Q4 2020 PepsiCo Inc Earnings Call

Good morning, and welcome to Pepsico's fourth quarter earnings question and answer session. Your lines have been placed on listen only until it is your turn to Africa question in order to ask a question or make a comment. Please press star followed by one on your Touchtone phone at any time, you may remove yourself from.

The queue by pressing the pound key today's call is being recorded and will be archived at www Dot Pepsico Dot com.

It is now my pleasure to introduce Mr. Ravi <unk> Senior Vice President of Investor Relations. Mr. <unk> you may begin.

Thank you operator, I hope that everyone has had a chance. This morning to review our press release and prepared remarks, both of which are available on our website.

Before we begin please take note of our cautionary statements. We may make forward looking statements on today's call, including about our business plans 'twenty 'twenty one outlook.

The potential impact of the COVID-19 pandemic on our business.

Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today and we are under no obligation to update.

When discussing our results we may refer to non-GAAP measures, which exclude certain items from reported results.

Please refer to today's earnings release, and 10-K available on Pepsico Dot com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward looking statements joining.

Joining me today are pepsico's, chairman and CEO, Ramon Laguardia, and Pepsico, as Vice Chairman and CFO Hugh Johnston.

We ask that you. Please limit yourself to one question now with that I will turn it over to the operator for the first question.

Thank you as a reminder, if you'd like to ask a question. Please press Star then the number one on your telephone keypad. Your first question comes from the line of Bonnie Herzog of Goldman Sachs.

Thank you good morning, everyone.

Good morning.

Good morning, I had a question on your marketing and you know how we should be thinking about your AD spend levels. This year.

It seems.

Quite obviously I guess that you know you can operate now at lower AD spend levels. So I guess I wanted to clarify with both of you that you do expect a pullback on the absolute level of your AD spend this year.

And then how should we think about this from a long term perspective, you know, especially when I think about in the context of the overall health of whether it's your categories and certainly your brand equity and how you're going to maintain that thanks.

Yeah, good morning, Bonnie.

This is ramon.

Isn't it.

The advertising levels.

I don't see where I'm actually minds on.

Investments what do we think is that the A&M line.

Has opportunities for optimization.

Especially in what we call non working and we're working hard on optimizing that part and obviously, we're working on optimizing the return on investment on India.

On the advertising part of the media that impacts the consumer.

One of the decisions we took this year was.

And if you look at Frito lay for example, or some of our international business, we actually increased our A&M.

And the reason for that is that within the formula for success of our.

Our portfolio, we have to have our large brands growing at a decent pace at the market level, hopefully and for that we need to keep them in a modernized where you have to keep innovating on those large brands, but also we need to invest in their.

The growth spaces of the category at.

Or sometimes we need to create new brands and that requires a well funded.

You know what kind of support package to get those brands up and running for example, if.

If you think about the Frito portfolio, obviously, we want to grow our cheetos Doritos Tostitos lays Russell.

Good space and I think we're doing that but at the same time, we need to be a healthier portfolio. Some brands like all day eat in Bath or a smart foods or.

Pulp gardeners or you know bear all those brands need to need to grow is to have a portfolio of the future are the same with with our beverage portfolio with bubbly or with some of the smaller brands were creating so that's how we're thinking about our our A&M optimization, obviously on the non working to get the maximum ROI on the.

On the working parts, but ensure that a weekend Schuh board you know the both the large brands in the smaller future branch in a way that we have a sustainable growth for the future.

Your next question comes from the line of Dara <unk> of Morgan Stanley.

Yeah.

Hey, guys.

So first just a detailed question.

As we look at your earnings guidance for 2021, it's in line with our long term algorithm. Despite having nearly 800 million of Covid costs in 2020 that I assume will drop off significantly. So just trying to understand why there could be upside to the to the long term algorithm should those costs drop off.

If you assume reinvestment or higher commodities or other factors and then second Ramon I'm.

