PepsiCo Inc Q2 2024 Earnings Call Transcript

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

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

Question: Bonnie Herzog - Goldman Sachs - Analyst : Hi. Thank you. Good morning, everyone. I actually had a question on PBNA, Ramon. I know you just touched on it a bit. But I'd be curious to hear if you're satisfied with some of the progress you might be making to reinvigorate the business and maybe what green shoots you are seeing within PBNA. And then, I guess, I'm hoping for some color on the initiatives you highlighted in terms of the disciplined commercial investments. Should we assume this will also mean a potential step-up in promos for PBNA? And do you maybe see a need for some brand repositioning? Are there structural opportunities? Essentially, what will be the drivers to re-accelerate growth at PBNA? Thanks.

Question: Lauren Lieberman - Barclays - Analyst : Great. Thanks so much. Ramon, I wanted to go back to Frito, if I may. Because you commented on some consumers being more valued to stay with our brands. But one thing we've been doing a lot in trying to parse through the data that's available to us, and it looks like the salty snack category as a whole is really pressured. It's not just your brands. I know, given your share, they're one and the same. But it looks like there's a broader category issue. Again, some of the data we've looked at, it feels like the category is not proving terribly responsive to promotion. So I just was hoping you could comment on that, if that is or isn't consistent with what you're seeing and how what you're going to be doing will be different. Because, again, what we've seen so far, it doesn't look like there's a lot of response, and it feels like the category is proving more discretionary. So just love your thoughts on that. Thanks.

Question: Bryan Spillane - BofA Global Research - Analyst : Hey, thanks, operator. Good morning, Ramon. Good morning, Jamie. I just wanted to circle back on Frito. And I guess, stepping back, you're able to sort of reset the margins and fund it with just drilling deeper into some of the reservoirs of productivity other places in the organization. So I guess, just if you can comment on two things related to that. One, given that you're tapping more productivity this year, how does that affect next year? Does that affect maybe not having as much productivity to flow through, or is that reservoir very deep? And then the second is, as we're thinking about Frito margins stepping back in the back half of the year, should we be thinking about that now as the new base to maybe grow off of gradually? Or is that a major step-down, and then you'd expect Frito to have another maybe a step change up in the future?

Question: Kaumil Gajrawala - Jefferies - Analyst : Hi, good morning, everybody. Do you believe that the prices at Frito are too high given the increases over recent years?

Question: Peter Grom - UBS - Analyst : Thanks, operator. Good morning, everyone. So I was hoping to get some color on Latin America. Organic revenue was the weakest we've seen in some time here. And I think in the prepared remarks, Brazil and Mexico seem solid. So just curious kind of what drove the weakness in the quarter. And then, Ramon, just as we look ahead, you mentioned you still expect strong growth from international in the back half of the year. How does Latin America fit into that equation? Would you anticipate improvement, or should we expect more muted performance to continue? Thanks. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 11, 2024 / 12:15PM, PEP.OQ - Q2 2024 PepsiCo Inc Earnings Call

Question: Filippo Falorni - Citi - Analyst : Hey, good morning, everyone. So just staying on the international business. Ramon, you sounded pretty confident on the growth in international. Maybe you can talk more about, like, what regions do you see the greater growth potential in that business? And going back to the question on guidance on top, like for the second half, is the improvement in organic sales mainly driven by an improvement in North America or an acceleration in international? If you can give some color there, it will be helpful.

Question: Robert Moskow - TD Cowen - Analyst : Hi, thanks. A couple questions. One is, I was hoping you'd give a little more color on the energy drinks category. Growth has slowed dramatically in the US. I just wanted to get your perspective and ask, like, do you think that consumers there are making a value decision as well? There's a lot of premium price drinks there. Do you see any evidence of trading down to maybe higher caffeine carbonated drinks? Thanks.

Question: Andrea Teixeira - JPMorgan - Analyst : Thank you. Good morning, everyone. Ramon, Jamie. My question is on the bridge to the mid-single digits organic sales growth in the second half. Assuming international, Ramon, you just mentioned growth, the same kind of mid-single digits into the second half. And of course, understanding the easy comps for Quaker, it still implies a good inflection into Frito and PBNA. How do you think like we should be thinking about the progress and perhaps, you know, related to that from a channel perspective, the away-from-home for you growing from what it seems to be like a distribution? What is the like for like in sales basically by channel, if you would

Question: Chris Carey - Wells Fargo - Analyst : Hi, good morning, everyone. Ramon, I know you mentioned international could be looked at on six months cadence. I was wondering, however, if you could comment on some specific regions, just in Europe, why, to your mind have trends been so resilient? I don't think it's just your portfolio. I think the region in general has been more resilient for longer than many expected. And then in Asia, I think you were clear last quarter that there was some timing benefit. Clearly, we saw that normalized this quarter. What's the right run rate for this division? And do you have any comments on the progress in China? Thank you.

Question: Robert Ottenstein - Evercore ISI - Analyst : Great. Thank you very much. I want to look at a more structural, strategic-type question. And that is to get your thoughts around the Carlsberg-Britvic transaction. And maybe talk a little bit why perhaps it made more sense for Carlsberg to buy Britvic rather than you, given the fact that you generally own your bottlers in the US. Why not Britvick? Does that have any implications in terms of how you're thinking about the US bottlers? And does the fact that maybe combining beer and CSDs makes more sense outside of the US, obviously, for regulatory reasons? How should we think about that component? Thank you.

Question: Carlos Laboy - HSBC - Analyst : Yes, good morning, everyone. Ramon, in keeping with the last two comments you've made and the deal, can you discuss the international franchise doctrine of PepsiCo? In other words, how are you thinking in terms of clarity of what each side is supposed to do and allow to keep, right? I'm trying to get a sense of how you're compelling independent bottlers in these great growth territories that you see to step up investments for the purpose of accelerated system revenue growth and bottling returns.

Question: Nik Modi - RBC Capital Markets - Analyst : Yeah, thank you. Good morning, everyone. Ramon, I was hoping you can just kind of share some perspective around overall food volume, right? Because a lot of questions have been asked about where's the volume going? It's not just salty snacks that's been under pressure pretty much across the board in terms of volumes. And so, I was just curious on your thoughts. I mean, I don't think it's GLP-1. I know that's what some might suggest, but I'd love your views on kind of where you think the volume is actually migrating.

Question: Kevin Grundy - BNP Paribas - Analyst : Great. Thanks. Good morning, everyone. Covered a lot of ground, and not to beat the dead horse, but just to drill down a couple areas, Ramon, if we could, on the demand weakness in snacks. So you mentioned some parts of the portfolio, but not all consumers. I apologize if I missed this. What are you seeing beyond the low-income consumer? There's a lot of focus on where is the consumer, and it depends on which management call you're listening to or what industry, frankly. What are you seeing specifically with the middle and high-end consumer? Is the weakness also being seen among that cohort as well? And then I think an important question as well, is there anything you're seeing in your market research -- I know you're staying close to the consumer that gives you any pause with the longer-term outlook for the Frito business, which has been so strong for so long? Is there anything there that kind of gives you pause? Or do you view this to be entirely transitory? So thanks for that. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 11, 2024 / 12:15PM, PEP.OQ - Q2 2024 PepsiCo Inc Earnings Call