like in sales, basically by channel, if you would think about away from home and at home?
Jamie Caulfield: Andrea, it's Jamie. On the acceleration in the back half, as Ramon mentioned, that's going to come mostly from North America for the reasons we cited and we're making the investment, primarily focused North America, we've got the easier lapse. And Quaker, so that gives us a lot of confidence. On channels, look, away from home has been a focus area for us. We put investment behind that and it's outgrowing the balance of our portfolio, so we'd expect that to continue.
Operator: Thank you. One moment for our next question. Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open.
Chris Carey: Hi. Good morning, everyone. Ramon, I know you mentioned international to be looked at on six-month cadence. I was wondering, however, if you could comment on some specific regions just in Europe. Why to your mind have trends been so resilient? I don't think it's just your portfolio, I think the region in general has been more resilient for longer than many expected. And then in Asia, I think you were clear last quarter that there were some timing benefit. Clearly we saw that normalize this quarter. What's the right run rate for this division? And do you have any comments on the progress in China? Thank you. |
6,125 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes. So listen, again, we're looking at international as a portfolio of geographies and markets, and we see the portfolio kind of when it's not growing so much here -- so at the end historically, we've learned that the portfolio is quite diversified and that gives us the opportunity to talk about an international business as a total. Obviously, we run the business locally. Now, when you go down to different parts of the world. Europe is resilient and is resilient in -- our business has been performing very well, both on top line and share and very importantly, in margin improvement, and that has been a focus of the management team for quite some time. We're getting a lot of traction. That's also giving the business the opportunity to reinvest, which also, obviously, drives the top line. And I think Europe in our case, is in a very positive cycle, which we expect to continue in the coming years. Now, I talked about Latin America, so I will not mention much. We continue to see a lot of growth in many parts of AMESA region, in particular, India is a big growth space for us, and is an investment area for sure. The opportunity is massive. If you think, it will take a decade perspective, and we're putting infrastructure on the ground and we're putting a lot of -- we are investing in the brands, make sure that we build the scale to capture what is going to be, I think a high demand market for many, many years. Then when it comes to Asia, we're seeing a very cautious consumer in China. The consumer is clearly saving more than spending, and that has an implication for many categories. Our categories is a low ticket item, so we continue to see good performance of our categories, and we're gaining share. It's quite an advantage business what we have in China, especially on the food sides. And we continue to invest in different regions of the country. We continue to get more penetration, additional distribution, that has been a big driver. So additional penetration, additional consumers coming to our brands, |
6,126 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | additional distribution, that has been a big driver. So additional penetration, additional consumers coming to our brands, coming to the habit of snacking, and that has been very positive. So in spite of a cautious consumer, we have levers to continue to grow the business. Some of that physical availability, some of that is share of market and better penetration of our brands. I think we have advantage products there. We have a very strong R&D center in China that develops is for east products, and that is giving us an advantage versus other companies. So that's how we're seeing the different parts of the world. And again, we'll continue to invest. For us, this is a business that, if you think about our international business, it's almost $40 billion already, right? So it's been growing very fast over time. It's almost $40 billion, it's accretive to PepsiCo. It's higher margin than the average of PepsiCo, and it's clearly the largest growth opportunity for our company if you think about the next decade, and that's where we are putting so much focus, so much investment. We believe that we -- both on the beverage side and on the food side we have a many years of growth in that particular part of the business. |
6,127 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Robert Ottenstein with Evercore ISI. Your line is open.
Robert Ottenstein: Great. Thank you very much. I want to look at a more structural, strategic type question. And that is to get your thoughts around the Carlsberg Britvic transaction. And maybe talk a little bit why perhaps it made more sense for Carlsberg to buy Britvic rather than you, given the fact that you generally own your bottlers in the U.S., why not Britvic? Does that have any implications in terms of how you're thinking about the U.S. bottlers. And does the fact that maybe combining beer and CSDs makes more sense outside of the U.S., obviously for regulatory reasons. How should we think about that component? Thank you.
Ramon Laguarta: Yes. I wouldn't extrapolate too much. This is a decision by Carlsberg to make an investment in the UK business. It makes a lot of sense for Carlsberg for multiple reasons. And we partner with Carlsberg in other geographies. We are very happy with the partnership. We trust them as a partner to grow our business. And, of course, we supported the transaction. So I wouldn't over extrapolate it. Let's make it a UK decision by Carlsberg, and we decided to endorse the transaction because we have a great relationship with Carlsberg, and we trust them.
Operator: Thank you. One moment for our next question. Our next question comes from Carlos Laboy with HSBC. Your line is open.
Carlos Laboy: Yes. Good morning, everyone. Ramon, in keeping with the last two comments you've made in the Britvic deal, can you discuss the international franchise doctrine of PepsiCo? In other words, how are you thinking in terms of clarity of what each side is supposed to do and allowed to keep, right? I'm trying to get a sense of how you're compelling independent bottlers in these great growth territories that you see to step up investments for the purpose of accelerated system revenue growth and bottling returns? |
6,128 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, Carlos. Listen, we're very pleased with the relationship we have with most of the bottlers and the strategic alignment. Actually, our international beverage business has been one of the growth engines of the company for the last few years. So we keep innovating and building great products that have consumer appeal, and specifically we've been very successful with our non-sugar business internationally. Our non-sugar Pepsi has been a great driver of growth for many years. Gatorade is also another great platform that we are moving around. So the last is growing 10% historically, and we will continue to invest. Now are there other opportunities to scale up some of our bottlers. Of course, there's always opportunities to improve the infrastructure, and we're working on that for the long-term, but I think this is a part of our business that is going well. It's a part of our business that we are prepared to invest even more. The bottlers know we obviously are very aligned statistically on which markets and which platforms we're going to put our focus and our investments. And I think, as I said, is part of our international story that I was referring to earlier. There's a food story and there's a beverage story, and there's a combination of the two story in some markets that we're playing long-term. So hopefully I'm answering your question. I don't know if you had some other kind of implications there.
Operator: Thank you. One moment for our next question. Our next question comes from Nik Modi with RBC. Your line is open. |
6,129 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Nik Modi with RBC. Your line is open.
Nik Modi: Yes. Thank you. Good morning, everyone. Ramon, I was hoping you can just kind of share some perspective around overall food volume, right? Because a lot of questions have been asked about where's the volume going? It's not just salty snacks that's been under pressure, it's pretty much across the board in terms of volumes. And so I was just curious on your thoughts. I don't think it's GLP-1, I know that's what some might suggest, but love your views on kind of where you think the volume is actually migrating? |
6,130 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, listen. Nik, I don't know about all the categories. I know that for many categories the multiple year inflation that we had to take because our input cost went up, has created some perception and some reality in a lot of households that food is expensive and consumers are making choices. And they can make choices to cook versus buy finished goods or finished products, or they can make a lot of decisions around how they spend their money and how do they feed themselves every day with the lowest budget. And I think that's the fundamental question to address for the food companies. Now that our cost are kind of normalizing, our input cost, and we've all been going at productivity in our case, this has been a very, very strategic focus for us. Now, how do we deploy those resources against what are the best levers to reignite growth? And again, it will not be a blanket approach, it will be a segmented approach. In our case, it will be very rational, it will based on data. I think we have a lot of data, and we have great segmentation. And I think we can execute with again, with precision so that we don't destroy value where we create value for the category as we increase the net revenue of the category. So that's how we're thinking about it. I don't think GLP at this point, Nik, as material impact in our category for sure, and we have a lot of panels and we have a lot of conversation with consumers, it's not impacting us. At this point is an economic value relationship for our categories, and we will address them in the second half of the year.
Operator: Thank you. Our last question comes from -- one moment -- comes from Kevin Grundy with BNP Paribas. Your line is open. |
6,131 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. Our last question comes from -- one moment -- comes from Kevin Grundy with BNP Paribas. Your line is open.
Kevin Grundy: Great, thanks. Good morning, everyone. Covered a lot of ground, and not to beat a dead horse, but just to drill down a couple of areas, Ramon, if we could on the demand weakness in snack. So you mentioned some parts of the portfolio, but not all consumers. I apologize if I missed this. What are you seeing beyond the low income consumer? It's a lot of focus on where's the consumer and depends on which management call you're listening to or what industry frankly. What are you seeing specifically with the middle and high-end consumer? Is the weakness also being seen among that cohort as well? And then I think an important question as well, is there anything you're seeing in your market research? I know you're staying close to the consumer that gives you any pause with the longer term outlook for the Frito business, which has been so strong for so long. Is there anything there that kind of gives you pause or you do this to be entirely transitory? So thanks for that. |
6,132 | PEP | 2 | 2,024 | 2024-07-11 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, thanks Kevin. Listen, I think the -- this need for value or more value consciousness I think is impacting every household in the U.S. So it is different levels of income, I think it's impacting everybody. And we're seeing behaviors in different income levels. I would aggregate all that -- the consumer is much more price conscious, is looking for more value across. So maybe you see the higher income consumers that they're not going to expensive restaurants, they're adjusting their behavior to more affordable restaurants, or they stay at home and then they create their own entertainment moments or fun moments at home. So do you see different behaviors happening everywhere, I think the connecting line it would be, the consumer is more cautious, the consumer is more choiceful, but the consumer is willing to spend in areas where they see value and we see it in our category, right, the more -- the parts of the category there I was referring to. But also for other parts of the category, they're asking for more value and they're willing to compromise in some of their decisions. So that's the problem to address. So I would stay there and I think once we address that situation, we will be back in growth, and we feel pretty good about the tools and the resources we have and the actions that we're taking and we're quite encouraged by recent performance of the business. Okay. So I think we -- this is the last question. So thank you, everyone, for joining us today and your thoughtful questions. And also, obviously, for the confidence that you've placed in us with your investments, and we hope everybody has a great summer, and do buy a lot of PepsiCo products, so thank you.
Jamie Caulfield: Thank you.
Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day. |
6,133 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Good morning and welcome to PepsiCo's 2024 First Quarter Earnings question-and-answer session. Your lines are being placed on listen-only until it's your turn to ask the question. Today's call is being recorded and will be archived at www.pepsico.com. It is now my pleasure to introduce Mr. Ravi Pamnani, Senior Vice President of Investor Relations. Mr. Pamnani, you may begin.