Just sort of further on on the question you just answered we did see a pretty big shift in Asia and spend the frito side.

This year, obviously, we've pulled back and beverage given the COVID-19 situation. So I'd love to hear your thoughts on the ROI behind the higher spend.

In Frito, and if you think youre getting.

Significant incremental revenue from that or the yield on those investments as you shifted the allocation within the portfolio in 2020.

Thanks.

Okay, Hugh you want to take the first part.

You know, how we're thinking about the short term long term and in our you know algorithm.

Yes.

Sure Mark good morning Dara.

There are obviously that there's a lot of items that are that are in our P&L.

Identified over the years.

We wanted to call out.

It was extraordinary there will be COVID-19 clock in significant COVID-19 thoughts.

Bill in 2000.

'twenty one so you really can't fall all of that to the bottom line.

In addition to that.

We are reporting.

As Ramon mentioned in it.

The absolute business day.

And a bit in the beverage business as well.

As we entered.

Year.

Given the level of <unk>.

Like being on long term algorithm from a revenue and profit perspective.

Was it appropriately.

Appropriate goldcorp.

Thanks.

Got it.

But if we hit these numbers as we expected.

It'll be a good.

Yeah Darrin. So that's you know what we're thinking about obviously maximizing the short term, but not at the expense of the long term.

I think it's to start the year thinking about in our long term algorithm is it would weigh to start focusing the company on a sustainable performance for many years. So that's how we're thinking about it and then with regards to the our marketing ROI.

We're getting much better at measuring the ROI in our marketing spend and we.

We've seen that actually where we're based on these measurement, we're getting much better are the rois delivery all of our investments we're.

We're putting tools and we're putting you know kind of performance metrics to our marketing teams are in in particular, where you were saying about the frito.

Frito has.

A very low level of advertising I mean full full A&M actually below 4% for our brand for it for quite a business that has so many multiple brands that have so much growth potential. If you think about the share of micro snacks that we have so I would I would seem that a if you think about the levers of growth for free.

Oh in the future I think a N M and an increased A&M should be part of it.

As we think about our push model, it's pretty optimized with our DSD execution capabilities I think on the pool side, we have opportunities probably too.

You know to maximize the the frequency and to maximize the.

The consumer connection with our brands on Frito are versus what we do with other with some other parts of our business though.

How are we thinking about the a D. A N M investments at Frito.

Your next question comes from the lineup Andrea to share out of J P. Morgan.

Thank you. Good morning. So my question is something use of capital as you the emphasize buybacks and you're focusing more on capex and the investment in capacity to meet demand or perhaps M&A. So if you can comment on your capital allocation Hugh and Ramon I was supposed to be impressed with your own.

Every company momentum there and is that going do you think it's going to go in and continue to into 'twenty 'twenty, one on any better guidance and Conversely, what what are your thoughts on the deceleration in Latam.

Okay, Let me start with the geography part and then Steve.

Talk about the capital they are there.

I would say Europe, we're seeing.

Defriend Europe's now we're seeing eastern Europe quite strong I would say, Russia Assembly Assembly strong Turkey very strong.

<unk>.

Some parts in central Europe are much better.

Central Europe, I mean, Germany.

Some of the some of them or develop Europe were seeing the south of Europe very impacted by by obviously, the lack of tourism and and you know people not go in there for weekends or a longer vacation so that.

That is how we see Europe when we when we look at 'twenty, one and we think obviously is as mobility increases were gonna see even better performance in Western Europe.

And hopefully we can continue to see good performance in the east what we can see in Europe across the board is we're becoming more competitive I think our share of market performance. Both in beverages and snacks was very good. This year. So we managed to gain share almost in every single market, which which is actually the metric that will fall.

So in the most inc.

And in a period of time, where the markets go up and down depending of Lockdowns et cetera that Latin America actually.

