PepsiCo Inc Q4 2024 Earnings Call Transcript

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

Question: Lauren Lieberman - Barclays - Analyst : Great thanks so much. Good morning everyone. I wanted to talk with about Frito, significant reinvestment in the business that really started over the summer, but we really saw it presumably step up in the fourth quarter funded by the onetime gain you had. But volumes decelerated, sequentially. So just curious if you can talk a little bit more about spending and reinvestment in the fourth quarter in particular, how much you would describe as kind of tactical versus laying strategic groundwork for next year, because right now just optically and super simplistically, the ROI on reinvestment, doesn't feel great with volumes kind of taking a step in the wrong direction. Thanks.

Question: Bonnie Herzog - Goldman Sachs - Analyst : Thank you. Good morning everyone. I actually had a question on your guidance for this year, your EPS guidance assumes some leverage but not nearly as much as you've reported in prior years so just, kind of wanted to understand the drivers of this. I assume your productivity savings will remain robust. So should we assume that the level of investments in your businesses are going to ramp a fair amount this year? And if so, could you maybe give us a little bit more of a sense of the types of investments, for instance, are Ramon are you considering more price investments at Frito, and then also you got it an EPS range versus your typical percentage increases is the idea there that you would, ultimate like to have more flexibility this year to maybe push more aggressively on investment levels if needed. Thank you.

Question: Kaumil Gajrawala - Jefferies - Analyst : Hey everybody, good morning. A couple questions I guess on the restructuring and sort of realignments, I guess the first thing is I don't know if it was 10 years ago, but there were a lot of conversations around splitting beverage and snack as two different businesses, and I just wonder if these restructurings or maybe a prelude to something bigger down the road or maybe what's your appetite for that and then I guess in the midst of a restructuring like this, does that also mean that. Any other M&A is off the table after these, two recent deals. Thanks.

Question: Dara Mohsenian - Morgan Stanley - Analyst : Hey, good morning guys. So, just looking at Q4 results for you guys across the CPG industry, clearly a pretty muted top line growth environment in North America. I know you touched on Frito-Lay North America already, but I just love to get a bit more granular on how you're specifically managing the business differently in 2025 relative to the back half of last year, on both the Frito-Lay and beverage side of the business and. Areas you're emphasizing more such as innovation, etc. And just sort of the tweaks and strategy in light of that sustained environment and also just can you give us a quick update on performance in Mexico and Q4 somewhat tied into the same vein of a subdued consumer environment so any update there would be helpful. Thanks.

Question: Bryan Spillane - Bank of America - Analyst : Hey, thanks, operator. Good morning everyone. Hey, Ramon, I'd like to pick up on the comments from the previous question and related to Frito and I guess, the focus on some of the more positive choices. And I guess as we step back, right, and we've all been trying to understand both the Frito share and the category, how much of it is just simply price got ahead of the consumer's wallet, how much of this is now a change in preference, right, is healthier, more important objective from here? And then I guess the last is just where Frito kind of fits in many meals because meals have become more expensive. And is there a migration to like, I don't know, what dollar menu relative to a bag of Lays and a Pepsi. So against those three things, which one is the most important? And specifically, is there something that you're hearing from consumers that is causing a refocus on the more positive choices?

Question: Filippo Falorni - Citi - Analyst : Hi, good morning, everyone. I wanted to ask about your low single-digit organic sales guidance for 2025. And -- can you comment how much is the international contribution versus the North America expectations? And specifically in North America, you called out the performance to improve gradually as the year progresses. Can you give us some sense of when you expect North America to improve? And kind of what are the key drivers of that improvement in '25.

Question: Peter Grom - UBS - Analyst : Thanks operator. Good morning everyone. Hope you're doing well. So Ramon, you mentioned in response to Lauren's question that you're kind of encouraged by some of the trends that you're seeing in Siete more recently and I know throughout this call, you kind of touched on a lot of the things that the company is doing to improve performance around affordability, innovation, et cetera. But just over the past year, category growth has been shopping and we've seen kind of these periods of growth kind of ultimately reverse. So I just want to be curious, as you look at it today, is there something that you're seeing that's different that gives you greater confidence that the category is on much better footing today as we move into the balance of '25. Thanks.

