An underperforming beverages business and an eventually slowing snacks division have put PepsiCo in the spotlight this year, with Elliott Investment Management asking the company to course-correct.
- In September this year, Elliott Management disclosed a $4 billion stake in PepsiCo and began pushing the company to change its portfolio and improve its share price.
- On Monday, PepsiCo decided to make changes to its business after engaging with Elliott.
- PepsiCo noted that, as part of its business review, it has decided to reduce operating costs and improve operations aggressively.
PepsiCo’s stock entered 2025 on a dour note as demand for the company’s traditional sodas continued to slow while Americans also started to pare back spending on snacks, putting the soda-and-snacks giant in a fix and prompting it to rethink its strategies.
Fast forward to September this year: Elliott Management disclosed a $4 billion stake in PepsiCo and began pushing the company to change its portfolio and improve its share price. The firm called out PepsiCo for its strategic missteps in its beverages business and for lagging behind peers such as Coca-Cola.
And on Monday, PepsiCo decided to tweak its business after engaging with Elliott — a move intended to force PepsiCo to rethink innovation, productivity and affordability initiatives mainly at its snacks and beverages division in North America.
PepsiCo’s revenue has also lagged that of peer Coca-Cola, which has been able to drive growth and capitalize on soda demand through marketing initiatives and newer collaborations, such as the one with Jack Daniel's.
PepsiCo’s New Playbook
The Lay’s chips maker said it would offer sharper everyday value through a targeted approach to affordable price tiers by brand and channel. The company is reportedly looking to lower the prices of some food items in the coming year.
PepsiCo noted that, as part of its business review, it has decided to reduce operating costs and improve operations aggressively. The company closed three manufacturing plants and shut several manufacturing lines this year. It plans to invest the savings generated in advertising and marketing, as well as in consumer value. PepsiCo also said it was in the process of reducing the stock-keeping units in the U.S. by nearly 20% by early next year.
“We are announcing our plans and initiatives that aim to accelerate organic revenue growth, deliver record productivity savings and improve core operating margin – starting in 2026,” said CEO Ramon Laguarta.
According to a Bloomberg News report, PepsiCo is also planning layoffs as part of cost reduction efforts. “We will be making structural changes to our business that will affect some roles in the company,” Jennifer Wells, chief people officer in North America, said in a message to workers on Sunday, according to Bloomberg.
First Kennedy Jr. And Then Elliott
As the year began, PepsiCo was among the food companies that were seeing the need to bring changes to its portfolio after Health & Human Services Secretary Robert F. Kennedy Jr. outlined plans to eliminate six petroleum-based food dyes by 2026 as part of his “Make America Healthy Again” campaign, aiming to replace them with natural alternatives.
In July, PepsiCo said it would revamp its large brand platforms, such as Lay’s and Tostitos, to exclude artificial colors and flavors by the end of this year. They added that the company will also expand the use of avocado or olive oil across specific brand platforms and enhance certain products with protein, fiber, and whole grains later this year and into next year within Frito-Lay and Quaker portfolios.
On Monday, as part of the agreement with Elliott, the company said that, building on the changes from July, it has recently introduced Simply NKD Cheetos and Doritos, restaged Lay’s and Tostitos, and is headed for the 2026 launch of Doritos Protein.
New CFO Takes Charge
In early October, PepsiCo named Steve Schmitt as the company’s new Chief Financial Officer, effective November 10. Schmitt was succeeding Jamie Caulfield, who has decided to retire next year after more than 30 years with the company. In 2023, Caulfield was named CFO after Hugh Johnston left PepsiCo for Walt Disney.
Schmitt joined PepsiCo from Walmart, where he served as CFO for Walmart U.S., overseeing the finance function for Walmart's multi-billion-dollar omni-channel U.S. organization and leading the core financial activities of Walmart's largest business unit.
However, PepsiCo has not said the change in CFO was due to its conversations with Elliott. On Monday, the company said that PepsiCo intends to continue its ongoing board refreshment with a focus on global leaders who can help the company meet its growth and profitability objectives.
Lifestyle Drinks: The Way To Create Demand Now
A broader shift in consumer demand toward buying more fitness and lifestyle drinks has started to dull sales of traditional sodas such as Pepsi and 7UP. Consumers, mainly Gen Z, are more health-conscious and have begun to prefer prebiotic sodas and energy drinks.
The company has also bought the prebiotic soda brand Poppi for $1.95 billion, eyeing the "healthier soda" category. The move comes at a time when demand for its traditional beverages and snacks has flattened.
Several soda companies are now capitalizing on this trend. Coca-Cola has expanded its Simply brand to launch a prebiotic soda called "Simply Pop". Celsius Holdings and Keurig Dr Pepper have also targeted the market by buying out smaller energy and wellness drink makers.
Are Retail Traders On Board?
Retail sentiment on PepsiCo was in the ‘bullish’ territory, compared to ‘bearish’ a year ago. In contrast, sentiment on Coca-Cola improved to ‘neutral’ from ‘bearish’ one year back, according to data from Stocktwits.
PepsiCo has seen a nearly 18% rise in users who have added the stock to their watchlist on Stocktwits over the past year, while Coca-Cola has witnessed an 8% increase.
Shares of PepsiCo have declined over 4% this year, while Coca-Cola’s stock has gained nearly 13% in the same period.
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