Steel has been very strong throughout the year and we you know we feel very good about our Brazilian business also in terms of share of market, but also category growth has been very very positive in Brazil, Mexico at the beginning of the pandemic, we suffered a little bit in the.

And the capital are part of our business. So the more you know.

Kind of smaller fragmented trade, we saw traffic down and that impacted our sales are given that we have a very good distribution and availability in the market that the business came back to you now.

Much more solid performance in the in the last quarter in Mexico, and although we've been gaining share across the year. We're seeing also the category recovering in Mexico. So hopefully, we'll see a much better.

Performance in Mexico. These year in absolute terms relative terms I think it will continue to to gain share in the market and so those are the two big markets in Latin America, you get it you get as good a good sign from those two and Hugh you want to talk about the capital principles that we have.

Yeah happy to Ramon.

Overall, our capital allocation strategy hasn't changed we talked about this many times number one make sure that we we fund the business to compete and grow.

Number two is dividend number three is it is a tuck in M&A and number four is a share repurchase.

One and two obviously, we talked about in terms of our guide.

I would not expect from the standpoint of the third one I would not expect much in the way of M&A is as we go through the course of this year.

And certainly nothing more so from that perspective.

Yeah, we we've got a lot to digest right now, we're happy with where the portfolio sits.

And then last in terms of share repurchase, obviously, where we're trying to balance our debt rating versus our cash return.

As shareholders, we we felt like the dividend increase was important.

And at the same time, given the level of M&A that Pat over the last couple of years balancing.

Balancing that out with the debt rating, we made a decision that we weren't going to have significant share repurchase in the in this year that that's purely based on balancing the debt rating with the with our with a return to equity shareholders nothing more than that driving that decision.

Your next question comes from the line of Com, Oh Gosh for awhile.

Please.

Yeah.

I would you guys.

You guys mind, providing some insights on how you're looking at the commodity cost environment.

What are you seeing maybe raw material inflation and then how you plan on addressing it through pricing or mix or trade spend.

Hugh Hugh Yeah, Yeah, I'm happy to pick that Ramon.

A couple I I, obviously, there there was some pressure in commodities, we're viewing commodities as as manageable right now I'll remind you that we do forward buy on on areas, where we can overcome.

Typically about nine months ahead.

But we can't afford buy on everything and obviously there was some inflation in certain aspects of our cost structure, but that's it.

The overall mixes as manageable.

Between pricing and the balance of the P&L such that we don't expect it to be disruptive to the algorithm this year.

Your next question comes from the line of Bryan Spillane of Bank of America.

Hey, good morning, everyone.

I guess I had a follow up question just related to Andreas.

Andreas question around cash flow and.

Hugh maybe can you talk about at the level of the Capex levels and will they be elevated for multiple years and and then I guess, maybe some color on just where like where that incremental capex spending is going is it is it capacity is it capabilities.

Trying to trying to get an understanding of whether or not we're going to be.

With an elevated capex cycle for a while and then also just where the where the where the capital is going.

We're around would you like me to handle their own yeah. Please go ahead.

Yeah Yeah.

Okay.

Brian a couple of things on that yeah. It is elevated we we sort of had been running as you know about 5% of sales in and that we're running.

A little bit north of six a couple of big drivers behind it number one is the.

I T and digitalization spending that we're doing that'll be elevated for a couple of years is as we sort of get.

Get through the combination of in S. E T upgrade as well as a whole variety of of digitalization efforts that we have going on in our in our supply chain and selling system.

The second piece is primarily around growth capacity.

And we expect that to be elevated for a couple of years. If you look at the way that we we used to run the business, we ran capacity pretty close to the edge and as we've pivoted to more of a growth strategy, we're taking capacity utilization down a little bit to enable us to capture more of the growth opportunities that are out there. So that's.

That's a big piece of the spin.

And then the last is as productivity Capex is as we're looking at automation as we're looking at are putting more and more capabilities into the plants that will yield cost savings.

