Core Insights - PepsiCo's international business is crucial for its global strategy and long-term growth, achieving 5% organic revenue growth in Q1 2025, marking 16 consecutive quarters of mid-single-digit growth despite geopolitical and macroeconomic challenges [1][4] - The international segment contributed nearly 40% of PepsiCo's total net revenues and core operating profit in 2024, with a portfolio valued at approximately $37 billion [1][4] International Business Performance - The international beverages business led growth with 11% organic growth in Q1 2025, driven by strong demand in markets such as China, India, Egypt, Turkey, Mexico, Brazil, the U.K., and Australia [2][8] - The international convenient foods business grew 2% organically, supported by strong performance in Brazil, Egypt, India, and Turkey, along with snack share gains in China, South Africa, Poland, and Thailand [2] Future Strategy - PepsiCo plans to enhance its global presence by deepening localization efforts, adapting product offerings to regional tastes, and expanding channel reach [3][4] - Investments in automation, digitalization, and standardization are aimed at increasing productivity and freeing up capital for reinvestment in commercial initiatives and innovation [3] Competitive Landscape - Key competitors in the international market include The Coca-Cola Company and Monster Beverage, both of which compete with PepsiCo in several key markets [5][6] - Coca-Cola's international strategy focuses on being a "Total Beverage Company," with significant market share in Latin America, Western Europe, and the Asia-Pacific region [6] - Monster Beverage is expanding its international footprint, contributing approximately 39.6% of its total revenues in Q1 2025, with a focus on key markets like China and India [7][9] Financial Performance and Valuation - PepsiCo's shares have declined approximately 13.5% year-to-date, contrasting with the industry's growth of 6.9% [12] - The forward price-to-earnings ratio for PepsiCo is 16.33X, below the industry average of 18.59X [13] - The Zacks Consensus Estimate for PepsiCo's 2025 earnings indicates a year-over-year decline of 3.6%, while the 2026 estimate suggests a 5.4% increase [14]

Core Viewpoint - The energy drinks market is highly competitive, with PepsiCo and Monster Beverage Corporation vying for dominance as consumer preferences evolve and the category diversifies [1][2]. Group 1: PepsiCo's Position - PepsiCo is leveraging its extensive distribution network and brand strength to assert itself in the energy drinks space, with a focus on high-growth segments like zero sugar and functional hydration [4][6]. - The company has made strategic acquisitions, such as Poppi, to tap into health-focused segments that overlap with energy drink consumers [5]. - Despite its strengths, PepsiCo faces challenges including soft top-line trends and cautious consumer sentiment in North America, influenced by inflation and value-conscious purchasing behavior [7]. Group 2: Monster Beverage's Position - Monster Beverage maintains a strong market presence with a diversified portfolio, achieving 2.2% sales growth in its core energy drinks segment in Q1 2025 [8][10]. - Innovation is central to Monster's strategy, with successful product launches like Monster Energy Ultra Blue Hawaiian contributing to its category leadership [9]. - The company is expanding its affordable energy offerings in international markets, which accounted for approximately 40% of total revenues in Q1 2025 [10][11]. Group 3: Financial Performance and Valuation - Year-to-date, PepsiCo shares have declined by 14.4%, while Monster's shares have increased by 20.1%, reflecting differing market sentiments [12]. - PepsiCo trades at a forward P/E multiple of 16.16X, while Monster's is significantly higher at 32.44X, indicating differing growth expectations [13][16]. - Earnings estimates for PepsiCo have been revised downwards, while Monster's estimates have seen upward revisions, suggesting growing investor optimism for Monster [17][21].

