Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Company: Pepsico
Business: Pepsic It is one of the world’s largest companies with consumer consumer goods with a portfolio of some most iconic brands in nutrition. Its brands include: Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and Sodastream. Its segments include Frito-Lay North America (FLNA); Quaker Foods North American (Qfna); Pepsico drinks of North America (PBNA); Latin America (Latam); Europe; Africa, Middle East and South Asia (Emesa) and Asia -Tsikhakani region, Australia, New Zealand and Chinese region (APAC). FLNA produces, markets, distributes and sells branded products that include corporate breakthroughs, cheese snacks, Doritos Tortilla chips, corn chips, potato chips and others. QFNA products include Cap’n Crunch, Life Croats, Syrups and Mixs with Pearl Muzzle, Quaker Chewy Granola Bars, Quaker Grits, Quaker Oatmeal and others. PBNA produces, sells and sells concentrates on drinks and fountain syrups under different beverage brands, including Aquafina, Bubly, Diet Pepsi, Gatorade and others.
The stock market value: $ 211.28 billion ($ 154.32 per share)
Activist: Elliott Investment Management
Property: ~ 1.9%
Average cost: N/a
Activist comment: Elliott is a multi -seat investment firm that manages the assets of about $ 76.1 billion (as of June 30, 2025) and is one of the oldest firms according to permanent management. Elliott, who is known for its wide check and resources, regularly monitors the companies before making investments. Elliot is the most active investor activist, interacting with companies of different industries and several geography.
What is happening
On Tuesday, Elliott sent a presentation and a letter to the Pepsico Council, which details the possibility of the company to re -cover and increase productivity through greater attention, improvement operations, strategic reinvestment and accounting.
Behind the scenes
Pepsico is one of the world’s largest consumer companies, with a portfolio of some of the most iconic brands in food and beverages. On the global scale company – number one player in snack and player number two in beverages that lag behind only Coca-Cola.
Pepsi is divided between its North America’s business (60% revenue) and international (40%). In North America, its segments are Pepsico Foods North America and Pepsico, which goes to North America, each of which accounts for about 30% of the company’s total income. Frito-Lay North America, which is about 90% PFNA, is the dominant leader in the field of salty snacks and a consistent growth driver. PBNA has a portfolio of iconic brands such as its flagship Pepsi, Mountain Dew and Gatorade, and the achievement that rivals Coca-Cola on a very attractive and high-reliance final market. Despite its scale, brand strength and growth results, Pepsi’s shares have fallen, losing almost $ 40 billion in market capitalization over the last three years and over the last 20 years behind its landmark.
The strategic errors in the main companies of the North America company are at the root of this insufficient work. In 2010, both Coca-Cola and Pepsi acquired most of their bottles. However, while Coca-Cola moved to remake its spill, Pepsi continued their vertically integrated. This decision was an expensive mistake for the PBNA segment.
Prior to this strategic divergence, PBNA operating profitability was 300 points per second higher than Coca-Cola. Now the PBNA operating profitability is lower than 1000 points, which reflects the pressure on the costs that occur when maintaining these costs and lower margina operations.
The second wrong step PBNA was his reaction to changing the preferences of soda consumers. As soda consumption fell in the early 2000s, PBNA rejected baking attention to healthier categories. While it was justified at the time, the advantage of the soda has since stabilized, but PBNA has not reinvered in soda. This lack of attention to basic products had serious consequences, including the delayed launch of PEPSI Zero sugar and decreased investment in major brands such as Mountain Dew. Moreover, instead of investing in these proven brands and products, Pepsi has overcome weaker brands such as Starry, Rockstar and Sodastream, while expanding to other reserves, or SKU, including limited offers and expanding the taste, leading to higher production and distribution costs. As a result, PBNA has 70% more SKU than Coca-Cola, despite the fact that brings about 15% less retail sales.
The weaknesses of the PBNA forced Pepsi to become more dependent on PFNA and its FLNA core, maintain overall growth and achieve targeted goals.
In 2020, counting on the increase in demand from COVID, Pepsi began to continue aggressive investment in PFNA, with capital expenses increased from $ 3.3 billion in 2018 to $ 5.2 billion in 2022. At this time there was a certain logic, but the growth that was corrected in the replenishment did not last. However, Capex continues to rise to $ 5.3 billion in 2024, despite the fact that FLNA sales are actually declining by 0.5%.