That obviously is a is a big driver. So I would say I would expect the capital spending to remain elevated for the next couple of years and then I would expect it to return back to our typical norms.

Our next question comes from the line of Laurent <unk> of Guggenheim.

Hey, good morning, Robert and Hugh and congrats on the strong hand of the year.

I'd like to focus my question on the energy category.

So in 'twenty 'twenty Hugh we so you can make your unit growth you've moved into the energy category with the acquisition of Rockstar and.

The agreement to distribute bank so could you please oh.

Date us on where you stand in your journey to become a leading energy player like to understand your view on the Rockstar not revamp.

We saw the Super Bowl AD that night to try to understand a bit more on that and hope you stay in your assessment of the situation was Bang, but also what are you planning to do with our other brands like do Indian interest category.

Yeah. Thank you Don.

Yeah. Good question isn't.

Let's talk first about Bang quickly.

Surprise right Bye Bye this move by a V P X and especially given that you know there was a very good performance value P. B N a on the distribution metrics, but.

End of the day, we plan to continue being the distributor of Bang until October 23.

And you know, we're going to do our best to make that brand.

Distributed.

In the marketplace.

But the core of our energy study was never batteries, a distribution a cherry on top.

Obviously, what we could do with our brands after the acquisition of Rockstar kind of free us up from some of the contractual obligations. We had so the first pillar is obviously Rockstar Rockstar a relaunch are both in the U S and it expansion internationally as our core.

Energy I'm kind of mainstream proposition the I would say the integration of rock starting to our supply chain is starting to happen, it's going to be a bit of a process until we get all the formulations and you know everything into our into our assist them, but obviously that's going to make it up.

Better supply chain and itself from the consumer point of view. We are you know you saw where we're planning to invest in the brand I think we've found the consumer space, where you know it's gonna be a bit quite differentiated and then where you are improving their formulas and we're improving the.

And different proposition for for multiple spaces and in that kind of mainstream mainstream energy at the same time. Hugh you you will be seeing shortly some announcements on mountain Dew a launch.

In the springtime.

There's going to be the first big move for months and you into the energy space.

We're very happy with the way the.

Product concept.

The <unk> package and the support we're getting from our customers in terms of the launch and show that that would be a good event and it will be the first move a bunch of new and they will be for future moves as well for mountain dew into the energy space. Obviously, you know one of our big dealers and energies are Starbucks partnership, which as you know I think it's.

Is that at all time high in terms of the relationship and the market performance, we continue to innovate.

The kind of coffee energy, Inc. Triple shot double shot and we have some I think good good ideas that will you know I I'm sure, we'll make make into the market as shortly so and they were looking at other brands in the sports area and some other kind of spaces with.

The energy management and energy up energy down that I think we can have a multiple set of solutions and brands that drive.

Drive consumer solutions and in a space that is obviously, a growing and it has a lot of consumer pool shot.

It's important for us as we said both from the growth point of view on the margin expansion point of view and we feel good about the steps, we're taking brick by brick to build a solid foundation for us to play and in energy over many years. So that's pretty much in line and you will see you will see more news from us and they come in in the coming week.

<unk>.

Your next question comes from the line of Vivian Asia.

Colin.

Hi, Thank Hugh good morning, I was hoping that you could.

Touch on your agreement with beyond meat and explain kind of the aspirations. There in terms of the partnership as well as any on embedded economic impacts and nurturing Cleveland guidance. Thank you.

Yeah, Great Great question, Yeah. As you think about you know, we're creating spaces for future growth.

One of them is plant based snacking plan base convenient solutions, we'd seen that beyond meat was the right partner in terms of we did a lot of due diligence in terms of R&D capabilities, and and I'm kind of willingness to to share with us in the future and.

We have high expectations for that there should be no implication for our 'twenty 'twenty one.

I'm kind of.

