PepsiCo Inc Q3 2024 Earnings Call Transcript

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

Question: Lauren Lieberman - Barclays - Analyst : Thanks. Good morning everyone. So in the release, clear that Frito volumes trended in the right direction in the third quarter category backdrop is still tough and you offered a lot of detail in the prepared remarks and kind of the strategy from here. I wanted to maybe think about the building blocks to a return to volume growth for that business. And if we isolate it between, let's say core lays and some of the promotional work that you started this summer, the expansion efforts we focused on kind of multicultural offerings and value offerings and then the positive choice more premium end of the spectrum. As we think about the path forward, what do you think about the growth rates for those three, if you will segments or initiatives? Do we think that long term lays gets back to and that kind of core part of the business to be a positive volume contributor or is it more of a -- kind of hold the line and, and avoid losses there? But the other two are really what drives the turnaround as we move forward? Thanks.

Question: Bryan Spillane - BofA Global Research - Analyst : Thanks, operator. Good morning everyone. So my question is just how we're approaching, planning for -- I guess, 25 and maybe just the medium term and and Ramon, I guess underneath my question is given that this is sort of in some ways uncharted water in terms of the what we're dealing with the consumer and finding ways to get them to respond. How is it affecting the way you're thinking about the balance right between investment, spending to stimulate demand, returns and how it affects the bottom line. And I guess really what I'm asking is how do you gauge or guard against cutting too much cost in order to preserve the bottom line while trying to -- we reaccelerate top line growth?

Question: Kaumil Gajrawala - Jefferies - Analyst : Hey guys, good morning. If I could just follow up on that -- with the -- other than the details, if organic revenue growth does indeed stay in the sort of low single digit or 1% range, can you still deliver 8% on EPS kind of putting all of that together? Do you have the flexibility to do that for the forward year?

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

Question: Dara Mohsenian - Morgan Stanley - Analyst : So Ramon, you touched on earlier and in the prepared remarks, some of the actions you've taken so far in Frito-Lay, just can you take a step back and give us your view in terms of the initial payback you're seeing. But the thrust of the question is really more about going forward, is it sort of tweaking those actions in place already to drive greater payoff going forward? Are there additional actions you're gonna lean heavier on? And just how do you think about sort of changing the magnitude of investment behind some of those? And maybe specifically, you can dial down on providing value to consumers that you mentioned. What it is that sort of mean? Is that more of a promotional focus? Is it taking less pricing? Give us a little more tangible detail on that front. 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. OCTOBER 08, 2024 / 12:15PM, PEP.OQ - Q3 2024 PepsiCo Inc Earnings Call

Question: Filippo Falorni - `Citi - Analyst : Hey, good morning, everyone. I wanted to ask about the international business. So Ramon, you mentioned in the prepared remarks, geopolitical tensions and some weaker consumer across certain markets. So maybe you can talk about those markets that had a negative impact and quantify any impact in the quarter. And then this kind of like looking at the two pieces of the international business, it seems like the deceleration has been more in the convenience food side versus the beverage business continues to do well. So what are the drivers in international? The slow down in snacks and convenient foods is similar to the US or there are other drivers? 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. OCTOBER 08, 2024 / 12:15PM, PEP.OQ - Q3 2024 PepsiCo Inc Earnings Call

Question: Peter Grom - UBS - Analyst : Thanks, operator. Good morning, everyone. Maybe just a bit more of a housekeeping question but the full year organic revenue guidance still implies a relatively wide range for the fourth quarter. So just any thoughts on where you would expect to fall within that range. And then within that, any comments on the underlying assumptions embedded, clearly things have been more challenged from an external perspective. So just would be curious if you were assuming kind of the current environment holds or would you anticipate category trying to show some improvement here as we exit 2024? Thanks.