Ravi Pamnani: Thank you, operator and good morning everyone. I hope everyone has had a chance this morning to review our press release and prepared remarks, both of which are available on our website. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans and 2024 guidance. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, April 23rd, 2024, and we are under no obligation to update them. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to our first quarter 2024 earnings release and first quarter 2024 Form 10-Q available on pepsico.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. Joining me today are PepsiCo's Chairman and CEO, Ramon Laguarta; and PepsiCo's Executive Vice President and CFO, Jamie Caulfield. We ask that you please limit yourself to one question. And with that, I will turn it over to the operator for the first question.
Operator: Thank you. [Operator Instructions] Our first question comes from Dara Mohsenian with Morgan Stanley. Your line is open.
Dara Mohsenian: Hey guys, good morning.
Ravi Pamnani: Goof morning Dara. |
6,134 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Dara Mohsenian: Hey guys, good morning.
Ravi Pamnani: Goof morning Dara.
Dara Mohsenian: So, really strong international profit results for the third quarter in a row here. Can you just take a step back, Ramon, and maybe give us some perspective on that international performance over the last few quarters? And, A, just looking forward, short-term, how confident are you in the sustainability of that in the balance of the year? But, B, also just long-term as you think about international development over the last few quarters give us some perspective looking out over the next few years, both from a top line perspective and then the margin flow through? Thanks. |
6,135 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Great. Thank you, Dara. And yes we're very pleased with the performance of international businesses in Q1, but also in the last few quarters, as you mentioned. And this has been an area of investment for us now for a few years, both in snacks and in beverages and trying to build scaled businesses in most of the markets where the scale in terms of population and profitable growth. So, I feel very good about our ability to continue to outperform our categories in international and to keep our categories growing both food and beverages in the future. Our innovation is strong. Our ability to understand local rituals and local food and beverage occasions is better than ever. We are adapting our portfolio to that. Our ability to attract the best talent in the markets where we participate and build really capable teams is better than ever. We've been investing in capacity. We're -- right now, we're in the process of opening factories in Vietnam and in China and in India and in Mexico, and we just opened one in Poland. So we keep expanding our manufacturing and our go-to-market capabilities in those markets. So we feel good, and I think that it's going to continue to be a big source of growth for us. As we mentioned in CAGNY, I think our international business is already $36 billion and it's growing at a very high single-digit level and with very good profitability. So it is part of the future growth story for PepsiCo for sure.
Operator: Thank you. One moment for our next question. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open. |
6,136 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | BonnieHerzog: Hi. Thank you. Good morning, everyone. I had a question on Frito-Lay op margins, which were a little soft in the quarter. So hoping you could talk through some of the key puts and takes on your margins in the quarter and then moving forward? And then is it realistic to assume Frito-Lay's op margins will expand in 2024? And I'm thinking about that in the context of commodity cost pressures easing a bit, or how do we think about your level of reinvestment as these cost savings maybe in an effort to drive faster top line growth? And then ultimately, curious to hear if Frito-Lay margins can ultimately return to the low 30% range? And if so, by when, how do we think about that? Thank you.
JamieCaulfield: Hey, Bonnie, it's Jamie here. How are you? Yeah on Frito, when you look at the Q1 profit, the thing to keep in mind is last year, we're lapping 24% growth in the first quarter of last year. I think we had 180 basis points of margin improvement last year. And we don't want to push the P&L that hard. The growth last year, growth this year, part of that has to do with investment timing, the flow of productivity. But I think you'll see margin improvement over time at Frito, but this is a business that has very healthy margins already, and we want to make sure that we're investing back in the business to sustain growth.
Ramon Laguarta: Yeah, Bonnie. I think on top of what Jamie said, for the long term, the key goal for Frito in the US is to continue to grow the salty, savory category at a very high rate and continue to get occasions from other parts of macro snacks into the savory and from meals into savory, and continue to gain share of that category as it has been doing and including Q1. So that's the ultimate goal. Because that, if you think about the high margin that we have in that business and the impact it would have in the overall PepsiCo margins, that's the role that Frito-Lay has in the portfolio. |
6,137 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Bryan Spillane with BofA. Your line is open.
Bryan Spillane: Thanks, operator. Good morning, everybody. Ramon, I guess, a question on PBNA and specifically on Gatorade and Mountain Dew. The volumes are still -- with Gatorade noticeably weak in the quarter. And so can you just talk about, one, how much in the quarter might have been affected by the weather? And then second, I guess, as we're thinking about volume recovery for the whole for the enterprise at PBNA, just what's on tap for both Mountain Dew and Gatorade to stabilize the volume trend? |
6,138 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: That's good, Bryan. Just actually we feel good about those two brands. Those two brands actually gained share in Q1, so Mountain Dew and Gatorade, in their own category. So that's a meaningful good performance, I would say. Now Gatorade, as you mentioned, a little bit of weather impact. So we're not concerned about Gatorade this year as the weather improves, I think we have the right investments, the right commercial programs. Our G2DSD was impactful to us last year operationally. I think we've learned a lot on how to deal with a very high seasonality product and category and give the better service to our customers and maintain the product in stock and available. So we feel good about we have the platform to take Gatorade to higher market share in a faster growing category. Now with regards to Dew, the launch of bubly burst has been very, very good to the brand. We launched it as a permanent additional flavor to the portfolio early in the year. It's been obviously successful. We knew it was a successful LTR and therefore, it's a successful permanent product. And it's been bringing incremental consumers to the brand and help us gain share now. Obviously, we will keep investing in the portfolio and the brand, and we have strong programs for the summer. Hopefully, that will deliver as we expect, and we'll continue to build Mountain Dew in the category. So feeling good about those two brands.
Operator: Thank you. One moment for our next question. Our next question comes from Lauren Lieberman with Barclays. Your line is open. |
6,139 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Lauren Lieberman: Great. Thanks, good morning. In the prepared remarks, I noticed in the discussion of PBNA and plans to improve profitability there. There were two new bullets. The first two talking about deemphasizing certain product and package combinations and the second around revenue management and increasingly precise consumer value proposition. So I was curious if you could just -- I know there's new management for that business as well. So I would love to get a little bit more color maybe around those two points? I thought would be helpful. Thanks.
Ramon Laguarta: Yes. Lauren, I think the -- I don't know, maybe we have put a bit more detail, but the intentionality was always there. And I mentioned last time on the last couple of calls that we're making choices in PBNA in terms of making sure that we deliver profitable growth, and we'll continue to make those choices emphasizing the parts of the portfolio where there is a better return on the investments for us and eliminating those parts of the portfolio where the margins are not that attractive and they're going to get probably not that better over time. So we've been referring to categories like packed water or some of the less profitable take-home formats, where we will be making choices. We feel good about both the productivity at PBNA under margin expansion of PBNA. And we feel that, that will continue based on the ideas that we have and the organizational focus that the team has been putting under the new management, but also the old management in PBNA. There's much more focus on becoming a better operating machine in the supply chain and sales and expanding the margin. So, we feel good about PBNA margin expansion and profitable growth delivery this year.
Operator: Thank you. Our next question comes from Andrea Teixeira with JPMorgan. Your line is open. |
6,140 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. Our next question comes from Andrea Teixeira with JPMorgan. Your line is open.
Andrea Teixeira: Hi, good morning. Thank you. So, Ramon, if you can please comment on the overall consumption and in particular for snacks and how consumer behavior evolved in the context of your comments about normalization? And then a clarification for Jamie, on the margin outlook. On the prepared remarks, you mentioned a more benign commodities environment, but that has recently changed in particular, for oil and looking at DSD. Hoping to get some clarification on the diesel impact or this is going to be more further down and perhaps not even impacting 2024? Thank you. |
6,141 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes. So, listen, Andrea hi. The -- I would say the consumer globally, we think is very resilient. And we see it in, as you saw from our international business performance. And it's basically supported by two facts, very low unemployment or quite low unemployment globally and wages growing at a good pace in majority of the countries where we participate. So, those two things make us feel quite good about the consumer. Now, when you double click, there is probably two areas that were -- that probably surface. One is Chinese consumers. I think Chinese consumers are being very cautious and we're seeing the savings rate really going very high in China. Our category is still resilient in China, but especially we're delivering growth through share of market gains in China. So, that's a good performance by the team, but an area of watch out for us. The other double-click is in the, I would say, the lower income consumer in the U.S. The lower income consumer in the U.S. is stretched, is making a lot of -- he is strategizing a lot to make their budgets get to the end of the month. And that's a consumer that is choosing what to buy, where to buy and making a lot of choices. That's a consumer that we're emphasizing in our commercial programs. I think we're learning how best to keep that consumer in our categories and the frequency that we want that consumer, and we are pivoting our commercial plans, our innovation, giving that consumer the right innovation, the right value in different parts of the month through different channels, digital and physical. Making sure that the ROI on the investments are the best ROIs. So, those two are the consumers that I would say we're paying more attention in terms of specific commercial programs. But I would say the consumer is very resilient everywhere else. And our teams, I think, are pivoting to maintain our brands top of mind in their baskets at the frequency that we want and continue to gain market share. So, this applies to beverages and to snacks. Your question was |
6,142 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | at the frequency that we want and continue to gain market share. So, this applies to beverages and to snacks. Your question was more on snacks, but I think it applies to both categories. So, I know Jamie on. |
6,143 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Jamie Caulfield: Yes. Andrea, on commodities, really no change in the outlook. A couple of points I just want to emphasize. One is the diversity of the inputs in the basket, so no single commodity accounts for more than 10% of the total. So that diversification kind of smooth things out. And the other point I'd make is we do tend to forward buy and hedge, so that we've got good visibility for the year that helps us with planning the business overall. And so outlook Q2 through Q4, so relatively benign inflation and not a lot of volatility in the rate of inflation quarter-to-quarter.
Operator: Thank you. One moment for our next question. Our next question comes from Peter Grom with UBS. Your line is open.
Peter Grom: Thanks operator and good morning, everyone. So I was hoping to get an update on the CELSIUS agreement and kind of just your broader energy drink strategy at this point. In the release, you spoke positively about the partnership, but I think there were some changes to the incentive structure a few weeks back. So maybe first, just any thoughts on how the brand is performing as part of your energy portfolio? And then just like anything you can share in terms of what changed with the agreement? But maybe specifically, how does it really help Pepsi? And maybe what benefit does it provide for CELSIUS, if anything? Thanks.
Ramon Laguarta: Yeah. Thank you, Peter. I will not talk too much about the agreement other than saying that it's a good alignment of the long-term interest of both companies, and it's great for PepsiCo shareholders. The partnership with CELSIUS is strong, and it's helping us to gain scale in our go-to-market, specifically in some channels where we need volume to justify some of the economics of the call. So that role continues. We're pleased with the partnership. Energy is a fast-growing category, profitable, that is great for our portfolio. So that's what I would say. We remain pleased with the partnership and we'll continue to build the partnership going forward. |
6,144 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Filippo Falorni with Citi. Your line is open.