Best men or or high sale is going to be still a small business for us in 'twenty 'twenty, one, but we plan to be in the market within this year.

Our next question comes from the line of Lauren Lieberman of Barclays.

Great. Thanks. Good morning, I was curious just thinking back to kind of your longer term plan that you've laid out now.

Two years ago and.

Is it fair I think your first order of business was seemingly to kind of shore up and reinvest in your bigger franchises.

And I felt like the language in the prepared remarks today, there was a little bit more emphasis on.

It's Steve.

The investments in the more and some of the ancillary but critical growth opportunities, whether it's smaller brands are kind of healthier segments of the categories.

Can you speak to the degree to which may be the environment of last year kind of accelerated and the support you're giving to your big brands and the impact that that really had an accelerating I guess you were.

Progress vis vis your your long term goals and I'd be curious to hear sort of a progress report.

That's great good question.

If you think back and you'll see the growth opportunity for Pepsico.

We are you think about the large LRB category globally, we're about less than 10% on a six $600 billion category growing at a four 5% and it pretty much the same with micro snacks, a large category 500 $600 billion globally, and we are less than 10.

So growth is the lever for the long term value creation of these companies.

Clearly the number one how should we thinking about our growth. Obviously, there is a lot of growth in our core core brands. Our large core brands has a lot of opportunities both for more penetration and four are obviously much more of a frequency. So we're thinking about that.

Pillar is critical and we are I think we're well invested now in our core brands. If you think about the performance for example, the BNA and how brick by brick we've been able to get Pepsi two growth margin neutral growth gateway to growth of the accelerated growth, while we're still grow our golf fees on our teas and our spark.

Waters I mean that is the growth model, if you turn to the to their snacks space and it is the same you have we have our big core categories that play India funds short shelf space and we're building a set of brands in more let's say either morning or during the day shallow.

Asia, where you know what.

Where we're less penetrated at this point is our brands I was referring earlier all day eat them bad Smart food.

Some of their recent acquisitions like Bob Coroners Bear we're building a beautiful portfolio of solutions for that for that for those spaces that is the growth of the company long term of well balanced growth between our core businesses and those smaller niche that one day you know 10 years from now will become the you know the.

The big brands.

If you think about other models that we're working clearly are a solid stream has been a fantastic acquisition for us and he says our platform not only to have a sweet spot between better for you and better for the planet, which I think is gonna be a sweet spot of growth.

Globally.

Also a and Hugh.

Any way to customize dreams. The same we're thinking about for example, the other questions that you guys got on beyond meat and the partnerships. We're building you know a lot of our future opportunities for our portfolio to grow at the same time, we don't want to keep our eyes off what are what are the core bra.

Does that drive the majority of the growth.

Growth in absolute dollars of this company and that has a massive runway for growth in the future. So that gives you a sense of how we're thinking about growth growth being our number one value creation.

Profitable growth, obviously, and I think we can do that over time.

Right.

Also creating those smaller spaces, where I think we can enter and win in the future.

Yeah.

Your next question comes from the line of Kevin Grundy of Jefferies.

Great. Thanks, Good morning, everyone and congratulations on a strong year.

Ramon and Hugh for that matter just building off the last question around sort of balanced growth I wanted to come back to the margin opportunity in North America beverages. Because this has come up so you don't want a number of a number of times on previous calls in your prepared remarks today, it's been more about delivering a better balance and improving profitability.

Last quarter I think it seemed to me at least the tone was more on improving profitability. So I'm just I just wanted to get a better understanding here if the current commodity cost environment in which you commented on a moment ago as well as the spending intentions of your key competitor because it's because one would argue that day, they probably never been more constrained than they have been this past year. So I'm just.

Curious if this is will be another year of sort of really limited margin enhancement given these factors and north American beverages and wanted to get a better understanding of how big a priority. This is for the organization and then when can we expect to return to the sort of elusive mid teens operating margin. So thanks for that Gregg just Olivier.

