PepsiCo Inc.

While the growth outlook for China is strong, the outlook for Africa is more moderate--in the low-single-digit-percent area--though given its emerging status it is possible growth could accelerate if more of the population reaches middle income status. Furthermore, we believe PepsiCo should be able to leverage Pioneer's existing distribution network to sell more of its products. The energy drink category has been growing by a solid double-digit-percent rate and we expect continued satisfactory growth. We believe PepsiCo should reach at least the lower end of its 4%-6% annual sales growth algorithm thanks to its attractive snack portfolio, improved performance at PepsiCo Beverages North America, and merger and acquisition (M&A) portfolio-strengthening initiatives. The stable outlook reflects our expectation that the company

...Heavy investments should propel top-line performance and moderate credit ratio improvement. PepsiCo Inc. spent almost $11 billion on acquisitions in 2018-2020 designed to fill gaps and strengthen its portfolio, compared to only about $550 million over the previous five years. This included high-growth potential businesses such as South Africa-based Pioneer Foods (increased PepsiCo's geographic presence on the continent), Rockstar Energy Beverages (enabled PepsiCo to take control of a brand it previously only distributed but now owns, while removing contractual limitations to expand into the higher-growth energy space), and Be & Cheery (added a China-based healthy snack foods manufacturer). We believe PepsiCo was underrepresented in these geographies and product categories. Table 1 highlights our estimate of PepsiCo's presence in these regions/categories and growth potential....

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