Filippo Falorni: Hey, good morning, everyone. So I wanted to go back to Frito but on the top line trends. Clearly, you guys were setting the toughest comp of the year in Frito-Lay. You mentioned you expect some sequential improvement. So maybe you could talk about volume trajectory, particularly for the business? And Ramon, you spoke in the past about the cycling of this shift towards smaller pack sizes. So maybe you can give us an update on that, and also any potential impact from cycling the reduction in SNAP benefits from last year? Thank you.
Ravi Pamnani: Yeah. I would say the Frito-Lay continues to outperform the category. And as I said earlier, the big opportunity for Frito-Lay is continue to create occasions for our savory category, bringing them from broader macro snacks or snacks and meals overlap, how do we bring more category stores, more occasion store snacking. So those are the two big strategic objectives of Frito-Lay. And all our innovation and pricing and channel mix and everything else is against that large objective and do it faster than others, so that we continue to gain shares. So as we -- as we look at the business performance, as you said, this is the toughest lap. I think last year, we grew 16% in Q1, and that lap is still high in Q2, but then it gets much better than half two. So we should expect a gradual sequential improvement of our volume for Frito-Lay, especially in the second half of the year, and we'll continue to be the guardians of the savory category and make sure it's valued properly, and it generates growth for our customers ahead of what food generates for our customers, and we continue to capture a disproportionate share of that very fast-growing and profitable business.
Operator: Thank you. One moment for our next question. Our next question comes from Kaumil Gajrawala with Jefferies. Your line is open. |
6,145 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Kaumil Gajrawala: Thanks. Good morning, everyone. Just you mentioned multiple times on gaining share within the category. Could you just give us some -- in multiple regions, can you just give us some context on what the categories are growing or at least what -- maybe what they're expected to grow as you think about the next – next year or so?
Ramon Laguarta: We -- yes, I mean, like what I said is that our goal is always for our categories to grow faster than overall food and beverages. I think that makes us a very attractive partner with our retail partners, and we deliver growth for them. And our categories are profitable. So it's a good combination of growth and profitability for our customers. So that's what we're trying to do. I think our categories will continue to grow faster than food and beverages in the majority of the countries around the world, given the trends on urbanization and the secular trends that we've been talking about both for convenient foods and beverages. So we feel good about that and our commercial programs, innovation and investments are in to deliver that for our partners. Obviously, there's countries around the world where we do better, others we do less well. And our goal is to keep emphasizing the ones we do better and improve the ones that we don't do so well. And that's how we're managing the company.
Operator: Thank you. One moment for our next question. Our next question comes from Robert Moskow with TD Cowen. Your line is open.
Robert Moskow: Hi. Thanks for the question. The 4% price mix benefit in Frito-Lay North America is pretty impressive in a food industry where there's just not a lot of pricing left. And I imagine a lot of it is from price pack architecture or maybe even consumers shifting to different pack sizes. Can you help delineate a little bit more like what's -- which of those is driving it more than the other? Or if it's about the same? And how do you expect it to evolve for the rest of the year? Do you expect it to be pretty constant? |
6,146 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Jamie Caulfield: Hey, Robert. It’s Jamie. And its majority is price but there’s an element of mix in there. I’d put it that probably two-thirds price and one-third mix. And yes, it comment earlier on our inflationary trends would expect them to be fairly moderate for the balance of the year, fairly smooth through the balance of the year. So I wouldn't expect a lot of volatility in that buying revenue relationship.
Operator: Thank you. One moment for our next question. Our next question comes from Robert Ottenstein with Evercore ISI. Your line is open.
RobertOttenstein: Great. Thank you very much. Two kind of follow-ups, if I may. Can you please talk about the spring shelf sets? Is it pretty much done? And how do you feel good about what you're seeing both on the Frito-Lay side and on the beverage side? And I understand on the beverage side, you're discontinuing some SKUs. So are you gaining shelf space where you want to? And then just a follow-up to an earlier question on CELSIUS. Maybe if you can give us an idea of how your energy drink strategy overall is evolving and what's going on with Rockstar, Starbucks, Mountain Dew in terms of the overall energy drink strategy? Thank you. |
6,147 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yeah. Listen, I'll step back a little bit. I would say our customer negotiations have been good and completed all over the world and especially Europe took a bit longer, but it's a very positive impact to our overall, I would say, European business and other parts of the world are less impacted by this type of negotiations -- are good. We feel good, including the US. To your specific question on space gains, I think it's going to be a good reset time for us across snacks and beverages. It's not completed yet. It's way normally I would say, probably another six weeks or so. We're feeling good about where we've seen already reset the performance improvement in the business. So that's good, well done by the commercial teams. So yeah, we feel good overall, and that's why we are reaffirming our guidance to grow at least over 4% in our net revenue for this year.
Operator: Thank you. One moment for our next question. Our next question comes from Chris Carey with Wells Fargo Securities.
Chris Carey: Hi, everyone. So one question on APAC division. Ramon, I think you were a bit more cautious or balanced on the Chinese consumer and yet double-digit growth in the quarter in China. I just wonder how APAC came in relative to your own expectations that whether there's any timing dynamic here or whether you see these results as perhaps a bit more durable going forward? And if I could just sneak in from the at-home versus away-from-home consumption globally, as you see some of the weaker trends from the lower income consumer, are you seeing any acceleration in that shift, which might be helping your business on a global basis as well? Thanks. |
6,148 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Two things, thanks. Good questions. I think the APAC performance is a little bit impacted by the timing of Chinese New Year. So there is a bit of benefit in our Q1 numbers versus Q2. It was a bit earlier this year. But the reality is that the APAC region is improving, I would say, outside of China. China still, as I mentioned earlier, I think the consumer is cautious and the consumer is saving a lot. And it might not impact so much the low price, let's say, products as ours. It might probably impact some other categories a bit harder than ours. The truth is that in China, as I said earlier, our team is not only this year, but already consistently for the last four, five years, been gaining share and creating a very capable and profitable business in China, we're very proud of. Now, to your other question on away-from-home, in-home, we're seeing mobility obviously, going back to pre-pandemic times anything we all forgot COVID anymore. And we're seeing, obviously, that impact in the consumption of food between home and away-from-home, especially in the U.S., I would say, it's probably the country that is having more impact. So, yes, away-from-home is growing faster than in-home for us and we're pivoting resources to away-from-home both in our food business and our beverage business, and we're trying to capture as much as possible that consumption that is moving to away-from-home. Internationally as well, I would say that is a huge wide space for growth for our business, both in trying to improve the availability of our current products and also creating new solutions that are more targeting meals and meal replacement as consumers buy more food away-from-home. And I think our brands belong in some of those occasions and as I mentioned at CAGNY, we're building both innovation and business models that can help us capture this meal location away-from-home with some of our large brands like Lays, Doritos, Tostidos, some of our well-known global brands. |
6,149 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. Our next question comes from Steve Powers with Deutsche Bank. Your line is open.
Steve Powers: Hey thanks and good morning. Ramon, maybe it ties to the pressures you mentioned earlier on the lower-income consumers in the U.S. or maybe even your comments just now on at home versus away-from-home. But if I think back over the last six-plus months, we've seen arguably unexpected slowing across many categories, but really in many immediate consumption categories where I think it was most unexpected across savory snacks, sweet snacks, arguably a number of beverage categories as well. Do you agree with that kind of unexpected slowing comments? And if so, how do you see the drivers? How do you stack up the drivers? Where do you think we are in that cycle? And how does that factor into your expectations on momentum recovery across your North American beverages -- sorry, North American businesses? I think the easing comps are obvious. I'm just -- I'm curious about sort of the -- your expectations on demand itself sequentially improving? |
6,150 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: That's great. Now, this is a great question and I think we need to step back and look at the bigger numbers. Obviously, there was huge inflation in our categories driven by input inflation over the last couple of years and operating cost inflation. Now, what makes us feel optimistic is a couple of data. Number one, I think wages are growing above inflation, and we see that not only in the U.S., but across the world. And we see our consumer packaged food inflation below, I would say, total CPI. So, those two numbers make us feel comfortable that the consumers will start coming back to our categories at the frequency and with the same level of -- or higher frequency than in the past. So those are two big numbers. Obviously, each one of us with our commercial programs, our innovation, our channel strategy is trying to accelerate that pivot back. But we feel good about the price volume mix that we see in our business, and that's how we think that we will continue to sequentially improve over the balance of the year into further years. Our North Star remains the same, is to make sure that, as I said earlier, we have innovation and consumer programs and channel programs that continue to drive savory snacks, ahead of micro snacks, ahead of food and the same with LRB, ahead of overall liquid consumption and ahead of food and beverages. So that drives value for our business and that drives value for our customers and that's how we think about driving the company long-term.
Operator: Thank you. One moment for our next question. Our next question comes from Brett Cooper with Consumer Edge Research. Your line is open. |
6,151 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Brett Cooper: Good morning. A question on the international business. On these calls over the years, PepsiCo has spoken about managing international profit delivery to provide affordability to consumers and support recruitment. And if we look at margins in the international business, they're up versus COVID or versus pre-COVID levels. So can you help us understand beyond the headline financial results that we can see, I guess, evidence of what you look at to ensure you're providing proper levels of affordability for category development to support the very long-term for that business? Thanks.
Ramon Laguarta: Yes. And the -- we're always very conscious of the relative value of our product versus other potential substitute products in the categories that we participate. So if you think about snacks, the big opportunities to transform and packaged snacks into packet snacks or other macro snacks into savory snacks. And we always look at that value ratio in every market, in every geography for different types of consumers. Now the same with beverages, right, moving from non-commercial beverages to commercial beverages, that is always the opportunity for us as an industry. We look at that very carefully. Now why are our margins expanding internationally because as we gain scale and obviously, that our fixed cost leverage is much better, and that's how we're getting to more profitable businesses in international markets, especially the large markets, whilst we keep affordability at the center of our strategy because that's long-term, including other things that we do, obviously, with availability and with innovation. We make our categories continue to grow at a very fast pace. But as you mentioned, affordability and relative value of our category is a key KPI that we measure all the time in every market because it's the key source of continuous growth for our categories.
