PEPSICO INC Q1 FY2025 earnings call

• Frito-Lay is executing a playbook with three pillars: granular investments, portfolio transformation, and operational excellence, with early returns on price pack and multi-pack investments.
• International business is a growth engine, with mid-single digit growth expected, though some markets like China and Mexico face challenges while others like Europe, India, and Brazil are positive.
• Guidance adjustment is due to tariffs, macro uncertainty, and Frito-Lay's subdued performance.
• Beverages segment is focused on margin improvement, brand investments, and innovation in protein, fiber, and hydration areas, with progress seen in brands like Pepsi and Gatorade.
• Regulatory changes (ingredients, colors) are being addressed with transition to natural ingredients, and GLP-1 impact is managed by focusing on protein, fiber, hydration products.

The transcript discusses various segments. Frito-Lay North America is implementing a playbook with investments in price pack architecture and away-from-home opportunities, with early signs of returns. The international business is a key growth engine, with mid-single digit growth expected, though some markets like China and Mexico face challenges while Europe, India, and Brazil are positive. The beverages segment is focusing on margin improvement, brand investments (e.g., Pepsi, Gatorade gaining share), and innovation in areas like protein, fiber, and hydration.

• Guidance adjusted due to tariffs, macro uncertainty, and Frito-Lay's weak performance.
• Top-line guidance remains in the low single-digit range, supported by international momentum.
• Tariffs are factored in with mitigation plans, but uncertainty remains.

• Tariff uncertainties impacting earnings.
• Pressured consumer environment affecting Frito-Lay and overall sales.
• Regulatory changes (ingredients, colors) potentially adding incremental costs.
• Market challenges in specific regions like China and Mexico.

Q: Bonnie Herzog from Goldman Sachs asks about how Frito-Lay's investments are paying off and if strategy needs adjustment in pressured consumer environment.

A: Ramon Laguarta responds that Frito-Lay is executing a playbook with three pillars, seeing returns on investments, and will continue with granular investments, portfolio transformation, and operational excellence.

Q: Steve Powers from Deutsche Bank asks about drivers of reduced full-year earnings outlook.

A: Jamie Caulfield responds it's due to tariffs, macro uncertainty, and Frito-Lay's subdued performance.

Q: Filippo Falorni from Citi asks about expectations for international business going forward.

A: Ramon Laguarta says international business is a growth engine with mid-single digit growth expected, though some markets face challenges.

Q: Dara Mohsenian from Morgan Stanley asks about re-investment in Frito-Lay North America.

A: Jamie Caulfield and Ramon Laguarta discuss managing through the consumer environment with productivity, intelligent reinvestment, and operational excellence.

Q: Lauren Lieberman from Barclays asks about legislation on ingredients, colors, and snap.

A: Ramon Laguarta responds on transition to natural ingredients and limited impact of snap on business.

Q: Bryan Spillane from BofA asks about international vs U.S. growth.

A: Ramon Laguarta says both international and U.S. are growth drivers, with U.S. having opportunities in new channels and portfolio evolution.

Q: Michael Lavery from Piper Sandler asks about guidance change and tariff outlook.

A: Ramon Laguarta says top-line guidance is in range, and tariffs are factored based on current observations.

Q: Kaumil Gajrawala's daughter asks about GLP-1 oral medications.

A: Ramon Laguarta responds on focusing on protein, fiber, hydration products and innovation in protein area.

Q: Unidentified Analyst from Evercore ISI asks about Poppi acquisition and PB&A margins.

A: Ramon Laguarta talks about beverage business progress, margin improvement, brand investments, and Poppi acquisition pending regulatory approval.

Q: Peter Grom from UBS asks about energy drinks and Celsius partnership.

A: Ramon Laguarta says ongoing discussions with Celsius, early on new acquisitions.

Q: Christopher Carey from Wells Fargo Securities asks about Pepsi brand durability and North America beverage business.

A: Ramon Laguarta talks about margin improvement through operational excellence, brand investments, and portfolio strategies. Q) Kevin Grundy from BNP Paribas asks about segment recast. A) Ramon Laguarta explains recast for better focus on international business and North America integration. Q) Robert Moskow from TD Cowen asks about potato chips commoditization. A) Ramon Laguarta says strategic intent remains on revenue management based on value differentiation. Q) Charlie Higgs from Redburn Atlantic asks about organic sales growth guidance and high inflation economies. A) Ramon Laguarta confirms inclusion of high inflation economies, immaterial impact on earnings.