Worse, Pepsi did not just increase Capex, but also sales, total and administrative costs, and PFNA operating margins decreased from 30% to 25% during this time.
These problems have greatly weighed the overall performance of PEPSI, as it made the market not notice its prosperous international business that is growing rapidly with margin expansion. Once the premium growth offer, Pepsi is currently trading in 18x P/E against the average ten-year in 22x or more than 4 discounts compared to the 1.4th turn.
Elliott, who announced the position of $ 4 billion in Pepsik, issued a letter and an comprehensive presentation, which details its ability to re -improve growth and improve productivity through greater attention, improve operations, strategic reinvestment and expanded liability. For PBNA Elliott, the first step is to rethink the spill network. This step makes a lot of meaning – a return to the system that has historically exceeded its closest competitor – since Pepsico reinterpreted its bottles in 1999, until it bought them in 2010, the Pepsico system significantly surpassed the Coca -Cola system.
Next is the optimization of the portfolio. PBNA just has too many products and need to rationalize the amount of SKU and get rid of insufficient brands. Elliot indicates Recent sale Rockter to Celsius As the main example of the possibilities that exist, simplify the portfolio.
Both of these stages should release PBNA spending capacity, which, according to Elliott, must be reinforced into the main franchises of soda and choose new growth categories (ie protein and probiotics). For PFNA, given its significant slowdown in the upper line, Elliot believes it’s time to stop this aggressive growth strategy and rebuild his costs and optimize the portfolio.
Elliott specifically points to Quaker as a potential lawsuit, emphasizing the plate products that rest behind the FLNA snack. Such steps will allow PFNA to concentrate on the areas where it has a true competitive advantage, in particular, in its FLNA products, and will help restore margins and release capital for reinvestment both in organic growth and in the accent gland of M&A. Elliott believes that these changes in the North American business will not only improve the company’s activities, but also help reset the large Pepsi investment history.
Currently, it is a lack of productivity and poor performance that weighing the company’s assessment and left international business and discount.
Specifically, Elliot believes that if this plan is implemented effectively, it can provide at least 50% up shareholders. Elliott is one of the most prolific investors today and has resources and results that affect significant changes in these types of Megacap Companies.
But landings and resources are meaningless if you do not represent an exhaustive plan that demonstrates a thoughtful way to create a long-term value, and the 74-page presentation of the eliot does exactly that.
In addition, while activists are often unfairly stereotypical as short -term investors who are partly paid to those who are sometimes correctly characterized in this way, this presentation should be considered as “exhibition” in how activists such as eliot developed over the years to be long -term in equaling with shareholders. Elliott’s plan includes recommendations such as: “Reinvest to revive the core and grow with focus”, “Continue organic and inorganic investments to provide long -term growth”, “then use gradual revenues from these actions to reinvest to rethink long -term growth” and “by the correct coverage The capital is to reinvest both organically and neorgan, and “fuel, fuel, fuel.”
In fact, on 74 pages, Elliot uses the word “reinfist” 54 times and repeatedly applies the word “ransom”, despite the fact that undervalued Pepsi shares are now. Yes, ransom shares can now be great for short-term, but the Elliot reinvestment plan is what will be best for the long-term perspective.
For all these reasons, it is difficult to argue with the analysis or recommendations of Elliot, and we could expect that shareholders and leadership agree with this, if not everyone. Assuming that the next step is to fulfill the plan, and it may be the most understated but important, part of the Elliot presentation.
A good activist and good members of the Council support the management of their plan, but is prosecuted when they are missing. This is exactly what we expect to do here. At this early stage, the Elliott’s plan looks simple enough that we don’t expect to make an impact at this point. Speaking, we expect Elliot to constantly monitor the situation and progress of management and bring them to justice if they do not lead to strategic actions and updated financial goals.
Ken Skvir is the founder and president of the 13D monitor, an institutional scientific and research service for shareholders’ activity, as well as the founder and managers of the 13D -activist fund portfolio, a mutual fund that investes in the portfolio of 13D investments.