Operator: Thank you. One moment for our next question. Our next question comes from Gerald Pascarelli with Wedbush Securities. Your line is open. |
6,152 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Gerald Pascarelli: Great. Thanks very much. Question on Europe. Another really strong quarter here, like the seventh consecutive quarter of double-digit revenue growth. It looks like it accelerated on an underlying two-year basis. So maybe if you could provide some color on the driver markets, ones that maybe came in better than your expectations? And then how you would compare how developed markets in Europe are performing relative to what we're seeing in the US? Thanks. |
6,153 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | RamonLaguarta: Yeah. Thank you and a good observation. I think our team in Europe is doing a fantastic work. It started with strong productivity, simplifying the business and driving cost control, eliminating duplication and then reinvesting that money back into our brands and becoming more competitive and also driving our availability and driving our brand preference. And that is a flywheel that is working for us across both developing and developed markets in Europe. Obviously, developing markets a bit more. So if you think about Eastern Europe markets are growing a little bit faster than Western Europe markets. Western Europe markets have been impacted a little bit in this first quarter by some of the negotiations, and that's not atypical in Europe. But I think we have a good flywheel in Europe, and Europe will be expanding its portfolio along the lines of what the US has been doing, which will give us additional consumers and additional penetration in households across developed and developing markets. So we feel good about the flywheel in Europe. But at the center of that is a very strong productivity, cost discipline and reinvestment strategy that is, in a way, what we're trying to do across the full company, elevating our productivity and driving their investments both into affordability, availability, a better brand equity and then investing back into our future, digitalization and sustainability at the center of that investment. So it's a flywheel that we're trying to do for all the world. Clearly, Europe is doing a good job at implementing it.
Operator: Thank you. Ladies and gentlemen, this does conclude the question-and-answer session. I would like to turn the call back to Ramon Laguarta for any closing remarks.
Ramon Laguarta : Yeah. Thank you, everyone, for joining us this morning and for the confidence that you've placed in us and in our stock. And we hope that you all stay healthy and safe. Thank you. |
6,154 | PEP | 1 | 2,024 | 2024-04-23 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.
Ravi Pamnani: Thank you, gentlemen. Appreciate your help.
Operator: You're welcome. |
6,155 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Good morning, and welcome to PepsiCo's 2025 First Quarter Earnings Question-and-Answer Session. Your lines have been placed on listen-only till it's your turn to ask a question. Today's call is being recorded and will be archived at www.pepsico.com. It is now my pleasure to introduce Mr. Ravi Pamnani, Senior Vice President of Investor Relations. Mr. Pamnani, you may begin.
Ravi Pamnani: Thank you, Kevin, and good morning, everyone. I hope everyone has had a chance this morning to review our press release and prepared remarks, both of which are available on our website. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans, updated 2025 guidance and outlook. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, April 24, 2025 and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to our first quarter 2025 earnings release and first quarter 2025 Form 10-Q available on pepsico.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. Joining me today are PepsiCo's Chairman and CEO, Ramon Laguarta; and PepsiCo's Executive Vice President and CFO, Jamie Caulfield. We ask that you please limit yourself to one question. And with that, I will turn it over to the operator for the first question.
Operator: Thank you. [Operator Instructions] Our first question comes from Bonnie Herzog with Goldman Sachs. Your line is open.
Bonnie Herzog: Hi, good morning.
Ramon Laguarta: Good morning. |
6,156 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Bonnie Herzog: Hi, good morning.
Ramon Laguarta: Good morning.
Bonnie Herzog: I have a question on Frito. Last quarter, you emphasized your step-up investments with a particular focus on improved price pack architecture, and then also an emphasis on the sizable away from home opportunity. So, Ramon, I'd be curious to hear how some of those investments are paying off? And then, if you're making any changes to your strategy, especially given the pressured consumer environment? For instance, do you now see a need to increase your investments to ultimately return Frito back to growth? Thank you. |
6,157 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Hey, Bonnie. So, I think we're executing the playbook that we talked late last year, early this year, and the playbook has multiple legs. One is, as you said, granular, good return on invested value investments. The second is portfolio transformation. And the third is operational excellence in a broader way, execution and cost. So, we're executing the three pillars with a sense of urgency at Frito. And we're starting to see the returns on some of the value and new price points investments that we're making. It's still early in the rollout of the strategy, but if you think about our dual size strategy in single serve, so below $2, above $2 where we have executed that strategy, we're seeing a meaningful improvement in units, especially when we attach the kind of the below $2 to meal deals. And that is especially in convenience stores. We're also seeing the when you take multi-packs and multi-pack has been a big growth segment of the business for the last few years. We're seeing the 10-count assortment. We've increased that assortment as an entry, much lower price point for consumers. That's also delivering good returns. So, as we're optimistic that as we execute the playbook, the full playbook, including take home eventually later in the year, that that's going to keep consumers in the category and it's going to increase the frequency of consumption of those consumers, which at the end is what we're trying to do with new price pack. At the same time, we're working hard at portfolio transformation and that is a key pillar, offering consumers more options where consumers want to go. And basically here is more permissibility, more functionality in our snacks. And we're also working on improving the operational excellence of Frito, both in terms of rightsizing the cost and improving the field rates and improving the granular execution in go-to-market. Frito went through an SAP implementation, it just finished. And like any big system implementation, there has been some learnings for the organization. I |
6,158 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | implementation, it just finished. And like any big system implementation, there has been some learnings for the organization. I think in the coming months that will be behind us and it will clearly have an impact on improved service levels and better visibility to execution. So, that is the full playbook and we will keep investing and we'll keep making sure that, that business continues to grow for the long-term and that's the perspective that we're putting on the business all the time. |
6,159 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Steve Powers with Deutsche Bank. Your line is open.
Steve Powers: Great. Good morning. I was hoping that you could maybe just decompose in a bit more detail just the drivers of the reduced full-year earnings outlook. With organic growth not really changing in the aggregate, the implication is that the vast majority of that, if not all of that is related to tariffs. If that's right, just kind of the pockets of tariff friction that you're encountering and plans long-term to offset it, assuming they stick around. But then also if there's other things in there, if there are incremental investments, just sort of the relative bridge between prior full-year outlook and today? Thank you. |
6,160 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Jamie Caulfield: Hey, Steve, it's Jamie. The rationale behind the guidance adjustment that we announced today is really driven by three things in a number of ways that are a little bit related to one another. The first is tariffs. So, that is new news since we gave our initial guidance at the beginning of the year. So, we've factored in what we know about tariffs today and we factored in mitigation plans, which we continue to work. Some of those we'll be able to execute more quickly. Some of those will take more time to execute. The second is just the heightened macro and consumer uncertainty. I'm sure you saw the Consumer Confidence Index that's really nosedive. So, relative to where we were three months ago, we probably aren't feeling as good about the consumer now as we were a few months ago. And then third, and this is also related to the consumer picture is Frito's subdued performance and we've got clear plans to continue to turn the business around, but that'll take a little while too. Now on the top line guidance, you saw Q1 versus our low-single-digit guide for the year. We put up 1% as we called out in the prepared remarks because our international quarter is only two months for the first quarter. If we included the third month in the first quarter, we would have grown too. So, we're solidly in the band of top line guidance that we gave back at the beginning of the year.
Operator: Thank you. One moment for our next question. Our next question comes from Filippo Falorni with Citi. Your line is open.
Filippo Falorni: Hey, good morning, everyone. I was wondering if you could talk a bit about the expectations for the international business going forward; clearly, solid 5% growth in the quarter. You mentioned also including the March, total company would have been 2% organic. So, you're expecting acceleration from here? Any color you could provide would be great. Thank you. |
6,161 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, good morning, Filippo. Listen, the international business continues to be the largest growth engine for the company. And, we continue to invest in that business. As you well said, it started the year at a good pace, if you take March, even faster. We see the international business continuing those trends during the balance of the year. There are markets that we're seeing a bit of a slowdown in the consumer, namely China. China is a market where we've seen the consumer hurting a little bit. We're seeing Mexico in a way impacted by what happens in the U.S. And, I think those two markets will continue to be connected in consumer sentiment and probably consumer disposable income as well. We're seeing Europe navigating quite well. The first signs that we have in Europe are positive. We're seeing India in a good place. We're seeing Brazil in a good place. So, overall, the portfolio of markets where we have the highest percentage of business are in a positive place. And, we see the international business continuing to contribute to our growth at that mid-single digit. Some markets obviously have high single digits in the balance of the year.
Operator: Thank you. One moment for our next question. Our next question comes from Dara Mohsenian with Morgan Stanley. Your line is open.
Dara Mohsenian: Hey, good morning.
Ramon Laguarta: Hi, Dara. |
6,162 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Dara Mohsenian: Hey, good morning.
Ramon Laguarta: Hi, Dara.
Dara Mohsenian: So, just wanted to follow-up on Bonnie's question, the magnitude and durability of the volume weakness in Frito in North America continues to disappoint. So, it was helpful to hear about all the fixes you're putting in place here today as well as at CAGNY. Just wanted to get your perspective on if at some point you think we might need a more substantial level of re-investment behind FL&A to turn around trends in that business, some type of more dramatic step up in investment. And maybe you can split that into just potentially the need to reinvest more on pricing in this consumer environment or investing more behind the business, whether it's frontline spend or marketing? And, just how you think about that balance in this consumer environment and if you might need more aggressive plans at some point to turn around trends there? Thanks.
Jamie Caulfield: Hey, Dara, Jamie. Look, the way we're managing through this is we want to make sure we protect the long-term health of the franchise. We've talked about providing value to the consumer, so we're doing that. But, we're not going to do it in a way that we damage the long-term health and profitability of the business. We are driving greater levels of productivity that provide the investment that we're making in the business. And, that's not only in revenue management tactics, but it's also in stepping up our execution capability. And the other part on productivity is we are looking at how do we -- as you saw in the first quarter, quite a bit of fixed cost deleverage, so we're going after costs with even more intentionality. |
6,163 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, I think the three pillars that we talked, Dara, they are equally important. So, the value investment is relevant and it impacts our core brands. And, I think putting more intelligence behind the investment, making sure that we get the best return, that for every occasion and for every channel we have the right package versus destroying value by over-investing in value. I think that an intelligent reinvestment of value is an important one. Now, it is as critically important for us to make sure that we participate in all the sub-segments of the market where the consumers are going. And, the consumers love existing spaces. But, they are also driving consumption in other spaces where we need to participate very intentionally. And that's what we're doing. There's some moves we're making organically our -- we obviously have visibility to next year's innovation plan. They're very strong. And we're also making some acquisitions, as you saw, between south Russia, that we have now two platforms to drive additional participation in new segments. And the third pillar is not something that is small. The operational excellence of the business is improving. We now have better data, we have better systems. We have talent stability. COVID was a disruption for the organization. We have better leaders in place and, we've gone through a system implementation that has been, in a way, a little bit complex as you imagine a business of that size, that it's also behind us. So, you should think about a multiple vector execution that will drive the performance of the business, value being important and good return on investment in value. It's how we're thinking about our investments in that part of the of the business.