Question: Steve Powers - Deutsche Bank - Analyst : So I don't want to beat a dead horse, but I just wanted to delve a little further into the topic of Frito investments, specifically the topic of pricing and value. Because I appreciate the comments you made so far, Ramon, but I just -- I guess I'm trying to put a little finer point on it. Because it's the one area where, I guess, you -- you could argue you haven't really yet made clear and considered investments just evidenced by the fact that pricing in Frito is still positive this quarter despite tactical initiatives you discussed coming into the quarter. So the comments you made today Ramon signal a change on that front such that pricing in Frito could potentially start to run negative as we start 2025. I certainly understand the risks and sensitivities of walking back pricing -- but on the flip side, I guess the question would be how would you think about the risks of not investing more in price to reenergize volume, just given that it's been, I guess, 18 months or so, where we've seen category volumes and volumes in your portfolio extend their declines and fall short of expectations. So just -- I think I'm hearing a little bit more so than this, but I just want to--

Question: Michael Lavery - Piper Sandler - Analyst : Thank you. Good morning. Just want to come back to Frito -- maybe not as much as the pricing piece, but some of the other spending at the end of Lauren's question, you were saying you reinvested most of the onetime gains in infrastructure. And just want to maybe understand a little bit better what that is. I mean I think the optics you pointed out are a little funny. But if we understand that better, I think that's helpful. And just a little bit related. You said that the percentage of sales for advertising and marketing went up in 4Q. Can you maybe touch on what your expectations are for 2025 for that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 1:15PM, PEP.OQ - Q4 2024 PepsiCo Inc Earnings Call

Question: Drew Levine - JPMorgan Chase & Co. - Analyst : Hey, can you hear me?

Question: Drew Levine - JPMorgan Chase & Co. - Analyst : Hey there, thanks for taking the question. So I think this is the first quarter in a while where energy wasn't specifically mentioned in the prepared remarks. So wondering, any change in view of the category or PepsiCo's platform in the category and I know the company has previously said you feel good about the service levels and execution. But maybe any color on what the company has planned for -- planning or execution perspective to drive growth in that part of the portfolio? Or if there's anything the partnership can be doing differently or better from your perspective? Thank you.

Question: Robert Moskow - TD Cowen - Analyst : Thank you for the question. I was curious, when you went through the list of factors impacting the slowdown in salty snacks. There's no mention of increased GLP usage. And there's a pretty detailed study by numerator Cornell showing that salty snacks was category that was probably most impacted by GLP usage. Would you agree with that assessment? Or do you think it overstates the impact? And then secondly, protein drinks is probably the fastest-growing segment of the drinks market. Would you have any desire to go to become more aggressive in that category given all the growth around it. Thanks.

Question: Chris Carey - Wells Fargo - Analyst : Hi, thank you. So number one, just on Europe. This has been a segment that has actually seen kind of successfully driven an improvement in volume just even as pricing has normalized, what's specific about what's going on in Europe that has allowed you to see that positive balance of delivery over the course of this year? And do you think this performance is sustainable going into next year? And then just connected, I think there was some view that international profit strength could fund some of the investments in North America. Would you continue to have that view given what we're seeing in the currency environment. So just the concept of international still being able to give you that profit lift. So as to fund some of the things that you want to do in North America.

Question: Kevin Grundy - BNP Paribas - Analyst : Ramon, I wanted to take a step back here and give you the opportunity to perhaps level set on the company's longer-term organic sales guidance of 4% to 6%. So not asking to be redundant in any way but pulling together a lot of themes on the call. It seems like you see issues in the snacks business is more transitory or cyclical as opposed to secular. You sound confident on the strength of the business outside the US, but perhaps maybe cautiously optimistic. Do you have the right plan in place to return snacks to growth. Time will tell. But as we sit here today, can you maybe comment on your level of confidence, these are de transitory issues facing the business and that 4% to 6% is still the right growth rate for your current portfolio on an intermediate-term basis? Thank you.