Financial Data and Key Metrics Changes - Reported net sales for Q1 2025 were $1,850 million, a decrease of 2.3% compared to $1,900 million in Q1 2024 [9] - Gross profit as a percentage of net sales increased to 56.5% in Q1 2025 from 54.1% in Q1 2024, driven by pricing actions and supply chain optimization [9] - Operating income for Q1 2025 increased by 5.1% to $569.7 million from $542 million in Q1 2024 [10] - Net income for Q1 2025 was $443 million, slightly up from $442 million in Q1 2024 [11] - Diluted earnings per share increased by 7.4% to $0.45 in Q1 2025 from $0.42 in Q1 2024 [11] Business Line Data and Key Metrics Changes - Sales of Monster energy drink increased by 8.7% in the thirteen-week period ending April 26, 2025 [14] - Sales of Reign decreased by 9.9%, while NOS increased by 0.8% and Full Throttle decreased by 1.5% [14] - The Alcohol Brands segment saw net sales of $34.7 million in Q1 2025, a decrease of approximately 38.1% compared to the previous year [34] Market Data and Key Metrics Changes - In the U.S., the energy drink category grew by 10% in the thirteen weeks ending April 26, 2025 [6] - In EMEA, the energy drink category grew by approximately 13.7% on an FX neutral basis [7] - In APAC, the energy drink category grew by approximately 13.6% on an FX neutral basis [8] - In Latin America, the energy drink category grew by approximately 15.7% on an FX neutral basis [8] Company Strategy and Development Direction - The company is focused on expanding its presence in non-Nielsen measured channels and optimizing its supply chain [41][42] - Plans for further innovation in the Monster Brewing portfolio and the rollout of Predator and Fury brands in international markets are underway [43][44] - The company is exploring opportunities for its alcohol products in certain international jurisdictions [43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term prospects for the Monster brand, particularly in China and India [31][38] - The energy category continues to grow globally, with increasing household penetration and per capita consumption [41] - Management noted that April 2025 sales were approximately 16.7% higher than the comparable April 2024 sales [39] Other Important Information - The effective tax rate for Q1 2025 was 23.4%, slightly down from 23.5% in Q1 2024 [11] - The company has approximately $500 million remaining for stock repurchase under the previously authorized program [38] - Management indicated that the tariff landscape is complicated but does not expect current tariffs to have a material impact on operating results [13] Q&A Session Summary Question: Impact of supply chain optimization on Q1 numbers - Management acknowledged that Q1 was impacted by bottler distributor ordering patterns and significant closure days of distribution centers [50] Question: Macro impact on retail sales trends - Management noted that consumer demand remains strong, with positive trends in retail takeaway reflected in Nielsen numbers [55][56] Question: Future gross margin expectations - Management indicated that while Q1 margins were strong, they do not expect the same level of margin in Q2 due to rising costs [65] Question: Top line sales versus internal expectations - Management confirmed that there was more innovation in Q1 than in Q2, with some shipment timing impacts to consider [69] Question: Pricing dynamics and market share satisfaction - Management stated that pricing decisions are based on various factors and emphasized the importance of regaining market share [76][77]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 were reported at $1,850 million, a decrease of 2.3% compared to $1,900 million in Q1 2024 [7] - Gross profit as a percentage of net sales increased to 56.5% from 54.1% in the previous year [8] - Operating income increased by 5.1% to $569.7 million from $542 million in Q1 2024 [9] - Net income for Q1 2025 was $443 million, slightly up from $442 million in Q1 2024 [10] - Diluted earnings per share increased by 7.4% to $0.45 from $0.42 in the previous year [10] Business Line Data and Key Metrics Changes - Sales of Monster energy drinks increased by 8.7%, while Reign sales decreased by 9.9% [13] - The Alcohol Brands segment saw a significant decline, with net sales down 38.1% to $34.7 million compared to the previous year [32] Market Data and Key Metrics Changes - In the U.S., the energy drink category grew by 10% year-over-year [5] - In EMEA, the energy drink category grew approximately 13.7% on an FX neutral basis [6] - In APAC, the category grew by 13.6% on an FX neutral basis [6] - In Latin America, the energy drink category grew by 15.7% on an FX neutral basis [6] - Monster's market share in the U.S. convenience and gas channel decreased from 37.1% to 36.4% [14][15] Company Strategy and Development Direction - The company is focused on expanding its product offerings and optimizing supply chains to enhance gross profit [8][9] - Plans for further innovation in the Monster Brewing segment are underway, with new products being launched in various markets [33][34] - The company is optimistic about long-term prospects in China and India, particularly with the rollout of the Predator brand [30][36] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer demand remains strong, with positive trends in retail takeaway [39][40] - The company