Operator: Thank you. One moment for our next question. Our next question comes from Andrea Teixeira with J.P. Morgan. Your line is open. |
6,164 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Andrea Teixeira: Yes, good morning. Thank you for taking the question. I wanted to go back, sorry, to Frito North America. As you look at the price letters, are you seeing more declines in the higher price points or in bigger packs? So in other words, on a comparable basis, and Ramon, you spoke over the past I would say few quarters, even about moving reaching your multi-pack, reaching 5 billion against like 1 billion business before. Is that the 4% decline that we saw? I think in the 10Q, correct me if I'm wrong, just on Frito-Lay, North America in declining volumes. On average, are you seeing a much deeper decline in those large packs? Where consumers may be thinking maybe feeling more pressure because of the cash out way? And conversely, you're seeing less or smaller declines in the small packs. I mean, I'm trying to gauge where, on a mixed neutral basis, are you seeing those movements and how you reacting to those, or in other words, or you got tapped off that multi-pack at some point and both of them are declining at similar paces and how to protect that? |
6,165 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes. Andrea it's a -- revenue management clearly is becoming more complex as consumers are feeling more challenged with their disposable income. And that obviously is different for different levels of income across the American consumer. Now what we're seeing is that consumers are giving a lot of value to absolute dollars now. So, clearly, entry price points and absolute outlay of money per unit is a very important, relevant metric. And so, we're putting more emphasis on those entry price points and making sure that we're not asking for large amount of money for participating in our brands, and that is something that we're very -- that's why smaller single serve smaller multi-packs, those are all tools for us to keep the consumers in the brand and make sure that the frequency is there as well. There are different behaviors beginning of the month versus end of the month, so maybe beginning of the month consumers are looking for more price per kilos of more quantities at a good value end of the month, maybe absolute price per unit, and again, very complex how that works per location and per cohort. But that, those are where I think the intelligence, the data, the tools that we have now in the hands of our people can help us get their best return on the investment. Now, there is a channel that is convenience stores that is impacted there's less traffic in the channel and our participation in that channel is very irrelevant both in beverages and snacks. So, how do we help our partners in the convenience store business to have traffic, but also have higher incidents is a very important part of our operating plan. And that's why I was referring to meal deals. I was referring to some specific offers that will have in that channel because that is an important part of our business and it's impacting our single serve performance.
Operator: Thank you. One moment for our next question. Our next question comes from Lauren Lieberman with Barclays. Your line is open. |
6,166 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Lauren Lieberman: Great, thanks. Good morning. I was hoping you could talk a little bit around how the business can deal with some of the new legislation around, ingredients and colors. And sort of I know you've got lots of technology and lots of technology and different markets around the world, but if the outlook currently built in some of the incremental costs, you'll need to be absorbing to manage through this. And also just any perspective on snap. I know there's just, a lot out there, but anything you can offer on sensitivity to business or exposure to the business with regard to snap. Thanks. |
6,167 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: That's great. Two good questions, I'm very relevant, we've been leading the transformation of the industry now for a long time. On sodium reduction, sugar reduction and better fats, and we already have a portfolio when we talk about the U.S. and the food business a 60 plus percent of our business today doesn't have any artificial color, so we're well undergoing that transition. And for example, brands like Lays will be out of artificial colors by the end of this year. The same with Tostitos. So, some of our big brands, so we're well underway. Ideally, we obviously we stand by the science and we we're products are very safe and there's nothing to worry about this, but we understand that there's going to be a probably a consumer demand for more natural ingredients, and we're going to be accelerating that transition. Ideally, we can do this in a very pragmatic, orchestrated way as an industry and not create unnecessary panic or chaos. But, we'll lead that transition. And in the next couple of years, we'll have migrated all the portfolio into natural colors or at least provide the consumer with natural color options. And obviously every consumer will have the opportunity to choose what they prefer. So, that's the journey we're undergoing. In terms of snap, again, there is a lot of conversation in different states and we're seeing that some of our categories could be exposed to some restrictions. I think this has -- will have a very limited impact in the business as we are calculating today. And we will need to see how the eventual legislation gets implemented. It's still a lot of unknowns on how this is going to be happening.
Operator: Thank you. One moment for our next question. Our next question comes from Bryan Spillane with BofA. Your line is open. |
6,168 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Bryan Spillane: Hey, thanks operator. Good morning everyone. So, Ramon, maybe just to step back, the last few years, some of the messaging, I think if I've heard it correctly from you has been. As you're looking at the business over the next few years, right? More of the growth sourced from international, and you've done a lot, right? The company's done a lot to build and begin to scale more international, more countries contributing growth. So, I know some of this has maybe been forced by the external environment, but when we look at the top line in a two, if we had three full months of international, it just seems like from a revenue perspective your international contribution kind of puts you in a position to maintain the longer term growth objectives, even with what would be, I guess a natural slowing of Frito in North America. So, one, is that kind of the right way to think about this? And then, second, if that's true, are we scaled enough to be able to drive profit growth alongside revenue growth? Is it -- if it's a more international heavy revenue model, I guess over the next few years? So I guess what I'm basically asking is, are we at a point now where international can really contribute more if Frito's going to naturally slow to a more modest growth over time? |
6,169 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: I think two. I mean, this is a great question, Brian and it's probably for a long conversation. I think international will continue to be a growth and profit key driver for the company for the long term. And it's -- if you look at the population inside, outside of the company, outside of the U.S. and how develop our per caps are internationally versus in the U.S. you could see right away that is the growth. And fortunately, we're now at a stage in the growth development of the company where that business is accretive to the company. So, two elements, high growth, high right to succeed in those markets, in the majority of those markets, both in beverages and in snacks and foods, and, accretive business. So, that part, and we'll continue to invest. We're investing in capacity, we're investing in talent, we're investing in go-to-market. We're investing in portfolio and the brands, and that will continue. Now, what I disagree with you is in the fact that the U.S. business cannot grow at a faster speed than it is growing today. I think I have -- I think the U.S. business, both beverages and foods, will continue to grow at a very good rate in the U.S. And when you think about the overall opportunity, both from the better execution to evolving the portfolio, to moving into new channels like away from home, we have, tremendous opportunities to take our brands into new spaces, leverage the capability of our business. And now that we have an operating model that will be more integrated in the U.S. that will give us more resources, will be less duplicated in some areas and synergize in other areas where we can drive growth in new service models direct-to-consumer, direct to B2B, whatever the we choose to play. So, I think the U.S., we see it as a girl driver. We see it as a source of funding for the rest of the world, but also a growth opportunity for the company. Way above where we are today, I think we're today in a broad emphasis given by all the consumer dynamics and some other dynamics that are |
6,170 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | where we are today, I think we're today in a broad emphasis given by all the consumer dynamics and some other dynamics that are happening in the us but that will go through -- we'll have a more relevant portfolio. We'll be in the relevant channels. We'll have the right price points and the consumer will be in a better place eventually in the U.S. So, we see the two components of growth, obviously international, we will grab that opportunity with the right investments, the right talent, the right brand strategies and challenge strategies. But the U.S. it's a great opportunity for us and we think we have the right to win. And we have the fundamentals of brands and market presence to capture that opportunity as well. |
6,171 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment before our next question. Our next question comes from Michael Lavery with Piper Sandler. Your line is open.
Michael Lavery: Thank you. Good morning. I just wanted to unpack the guidance change a little bit further. You touched on the three pieces, the tariffs, the macro uncertainty and the Frito North America weakness. But the second and third are, have a top line component and you've held the revenue outlook constant. Is it just because of the impact, is modest enough to be in the wiggle room of low single digits, or is it an offset from international? I guess how do we think about the top line piece that's wrapped into that and then just on the tariff piece. Is your outlook based on current estimates, and I guess just simply, would we be right to assume that if, for example, the 90 day pause gets extended or if there's any changes there, it could certainly drive some upside if you get a little relief out of that.
Ramon Laguarta: Okay. So, I think there was two questions in there. The first Michael, yes. The momentum in international is one of the key underpinnings of the guidance that we reiterated on the topline. And as I mentioned, you look at the first quarter sort of normalize it for the -- our accounting calendar thing. And we're right in the middle of that low single-digit guidance. On tariffs, we're not going to get too much into piecemeal analysis. We based our guidance on what we observe today. We've run various scenarios of what could happen, and I think based on what we know today, that's what we factored into the guidance.
Operator: Thank you. One moment for our next question. Our next question comes from Kaumil Gajrawala with Jefferies. Your line is open.
Kaumil Gajrawala: Hey guys, it's Bring Your Kid to Workday at Jefferies. So, if you don't mind, my daughter Melaina's going to ask the question.
Ramon Laguarta: That's awesome.
Kaumil Gajrawala: So what do you think about the launch of GLP-1 oral medications coming to market next year? |
6,172 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Kaumil Gajrawala: So what do you think about the launch of GLP-1 oral medications coming to market next year?
Ramon Laguarta: Yes, just an --
Kaumil Gajrawala: That was entirely her own. |
6,173 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, just an --
Kaumil Gajrawala: That was entirely her own.
Ramon Laguarta: Yes, that's good. That's good. And I think it's relevant and it's again I would. Kaumil, and I don't know your daughter's name. But obviously we've been transforming the portfolio and we'll continue to give the consumer offerings that help them in any sort of dietary preferences that they have. So, whether they're in a GLP situation or they're not, we will keep providing them. What we're seeing with GLP consumers is again, they're driving more consumption on protein space, on fiber, on hydration. I think we're well positioned for both fiber and hydration solutions and we will increase the availability of products in those two areas. I think we're a bit less well-positioned in protein and that we're innovating. Our teams are working on innovation for against protein, both on the beverage and the food business. And you will see some late this year, early next year. And that's the space that I think we can capture more incremental value. Now, the other thing we're seeing in GLP consumers is that they're keeping our branch in their repertoire probably in, in a smaller portion. So, they're going for -- and that's the way they're actually eating across most of their choices. They're eating less quantities, so our offerings in the small portions and whether it's in multi-pack or some other options that we provide keeps our brands in their repertoire and it's still relevant. So, again, portfolio transformation, portion control, and the right offerings for those consumers will make sure that, our brands stay relevant to those consumers. And I don't know whether that the current participation I think is about an eight, seven, 8%. And there's obviously still a lot of trial and error from consumers in that space, but I think it's going to be relevant in the future and something that every food company is thinking about and we are obviously thinking about it and reacting. |
6,174 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Robert Ottenstein with Evercore ISI. Your line is open?
