PepsiCo Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Bonnie Herzog - Goldman Sachs - Analyst : Hi, good morning.

Question: Bonnie Herzog - Goldman Sachs - Analyst : 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.

Question: Steve Powers - Deutsche Bank - Analyst : 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.

Question: Filippo Falorni - Citi - Analyst : 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.

Question: Dara Mohsenian - Morgan Stanley - Analyst : Hey, good morning.

Question: Dara Mohsenian - Morgan Stanley - Analyst : 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. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:15PM, PEP.OQ - Q1 2025 PepsiCo Inc Earnings Call 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.

Question: Andrea Teixeira - J.P. Morgan. - Analyst : Yeah, good morning. Thank you for taking the question. I wanted to go back, sorry, to Frito North America. As you look at the price ladders, are you seeing more declines in the higher price points or in bigger packs? So in other words, on a comparable basis. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:15PM, PEP.OQ - Q1 2025 PepsiCo Inc Earnings Call And Ramon, you spoke over the past, I would say, a few quarters even, about like moving -- reaching -- your multipack reaching $5 billion against like $1 billion business before. Is that the 4% decline that we saw, I think, in the 10-Q, correct me if I'm wrong, but 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 -- may be feeling more pressure because of the cash outlay? And conversely, you're seeing less -- or smaller declines in the small packs. I mean I'm trying to gauge where, on a mix-neutral basis, are you seeing those movements. And how are 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?

Question: Lauren Lieberman - Barclays - Analyst : 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. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:15PM, PEP.OQ - Q1 2025 PepsiCo Inc Earnings Call

Question: Bryan Spillane - BofA - Analyst : 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?

Question: Michael Lavery - Piper Sandler - Analyst : 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.

Question: Kaumil Gajrawala - Jefferies - Analyst : 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.

Question: Kaumil Gajrawala - Jefferies - Analyst : So what do you think about the launch of GLP-1 oral medications coming to market next year?

Question: Kaumil Gajrawala - Jefferies - Analyst : That was entirely her own.

Question: Peter Grom - UBS - Analyst : 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

Question: Chris Carey - Wells Fargo Securities - Analyst : 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.

Question: Kevin Grundy - BNP Paribas - Analyst : 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.

Question: Robert Moskow - TD Cowen - Analyst : 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.

Question: Charlie Higgs - Redburn Atlantic - Analyst : 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. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:15PM, PEP.OQ - Q1 2025 PepsiCo Inc Earnings Call