Question: Robert Moskow - TD Cowen - Analyst : Hi. Thank you. Ramon, you have a very thoughtful strategic approach to investing in Frito-Lay. In some areas you're investing in some -- in different ways in different areas. Two questions, I thought that the plan was to also invest behind Tostitos and promote more. I thought it was like similar to the process for lays. Did you put that into market or not? Because we didn't see much yet for Tostitos. And then secondly, regarding the positive choice brands, I would have thought that they would be less exposed to value seeking consumer behavior because I think they tend to skew more towards higher income but they've been weak. Can you give us a little bit of the what progress you've made to improve their distribution and where you are in terms of turning them around? 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. OCTOBER 08, 2024 / 12:15PM, PEP.OQ - Q3 2024 PepsiCo Inc Earnings Call

Question: Steve Powers - Deutsche Bank AG - Analyst : Good morning, everybody. Thank you. So I just -- maybe clarify, Ramon if you could talk a little bit more about what drove the step down between 4% organic sales growth for the year and now low single digits, the balance between how much was driven by some of the changes in international REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 08, 2024 / 12:15PM, PEP.OQ - Q3 2024 PepsiCo Inc Earnings Call markets that you talked about versus less improvement than expected in some of the domestic businesses. Because I'm not 100% clear where the incrementality was. And then within that -- within Frito-Lay, specifically, you talked a lot about investments both in incremental brand building and in sort of sharpening price points and the value equation, I guess I'm glean from that we should potentially expect segment pricing to flip negative as we go forward as you realize those investments. And I just wanted to play that back and see if that was an appropriate assumption.

Question: Andrea Teixeira - JPMorgan - Analyst : Thank you. Good morning. I wanted to step back and think about international convenience food. If you also need to see an increased level of reinvestment in marketing to flat volumes in key regions like in LatAm while also keeping momentum in Europe. That was -- that has been a very nice place where I know Ramon, you have a lot of experience in there in negotiating with retailers. And should we see -- I mean, my question is rooted on the affordability that we saw also in the US. Is that something that should be pricing for in places like LatAm, specifically in Mexico? I understand the tough calls, but going forward looking at ways to kind of dialing in [RGM] in Latam. And on the Frito-Lay North America, just a bit of a check in and a follow up. In reinvestments you mentioned, should we prepare for margins to remain pressured? It seems until we lack summer next year. And therefore, I mean, we saw a sizable 200 basis points declining in operating margin for Frito-Lay. I'd appreciate that. Thank you.

Question: Chris Carey - Wells Fargo - Analyst : Hi, good morning. Thank you for the question. I just wanted to ask a higher-level question then a follow-up on the line of questioning that Andrea was approaching. Like the higher level question, Ramon as you begin to make pricing investments into this portfolio and other strategic investments that you had outlined for Frito-Lay, you're beginning to see the sort of traction that you're getting or not? And I just wonder if your assessment of the slowdown that we're seeing is highly cyclical said another way this is purely about value equations or are you seeing any consumption habits which may feel more structural or secular that are moving away from that business? I wonder if the [CST] acquisition is a nod to how you see the direction of travel this business over time? And if I could just one follow-up on the line of questioning about total company margins. Just from a productivity standpoint, are there any divisions where you feel better about your productivity initiatives? Nearly Frito profit was under pressure this quarter despite you're going to be expanding the program. So are they international and [TB&A] productivity programs? Is it the visibility there? Just quite good. And so anyway, just expansion on your visibility on cost offsets for the investments that are company and pre-dose. Thanks for entertaining both those.

Question: Robert Ottenstein - Evercore ISI - Analyst : Great. Thank you very much. First off, I was wondering if you can give us a report card on the Gatorade transition. And then related to that, perhaps if you could discuss the DSD system in general in PBNA, and whether through all the great work that you guys have been doing for the last couple of years, have you been able to reengineer the system so that perhaps it's less volume dependent than it was in the past and that is part of your path to the mid teen margins in a few years? Thank you.

Question: Kevin Grundy - BNP Paribas - Analyst : Great. Thanks. Morning, everyone. Thanks for the question. So Ramon, just sticking with North American beverages, maybe we can get an update on the energy drink category. We broadened portfolio strategy here in recent years. Not lost on your course, like salty snacks in the US category remained surprisingly weak. For a couple of questions, please one, maybe just some updated thoughts on the energy drink category and what the recovery there may look like. And then two, perhaps comment on the sharp slowdown that we see myself, this is market share in your ability for that brand to regain lost momentum in the Pepsi system.Thank you.