Unidentified Analyst: Yes. Hi, this is [Greg] (ph) on Robert. We have two questions on the PB&A business. I guess first, if you could talk about kind of the rationale behind the acquisition of Poppi and what you're planning to do with the brand. And then, second of all if you could talk about the drivers for PB&A margins, kind of how you're thinking about that segment and the set up, and any new thoughts on where you see the margin goal being over the medium term. Thank you. |
6,175 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, and listen, we're feeling good about our beverage business in North America. And we made choices a few years ago. We're executing those choices and I think we're executing quite well. And I need to thank the team for their focus and their good execution of the playbook. Now, one of the key pillars was improving the margin of the business. And you can see these in a multi-year trend that we keep improving. Q1 was a good step in the right direction. I think there's. There's opportunities still to become a better operating business and keep driving better excellence out of everything of our value chain from making, moving and selling. So, good progress there. We're also very, very optimistic about our brands and if you think about our soft drink business or CSD business, Pepsi is growing faster than in the last few years. Pepsi actually is starting to gain share of carbonated soft drinks, and it is been the focus on zero sugar. It's been the focus on Pepsi and food and all the activation of the brand in that space that is giving us very good results. We're also happy with Gatorade. Gatorade is also a business that is starting to regain share in the sports drink category. If you add to that Propel and the functional hydration, that space where clearly we're leaders and we keep we keep driving better performance. Now, our powders and tablets, our enhancer business is also gaining share. So, that is again a multi prone strategy that is starting to deliver for us. So, we feel good about it. There are areas where we need to keep improving, right? So if you think about Mountain Dew, we've been working on it for a while. There's a big re-launch of the brand in a few weeks. We would feel optimistic as well about Baja Blast being a good addition to the portfolio that will drive a structural demand for the brand. So, we're feeling good about both the operating improvement. We're feeling good about some of the brands and we're feeling good about some of the inorganic moves that we're making. Again, this |
6,176 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | feeling good about some of the brands and we're feeling good about some of the inorganic moves that we're making. Again, this is all subject to regulatory approval. So, when things are approved, then I think we can talk more about Poppy and how we're planning to integrate that into the business. |
6,177 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Peter Grom with UBS. Your line is open.
Peter Grom: Thanks, operator. Good morning, everyone. Ramon, I wanted to follow-up on your commentary there around beverages and just the commentary around the portfolio. But can you maybe just give us an update on energy drinks? I think it's one of the few categories that has seen some sequential improvement year-to-date from a category perspective. Celsius has seen some improved performance as well. And then, just when you think about your partnership with Celsius, they obviously have brought on a new brand in Alani Nu. So, can you just talk about your willingness to kind of bring that brand on through your distribution network? Thanks.
Ramon Laguarta: Yes. Listen, we feel good about energy and we feel good about the strategy and the partnerships that we have in this space. We're having conversations with Celsius, obviously after they acquired new brands and still I would say early discussions about how we can find ways to participate or not in this new acquisition. It's still too early to make any kind of public comment on this.
Operator: Thank you. One moment for our next question. Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open. |
6,178 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Christopher Carey: Hi, good morning, everyone. I did want to follow-up on a question around PBNA, specifically on the Pepsi brand. It gained market share in the quarter as highlighted in the prepared remarks, which is certainly encouraging. Do you think that this is the start of something that can be a bit more durable? What are your expectations for the brand from here? And then if we take a step back, it's a little bit like Brian's question, but more toward North America and specifically on beverages. Your peers have delivered pretty dynamic results in their North American beverage business in recent years. Certainly, you've been active in the environment as well. But has your thought process on this business changed over time? I will tell you my personal view is that it feels like there's a lot of focus on margins from the investment community and less so from growth certainly that wouldn't be your starting point with your pillars of profitable growth. But maybe just as you canvass this North American beverage environment over the past few years, has that evolved your thinking on what this business is capable of going through the medium term? Thanks so much. |
6,179 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, listen, it's a good, it's a very good question. And as I would refer back to my previous answer, we were feeling very good about the progress that we're making and these large businesses is about clear focus, clear tradeoffs, clear areas of where do you want to improve the business and over time you execute and we're feeling good about both the operational excellence. So, the margin improvement is not only a margin improvement, it's an operational excellence, it's an operating improvement metrics across make, move and sell and that's where the business is focused. So, it is a long-term improvement in capabilities, in infrastructure, in data and technology and all that is being rolled out to make the business more capable and more granular and more intelligent. Now, on the brands as well, obviously we have been investing regularly in consistently in our brands with focus on Pepsi and Gatorade and those two brands are starting to gain share. We feel good about the positioning, we'll feel good about the advertising, we'll feel good about the portfolio. If you think about Pepsi Zero, it's a great addition to the portfolio and it's performing very well. If you think about Gatorade, rapid hydration is a big consumer space that we're participating with Gatorade. Gatorade Zero as well has been a good addition to the portfolio, a very, very large scale part of the business now. And we're investing in powders and tablets because we see the consumer moving there. We're now going to have new infrastructure, new assets that help us increase our offerings and probably add more functionality to that part of the portfolio. I think there are still opportunities on the brand. Some of them will be organic. Some of that would be inorganically or through partnerships as you mentioned with CELSIUS on the energy space, with Starbucks on the coffee space. And we have also, I think, a pretty good development of the tea category ahead of us with our partnership with Unilever. So, again, through a partnership, organic |
6,180 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | good development of the tea category ahead of us with our partnership with Unilever. So, again, through a partnership, organic or inorganic, I think the portfolio, we have very good strategic intentions of where we want to take the portfolio, where the consumer is going. And, we feel good about the progress we are making. This is not going to be an overnight. We knew that. This is going to be a year after year progress. But, the way the business is performing, the way we are building the talent, the way we are building it step-by-step, the capabilities of the business make us feel very good about this business long-term. |
6,181 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you, one moment for our next question. Our next question comes from Kevin Grundy with BNP Paribas. Your line is open.
Kevin Grundy: Great. Thanks. Good morning, everyone. Question for Ramon, just on the decision to recast your segment results, but really from a strategic perspective, so, as you're aware, it's not uncommon for such moves to be a precursor to more impactful strategic considerations from a company's board, particularly when a stock's been under pressure. So, I wouldn't expect you to front run anything, of course, on a call like this today. But, perhaps provide context, one, for the decision to recast your segment results. And then, two, what you believe investors may under appreciate about the story of PepsiCo that perhaps becomes more evident with the company's new financial segment reporting. So, thank you for that. |
6,182 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: No, Kevin, I think we have a new -- as we think about maximizing the growth of the company in the future, we think there is an opportunity to both provide more focus in some parts of the business, either beverage or foods, or operating model, COBO or FOBO, in our international business. So, that has been the majority of the recast. And so, it provides a separation of the FOBO business international versus the operating units where we control from the manufacturing all the way to the selling. And so, this is a very simple way for our international business, which is where you scale today to have a bit more focus on the value we provide to our partners in the FOBO business and the operating infrastructure around our company-owned businesses, and how we apply technology, and how we provide services to our operating units. So, it's more on the let's make sure that we're well-positioned for the long-term growth of our international business and nothing else. Now on the North America business, Quaker has been part of the food business now for a couple of years. So, we're just recognizing something that is the way we're thinking about the business and running the business. And then, the beverage business continues to be separate. Now what we're adding in North America, it's a North America integration opportunity, both from running the business more efficiently in the short term, but most importantly about how we can grow the business in a different way in the future, especially as we look at common infrastructure for some of our supply chain or some of our go-to-market models for particular channels where I think the scale could give more value than the separation. And, that's how you should be thinking about why we've made some of these changes. The North American one is not on the reporting, it's more on the operating. The international one is the reporting and the operating both. |
6,183 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Operator: Thank you. One moment for our next question. Our next question comes from Robert Moskow with TD Cowen. Your line is open.
Robert Moskow: Thanks. Kaumil's daughter took my first question. But, fortunately, I have a backup here. So, last year, you characterized potato chips and other kind of unflavored chip products as being more commoditized. And that was where you wanted to be more forward on your promotional activity. And there's not much talk about that this year. So, Ramon, I wanted to know do you feel like in terms of your value actions, you need to be more active on that part of the portfolio, or do you feel like you've got it where you need to be. |
6,184 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: Yes, I think the strategic intent remains the same in areas where we have less consumer differentiation. We need to probably be a bit more intentional in our revenue management initiatives. In areas where we are more differentiated, we can probably be also more intentional, but in the other direction, right? In terms of capturing more value from consumers where our products provide more uniqueness and they, obviously consider, consumers will give us more recognition for that value. So, nothing has changed. We're not talking the details because obviously we're not going so much into that space. But in the work that teams are doing. We have -- we understand where we provide value and value, it's in the product, it's in the brand, it's in the experience, it's in multiple elements of value. And then, obviously where we have less differentiation or we provide less value, we need to have, we can afford less gap versus competitors in terms of pricing. So I mean, the principle, the strategic principles of our pricing versus our value remain the same. Actually I think we've gotten better at understanding really our value and the drivers of value and how then our pricing needs to reflect those elements in particular occasions or particular brands. I think the organization has become more nuanced, more granular, more intelligent in what is a critical element of our profitability and our growth.
Operator: Thank you. One moment for our next question. Our last question comes from Charlie Higgs with Redburn Atlantic. Your line is open.
Charlie Higgs: Hi, Ramon and Jamie. Good morning, as well. I just wanted to dig into the organic sales growth guidance please, because I think you are now including high inflation economies in that, can I just confirm and what you are building in for the rest of the year as a contribution from these high inflation economies? Thank you. |
6,185 | PEP | 1 | 2,025 | 2025-04-24 08:15:00 | PepsiCo, Inc. | 32,854 | Ramon Laguarta: So, yes, I'll confirm that we do include it. And frankly, that was to put us on a comparable basis with many of our close in peers. It's not going to be a significant part of the revenue generation for the year. And it wasn't a significant contributor in the first quarter.
Ravi Pamnani: Yes. Charlie, it's Ravi. It's immaterial and there's no impact on earnings either. Just to make sure we clarify that. Benefit or impact? Nothing.
