PepsiCo(US:PEP)2025-10-09 13:17Financial Data and Key Metrics Changes - The company reported a sequential improvement in business performance, particularly in beverages, which grew volume in the quarter, with larger brands like Pepsi showing positive growth in volume and net revenue [8][10] - The food business experienced a shift in promotional strategy, leading to better revenue realization but impacted volume growth, with expectations of flat performance in the food segment for the quarter [9][10] - The company anticipates margin improvement in 2026, driven by international growth and cost structure adjustments [23][24] Business Line Data and Key Metrics Changes - In the beverage segment, volume growth was noted, particularly in larger brands, while the food segment faced volume pressures due to promotional strategy changes [8][9] - The company is optimistic about the performance of its core brands, with significant interventions planned for Lay's, Tostitos, and Gatorade to drive future growth [16][18] - The permissible snacks category continues to perform well, contributing positively to the overall portfolio [56] Market Data and Key Metrics Changes - International markets showed mid to high single-digit performance in September, recovering from a weaker summer due to weather impacts [10][36] - The consumer landscape varies by region, with growth in India and Brazil, while consumers in China are more cautious [36][37] - The company is focusing on enhancing its presence in the Middle East and managing challenges in Mexico due to economic conditions [37] Company Strategy and Development Direction - The company is focused on reigniting top-line growth through innovation, brand relaunches, and enhancing customer engagement [14][16] - There is a strong emphasis on leveraging technology and operational efficiency to adapt to changing consumer demands and improve cost structures [68] - The company is open to exploring franchising options for its beverage operations to enhance agility and responsiveness to market demands [72] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to long-term growth algorithms by 2026, emphasizing the importance of executing core business fundamentals [14][47] - The company acknowledges the need for affordability and value in its offerings, reflecting broader consumer trends [79] - Engagement with activist investors has been constructive, with alignment on the need for portfolio transformation and cost reduction [83] Other Important Information - The company is undergoing a leadership transition with a new CFO expected to drive future strategic initiatives [69] - There is a focus on innovation in protein and functional hydration products, with plans to enhance existing brands and introduce new offerings [18][61] Q&A Session Summary Question: Volume pressures in food and beverage businesses - Management noted that beverage volumes grew, while food volumes were impacted by promotional strategy changes, but they remain optimistic about future volume growth due to innovation [8][9][10] Question: Long-term revenue growth acceleration - Management sees a clear path to returning to long-term growth algorithms by 2026, focusing on brand relaunches and operational excellence [14][16] Question: Cost implications of innovations - The company is working on improving margins while investing in innovation, with expectations of margin expansion in 2026 [23][25] Question: Right-sizing fixed cost structure - Management is actively rationalizing manufacturing and warehouse operations to improve efficiency and reduce costs [28][29] Question: Health of consumers in international markets - The company is seeing varied consumer behavior globally, with strong growth in India and Brazil, while consumers in China are more cautious [36][37] Question: Engagement with activist investors - Management is aligned with activist investors on the need for value creation and is open to constructive dialogue on strategic initiatives [83]