is optimistic about the energy drink category's growth, citing increasing household penetration and per capita consumption [39] - Management acknowledged challenges from foreign currency exchange rates and adverse weather impacting sales [7][10] Other Important Information - The company has approximately $500 million remaining for stock repurchase under its authorized program [36] - The juice plant at the AFF facility in Ireland is expected to be operational by mid-year 2025 [41] Q&A Session Summary Question: Impact of supply chain optimization on Q1 numbers - Management explained that Q1 was impacted by bottler distributor ordering patterns and distribution center closures, but April showed robust sales [47][48] Question: Macro impact on the energy category - Management indicated that the energy category remains healthy, with positive trends in both the U.S. and international markets [52][54] Question: Future gross margin expectations - Management expects that the second quarter margin will not be as high as Q1 due to rising costs from the Midwest premium [62] Question: Innovation pipeline and shipment timing - More innovation was rolled out in Q1 compared to Q2, with continued acceleration in distribution expected [66] Question: Pricing dynamics and market share satisfaction - Management stated that pricing decisions are based on market opportunities and emphasized the importance of regaining market share [72][73]

Financial Data and Key Metrics Changes - The company achieved record fourth quarter net sales of $1.81 billion, a 4.7% increase from $1.73 billion in the comparable 2023 quarter, and a 4.8% increase excluding the Alcohol segment [14] - Gross profit as a percentage of net sales for the fourth quarter was 55.3%, up from 54.2% in the 2023 fourth quarter [14] - Net income for the fourth quarter was $270.7 million, down from $367 million in the 2023 comparable quarter, with diluted earnings per share decreasing 20.8% to $0.28 from $0.35 [18] Business Line Data and Key Metrics Changes - The Alcohol Brands segment faced challenges, with net sales of $34.9 million in the fourth quarter, a decrease of approximately $0.3 million or 0.8% lower than the 2023 comparable quarter [44] - Operating income decreased 12.2% to $381.2 million from $434 million in the 2023 comparative quarter, while adjusted operating income increased 7.9% to $517.9 million [17] Market Data and Key Metrics Changes - In the U.S., the energy drink category grew 6.2% for the 13 weeks ending February 15, 2025, while the company's energy drink brands, including Monster, saw a 4.8% increase [10][21] - In EMEA, the energy drink category grew approximately 14.4%, and in APAC, it grew about 11.8% for the same period [10] - In Latin America, the energy drink category grew approximately 20.2% [10] Company Strategy and Development Direction - The company is focusing on innovation and expanding its product portfolio, with plans to launch new flavors and products in various markets [46][48] - The company is optimistic about long-term prospects in China and India, particularly with the rollout of the Predator brand [52] - The company is exploring opportunities for its alcohol products in certain international jurisdictions [59] Management's Comments on Operating Environment and Future Outlook - Management noted that the energy drink category continues to grow globally, with positive trends in household penetration and per capita consumption [56] - The company is monitoring opportunities for further pricing actions domestically and internationally [20][57] - Management expressed optimism about the recovery of the energy category in the U.S. and the potential for market share growth [74][76] Other Important Information - The company faced adverse impacts from unfavorable foreign currency exchange rates, which negatively affected net sales by approximately $52.3 million for the fourth quarter [20] - The company has approximately $500 million remaining available for repurchase under the previously authorized repurchase program [52] Q&A Session Summary Question: Can you provide more details on the drivers behind the gross margin expansion? - Management indicated that reduced input costs were a major driver, with the price increase in November positively impacting gross margin, but other costs also offset this [66][68] Question: What are the expectations for Monster's U.S. market share performance? - Management noted that they have negotiated for increased shelf space and are optimistic about the category's growth, despite ongoing competition [74][76] Question: Can you comment on the untracked portion of the business and any slowdown in smaller stores? - Management acknowledged that January's performance was affected by weather conditions and emphasized that Nielsen data reflects consumer purchases at retail, not sales to distributors [88][90] Question: What are the plans for innovation in the functional segment? - Management highlighted the distinct positioning of brands like Bang and Reign, and expressed confidence in their innovation strategies for 2025 [96][100] Question: What factors are considered when deciding on new pricing? - Management stated that they continuously look for pricing opportunities, influenced by cost increases and competitor actions, while ensuring not to disadvantage their brands [106][107]