Ramon Laguarta: Great. Okay. I think this is the last question and we close the call by now. Thank you very much for your participation and obviously thank you very much, especially for the trust you have in ourselves and in PepsiCo for your investment. Thank you.
Operator: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day. |
6,186 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Good morning and welcome to PayPal's Fourth Quarter and Full Year 2024 Earnings Conference Call. My name is Sarah and I will be your conference operator today. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Steve Winoker, PayPal's Chief Investor Relations Officer. Please Go ahead.
Steve Winoker : Thanks, Sarah. Welcome to PayPal's fourth quarter and full year of 2024 earnings call. I'm joined by CEO, Alex Chriss and CFO, Jamie Miller. Our remarks today include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Our commentary is based on our best view of the world and our businesses as we see them today. As described in our earnings press release, SEC filings, and on our website, those elements may change as the world changes. Now over to you, Alex. |
6,187 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss : Thanks, Steve, and thank you to everyone for joining us this morning. PayPal had a successful 2024, delivering strong operating and financial results. The improvements we've made to branded checkout, P2P and Venmo. Plus the progress we have made on our price to value strategy are beginning to show up in our results. We set out at the beginning of 2024 to make it a transition year. To narrow our focus and to make sure we are executing the initiatives that matter the most to the growth of our business. One year later, I'm proud that we've laid a strong foundation for durable growth. We drove branded checkout transaction margin dollar growth in each quarter. US branded checkout growth accelerated in the fourth quarter to exit the year at a high point as our new checkout innovations are scaling to customers. Driven by a renewed focus on pricing to value, Braintree has meaningfully contributed to our transaction margin dollar growth over the last three quarters. Venmo monetization is making great strides with over 20% growth in Venmo debit card and Pay with Venmo monthly active accounts. Put simply, the PayPal team executed well during our transition year and made strong progress on our transformation. The investments we made throughout 2024 allowed us to perform well during the holiday shopping season and finished the year strongly. Total active accounts returned to growth in 2024, as we enhanced our value proposition and brought innovation to market. Total payment volume grew 10% to nearly $1.7 trillion. We delivered $32 billion in revenue up 7%. We reached an inflection point for transaction margin dollar growth, which increased 5% excluding the benefit of interest on customer balances. Our non-GAAP earnings per share increased 21% year-over-year. We generated $6.8 billion in free cash flow and completed $6 billion in share buybacks. For 2025, we expect another solid year of transaction margin dollar growth and strong free cash flow, which Jamie will discuss. As we look ahead to 2025, I want to share |
6,188 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | transaction margin dollar growth and strong free cash flow, which Jamie will discuss. As we look ahead to 2025, I want to share the areas we're most focused on. First is innovation. With the leadership team in place and the velocity with which we're executing, we've proven we can bring innovations to market. In 2024, we rolled out new branded checkout experiences, launched PayPal Everywhere, introduced Fastlane, and expanded PayPal Complete Payments. We are not stopping there and will continue to innovate to solve our customers' biggest challenges. The second is product adoption. 2025 will be focused on scaling adoption of our innovations. We have world-class products and solutions, and we'll continue educating customers about all we have to offer. In 2024, we completely revamped our marketing and go-to-market playbook. We're just scratching the surface, so you can expect more ahead. Third is partnerships. Last year we formed significant partnerships to drive Fastlane adoption and bring more value to customers. We're building on our leadership position in payments and commerce and establishing ourselves as [the platform] (ph) that leading brands want to work with. We will strike even more partnerships throughout 2025. Fourth is efficiency and effectiveness. In 2024, we reduced headcount by 10%. We made deliberate investments in AI and automation, which are critical to our future. This year, we are prioritizing the use of AI to improve the customer experience and drive efficiency and effectiveness within PayPal. We expect to make meaningful progress on all four of these areas in 2025. Let me walk you through how this focus will drive our results this year and beyond. In 2025, our key strategic initiatives will be to win checkout, scale Omni, grow Venmo, and accelerate SMB. Our teams are organized around these priorities and tracking progress daily. Starting with Win Checkout, our #1 priority. With our upgraded experiences, we now have the leading checkout solution on desktop and mobile. When fully implemented, |
6,189 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | With our upgraded experiences, we now have the leading checkout solution on desktop and mobile. When fully implemented, the upgraded experiences reduce latency by more than 40% and drive more than 100 basis points of conversion lift on average, consistent with the early results we've shared. These upgrades are now live for more than 25% of U.S. Checkout traffic, which is up from 5% last quarter. We have a lot of room to grow here as adoption increases in the U.S. and then expands globally. On top of the benefit of higher conversion, these new experiences improve the presentment of our branded marks and solutions like buy-now-pay-later, which can help to expand our share of wallet. BNPL customers spend 30% more on average and merchants see higher sales after adding BNPL messaging to their sites, which is critical when one more sale can make all the difference. In 2024, we drove approximately $33 billion in BNPL total payment volume, growing 21% from the prior year. Consumers and merchants trust the PayPal brand and experience. We have a lot more we can do with BNPL in the next year. Merchants continue to show strong interest in Fastlane. In the fourth quarter we focused on selling Fastlane to large brands that can drive future volume. I'm excited to share that we have signed NBCUniversal, Roku, and StockX and are working on implementation. We now have nearly 2,000 merchants up and running with Fastlane. We expect an inflection point in adoption when we expand our go-to-market efforts and bring Fastlane to even more merchants through Adyen, Global Payments, and Pfizer this year. From early data, what's exciting is that 25% of Fastlane users have never had a PayPal account before. And more than half have a PayPal account but haven't been active in the last 12 months. To say that simply, 75% of Fastlane consumers are new or dormant PayPal users. This means that Fastlane not only improves conversion for our merchants, but also introduces more shoppers to PayPal and enables us to reengage in active users. We've shared |
6,190 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | for our merchants, but also introduces more shoppers to PayPal and enables us to reengage in active users. We've shared that one of our strategies is to build deeper relationships with our largest merchants as we renegotiate deals to reflect the value we provide. A key part of that is adding value-added services that improve the experience for our mutual customers. We built a suite of world-class value-added services and continue to introduce new ones. In the fourth quarter, we launched FX-as-a-service, which is automated currency conversion, and it's already live for Meta. We also actively scaled the use of network tokens for automated billing capabilities, which is live with merchants, including Instacart, Mint Mobile, and Poshmark. The expansion of our value-added services is a key driver of the transaction margin dollar growth we are delivering. Next let's talk about our initiative to expand beyond e-commerce to become truly omnichannel. We launched PayPal Everywhere in September which is driving significant increases in debit card adoption and opening new categories of spend. We added more than 1.5 million first-time PayPal debit card users in the fourth quarter, and debit card TPV was up nearly 100% in Q4. Our most active reward categories are gas, groceries, and restaurants. These new capabilities are driving deeper relationships with our users and more PayPal volume overall, offline and online. The average debit card actives generate 5 times the transaction activity and 2 times the average revenue per account compared to users who only use Branded Checkout. This is leading to habituation. Power users, which are PayPal consumer accounts transacting more than 100 times per year, grew more than 9% year-over-year in the fourth quarter. So we are seeing strong momentum today with our omnichannel push, but we are just getting started. We plan to expand our PayPal Everywhere value proposition to several European markets this year, including launching NFC capabilities in Germany. Moving to our progress to grow |
6,191 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | to several European markets this year, including launching NFC capabilities in Germany. Moving to our progress to grow Venmo, our task is twofold. First, continue to improve the social P2P payment experience that made Venmo a verve, increasing engagement and bringing on more users. Second, drive adoption of our monetized products, including the Venmo debit card and Pay with Venmo. In the fourth quarter, we continued improving the Venmo experience by giving our users more of the capabilities they've been asking for, like [scheduled send] (ph) and improved search. With these steady improvements to the experience, we see engagement increasing. Our engaged Venmo user base grew 4% in the quarter, reaching more than 64 million monthly active accounts. On monetization, we increased the average revenue per active Venmo account in 2024, and we plan to build on that growth in 2025. Monetized Venmo monthly active accounts beyond P2P and instant transfers grew more than 20% in the fourth quarter, driven by the adoption of Venmo debit card and Pay with Venmo. Venmo debit card monthly actives grew more than 30% and Pay with Venmo monthly actives grew more than 20%. We continue to expand Venmo's acceptance with major brands like Instacart and MoonPay, adding Venmo in the fourth quarter. And as we recently announced, JetBlue became the first airline to accept Venmo for flight bookings. So while we are still early in monetizing Venmo, we have a proven playbook that is resonating with customers. This gives us confidence as we move to 2025 and beyond. Finally, I'd like to cover our efforts to accelerate growth for SMBs. We are moving from a disparate set of payment products to building an end-to-end suite of solutions that solves more small business needs. PayPal Complete Payments was the first step towards an integrated suite of solutions, and we continue to make progress driving adoption with 45% of SMB processing and checkout volume now on this platform. Merchants on PPCP benefit from our upgraded branded checkout experiences. |
6,192 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | processing and checkout volume now on this platform. Merchants on PPCP benefit from our upgraded branded checkout experiences. Key to our success in growing with small businesses on our platform is our expanding set of connected and value-added services, which move us beyond a payment provider to a growth partner and help us retain customers throughout their business life cycle. Take for example our merchant financing solutions. Entrepreneurs come to us for payment services, as they start their business. As their business grows, they need access to capital to buy inventory, invest in marketing, and higher. PayPal Working Capital is a financing solution purpose-built for early stage companies. As the business matures, PayPal Business Loan offers more traditional merchant financing to match the increasing complexity and multichannel nature of larger businesses. Our business financing solutions increase loyalty and engagement driving the PayPal flywheel. Merchants typically increase their PayPal volume by 36% after adopting PayPal Working Capital and 16% after taking a PayPal Business Loan. Our merchant lending originations were $3 billion in '24, demonstrating our leadership and that there is plenty of room to grow to support our customers. This is just one example of the services we offer that help SMBs change the trajectory of their businesses. Expanding this ecosystem of value-added services is a focus in 2025 and beyond. To close out, I want to thank the PayPal team for their focus on delivering for customers every day. I’m proud of how far we have come in the last year. It was an important transition year for PayPal. We created strong momentum that sets up well for 2025 and beyond. We are now executing a game plan that we have confidence in, and I'm excited to share more at our Investor Day later this month. With that, over to Jamie. |
6,193 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Thanks, Alex. Moving to Slide 7. PayPal delivered another solid quarter of results to end the year. While there is still more work to be done, the team is making progress, building on the firm foundation that we’ve established. As we enter the second year of the company's transformation, our teams are energized and moving quickly. We remain focused on better serving our customers as we seek to drive durable, profitable growth. Looking at the high level financial results in the fourth quarter. Revenue grew 4% on both a spot and currency neutral basis. For the full year, revenue grew 7% on both a spot and currency neutral basis. Transaction margin dollars grew 7% in the fourth quarter or 6% excluding the benefit of interest on customer balances. Outperformance compared to our guidance was driven by higher contribution from branded checkout and Venmo, credit performance and interest earned on customer balances. For the full year, transaction margin dollars grew 7% or 5% excluding the benefit of interest and customer balances. Non-GAAP earnings per share were $1.19 in the quarter, up 5%. We ended the full year with $4.65 of non-GAAP earnings per share, up 21%. These full year results benefited from a return to transaction margin dollar growth, fueled by our transformation efforts, expense discipline, the higher interest rate environment and a strong capital return program. Turning to Slide 8. Our operating metrics reflect another quarter of steady progress. Total active accounts increased by nearly $3 million from the third quarter and nearly $9 million from last year to $434 million. Monthly active accounts also continued to show steady progress, up 2% year-over-year to $229 million with contributions from PayPal consumer accounts and Venmo. Transactions per active account excluding PSP processing grew 4%. Moving to Slide 9. Total payment volume grew 7% on a spot and currency neutral basis to $438 billion. For the full year, TPV grew to nearly $1.7 trillion, up 10% on a spot and currency neutral |
6,194 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | neutral basis to $438 billion. For the full year, TPV grew to nearly $1.7 trillion, up 10% on a spot and currency neutral basis. Looking at the TPV breakdown by product, we see strengths starting to build in some key areas. PayPal P2P accelerated for the sixth consecutive quarter to 6% growth. Venmo also accelerated by 2 points to 10% growth. Steady incremental product improvements combined with reinvigorated marketing campaigns are starting to make an impact. Global branded checkout volumes increased 6% on a currency neutral basis in the fourth quarter. This was about a 50 basis point acceleration from the prior quarter. Underlying this growth, we were encouraged to see U.S. branded checkout volume improve in the fourth quarter. Part of this increase can be attributed to a healthy spending environment and specific vertical exposure. In the U.S., we’re focused on scaling our modern, best-in-class experiences. From a merchant perspective, we continue to see the greatest strength across large enterprises, platforms and marketplaces. Winning checkout remains our most critical priority. Our goal is to drive more consumer engagement and a higher PayPal selection rate, which should accelerate TPV over time. Turning to PSP. As discussed throughout the past year, we moved rapidly within our Braintree business to prioritize healthy, profitable growth and intentionally let go of unprofitable volume. In-line with this strategy, PSP processing volume grew 2% in the fourth quarter compared to 11% in the third quarter. Our conversations with merchants have become more holistic, moving beyond price and share of card processing to a deeper appreciation of our customers' needs and how we can add value through our full suite of solutions. We expect a handful of large Braintree merchant renegotiations to result in a headwind to revenue growth of about 5 points in 2025. Shifting away from this volume pressures gross revenue but is accretive to transaction margin dollars and will result in more than 1 point benefit this year. We |
6,195 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | gross revenue but is accretive to transaction margin dollars and will result in more than 1 point benefit this year. We expect this benefit to build over time as we drive more value-added services. Over the next few quarters, we will continue to work through renegotiations at which point we should reach a new baseline to drive faster volume and revenue growth. Moving to more financial detail on Slide 10. Transaction revenue grew 4% on a spot basis to $7.6 billion, driven primarily by branded checkout and Venmo. Other value-added services revenue in the quarter grew 5% to $778 million. This acceleration was driven largely by a return to growth in credit revenue. We continue to see solid performance across our credit portfolio. As Alex shared, we have begun to modestly grow merchant originations and expect credit to be a positive revenue and profit driver in 2025. Transaction take rate declined by 4 basis points to 1.73%, driven largely by mix. Venmo monetization was a slight benefit, offset by merchant mix within branded checkout and Braintree, faster growth in payouts and foreign exchange. Turning to transaction margin dollars. The largest contributors were branded checkout, Venmo, interest on customer balances, a return to growth in credit and Braintree. Transaction margin percent increased by more than 100 basis points for the second consecutive quarter, reflecting our focus on price-to-value and profitable growth. As planned, we increased our level of strategic investment in the quarter, growing non-transaction operating expense by 10%. This growth included marketing spend deferred from the first half of the year and efforts to support the rollout of new products and initiatives. Non-GAAP operating income grew 2% in the quarter to $1.5 billion. Non-GAAP operating margin declined 34 basis points to 18%. PayPal generated $2.2 billion of free cash flow in the quarter, bringing full year free cash flow to $6.8 billion. This is meaningfully ahead of the $5 billion we planned for at the start of the year and |
6,196 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | year free cash flow to $6.8 billion. This is meaningfully ahead of the $5 billion we planned for at the start of the year and includes some benefit from lower cash taxes, which we expect to be a headwind in 2025. In the quarter, we completed $1.2 billion in share repurchases, bringing full-year share repurchases to $6 billion. Finally, we ended the quarter with $15.4 billion in cash, cash equivalents and investments and $11.1 billion in debt. Moving to guidance on Slide 11 for the first quarter and full year 2025. For the first quarter, we expect flat to low single-digit revenue growth on a currency-neutral basis, which is heavily impacted by the Braintree renegotiation efforts I discussed earlier. This also includes about a 1 point headwind from lapping last year's leap day. We expect transaction margin dollars to be between $3.6 billion and $3.65 billion, which represents 5% growth at the midpoint. We are planning for low single-digit non-transaction OpEx growth in the quarter, and we expect to deliver non-GAAP EPS in the range of $1.15 to $1.17 or approximately 7% growth at the midpoint. Moving to the full year. We plan to continue guiding revenue one quarter at a time. We believe this approach has served the company well during our transformation, enabling healthy long-term decision-making that prioritizes driving faster transaction margin dollar growth. Over time, we are focused on accelerating both revenue and profitability. For the full year, we expect transaction margin dollars of approximately $15.2 billion to $15.4 billion, representing approximately 4.5% growth at the midpoint. In 2024, we had a two-point benefit from interest on customer balances. For 2025, our guidance includes about a $150 million or about a 1 point headwind due to interest rate cuts. Excluding interest on customer balances, we expect transaction margin dollars to grow by at least 5% compared to 4.6% growth in 2024. In the first quarter, we expect minimal benefit from growth of interest on customer balances and then a headwind for |
6,197 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | in 2024. In the first quarter, we expect minimal benefit from growth of interest on customer balances and then a headwind for the remainder of the year. One other factor to keep in mind is that in 2024, we saw a 1 point benefit from transaction loss improvements. We are planning for some normalization and transaction loss during 2025, as we roll out new products. Our focus in 2025 is to strike the right balance between investment and productivity, seeking to fund long-term investments largely through savings generated from better tech and automation deployment. We expect full year non-transaction operating expenses to increase in the low single-digit range. There will likely be some unevenness quarter-to-quarter due to the timing of initiatives, marketing spend and comparisons to the prior year. As a result, we expect second quarter OpEx growth to be higher than in other periods. We expect to deliver full year non-GAAP EPS in the range of $4.95 to $5.10, representing about 8% growth at the midpoint. This includes negative impact from lower interest rates and just over a two-point increase in our expected non-GAAP effective tax rate. Our guidance also includes approximately $6 billion in share buyback, and we expect full-year free cash flow of approximately $6 billion to $7 billion. I'd like to wrap up by thanking the PayPal team for their continued focus and dedication. The progress we made in 2024 gives us a strong foundation to build on, as we move into the second year of PayPal's transformation. One of our primary focuses this year will be driving adoption of recent innovation and scaling better customer experiences. It will take time for some of our efforts to build and drive financial impact, but we are confident in our road map and in our execution plans, and we're excited to share more with you at our Investor Day on February 25. With that, back to you, Alex. |
6,198 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Thanks, Jamie. To summarize, in 2024, we executed the transition plan we laid out. We have positioned PayPal to compete and win and delivered strong results along the way. I'm very proud of our team and the impact they made during a year of intense change. The momentum we have created sets us up well for 2025, which is about scaling adoption. It is still early in our transformation, but our objective is clear. We are evolving PayPal from a payments company to a commerce platform that helps merchants win every sale and helps consumers shop smarter. Steve, let's go to Q&A.
Steve Winoker: [Operator Instructions] Sarah, please open the line.
Operator: Thank you. [Operator Instructions] Your first question comes from the line of Andrew Schmidt with Citi. Your line is open.
Andrew Schmidt: Hi, Alex and Jamie, good to see the next stage of the transformation here. I wondered -- just digging on branded volume growth. Maybe you can just unpack the fourth quarter performance particularly in the U.S. How did it sort of trend relative to your expectation in terms of share of checkout? And then as we think about 2025, what are the right expectations to set for branded volume growth? And I know you mentioned a few things that are drivers there, your checkout integrations, reinvigorating the consumer side. Maybe just remind us what are the biggest unlocks in the time frame to see those come into play? Thanks so much. |
6,199 | PYPL | 4 | 2,024 | 2025-02-04 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss : Yes. Thank you, Andrew. Let me kick off and then hand it over to Jamie. So first, let me just remind us of the context of what we walked into at '24 on branded checkout. I talked about it throughout the course of the year as our #1 priority, and most of it was focused on how do we improve the customer experience. We felt good about the desktop experience, but clearly gaps in mobile. And that was innovation that the team really executed on throughout 2024, tested a number of different pay sheets, a number of different vaulted experiences. And then by the time we got to '24, felt really good about the innovation we were rolling out. And as we start to roll out, just as a reminder, our onetime checkout improvements is 400 basis points on conversion. Our vaulted improvement is 100 basis points on conversion. And so -- and the biggest impact is really on our mobile and our small business base. So really excited about the innovation that's now rolling out. As we talked about in Q3, we had just started to roll out. We'd ramp that to about 5% throughout Q4. We continue to execute on our rollout and got that up to 25% by the end of the year. So as we exit '24, I'm feeling really good about the quality of the innovation, our ability to roll it out and impact customers. And as we look to 2025, we now have I believe, the best-in-class experience on desktop, on mobile and starting to see knock-on effects of things like our Buy Now, Pay Later attach which is up 20% with this new pay sheet. So from an innovation perspective and a customer impact perspective, feeling really good as we go into '25. |
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