Let me take it first and then Hugh can add I think when we you know I think.

The conversations were starting about a couple of years ago was we wanted to make sure that you know we we got to be in a to be a growth engine and I think you know brick by brick we've been able to bill they.

Kind of make sure our brands are all growth brands, and I think where they're in the latest quarter or five plus growth shows that okay.

You know most of our brands are performing at a very good level that was critical because we thought that you know there's no way to cut your costs in a way that is sustainable and so now we have I think a good good machine that has the right local execution capabilities and the good brands and innovation now I we.

We have the intention to you know two to work obviously on the margin expansion of B B N. A that is a that is a priority for Asbury a day for the business. We see this business long term and mid teens.

You know we want to do it in a sustainable way, where we keep growing with the category and expand our margins and we have obviously ideas on how do we be able to categories segments of the category that are highly more profitable how we get better at selling the right back in the rights and the rights are in the right place at the right price.

So our revenue management capabilities, we have a lot of cost opportunities in the end to end supply chain management and also the way we support the business.

Our G&A expenses on a little bit of an hour a day.

A N M. As you mentioned optimization, so all of that should shouldnt.

<unk> gave us the opportunities to continue to grow as a category or a ball and it's starting to expand their margins. This year should be a year, where you see already some some movement in that in that in that regard and as I said earlier, we see this business getting into the teens margins over the long run and.

Without sacrificing our competitive performance.

Your next question comes from the line of Michael Modi of RBC capital markets.

Yeah. Good morning, everyone. Ramon I was hoping you could just talk about whats going on at retail in terms of assortment.

Can you management at the at the retail level because it seems like you're finally, starting to focus on higher velocity items, and you know really simplify their shelves because they all learned the lessons of COVID-19 and not having enough stock of Hi, Tec brand and just wanted to get your perspective on that and you know some of the things you've heard from me.

Mike Quaker.

Has been under a little bit of space pressure. So I'm, just hoping you can provide some clarity there.

Yeah, I think listen obviously, we all had to take a look at our supply chain right.

This year, because we you know it's been a challenging year from the supply chain point of view given the number of infected.

Infected people that we had in our supply chain and so on so simplifying our portfolio. So there's been a solution to continue to have elevated levels of supply to our customers, which has been our focus I think as we go forward and consumers move back to more of a you know a.

More of a normal life in physical stores.

Continue to be a meaningful part of their shopping experience I think consumers will go back to a spring minting a little bit more and are they will be looking for innovation and smaller escaped us. So I think we're going to see a small you know a slow return back to weigh a bit more complex.

Portfolios.

But I think we've all learned that maybe the tail of the portfolio.

What's not really delivering the returns that we needed to have for every SKU that we had in the marketplace. So I think theres going to be an optimization of their portfolios, but about an increasing complexity as well versus what we have today, even though their consumers will be asking for a bit more experimentation and especially in our categories.

Iot is a is a key driver of also purchased.

Your next question comes from the line of Steve powers of Deutsche Bank.

Hey, great. Thanks Bill.

Just two things.

First as Hugh if you could given the higher Capex that you mentioned just your thoughts on on free cash flow and free cash flow conversion for the year, I guess I'm thinking that a roundabout, 80% free cash flow conversion is a reasonable place to start for the year consistent with 2020, but.

Any thoughts you might have as to why that could be materially higher or lower and then ramon.

I guess, maybe could you talk a little bit about the Gatorade franchise that had a had a really strong 2020 behind zero and other initiatives and I am curious to how you're thinking about it into 'twenty one.

And maybe as part of that you'd mentioned kind of a sports energy convergence in your answer to Lauren's question and it looks to me like you're increasingly positioning both 24 to play in that area. So maybe you could talk a little bit more about how those lines maybe blurring. Thank you okay Hugh.

Bill you want it.

Yeah I'll jump in on that so obviously, Steve we didn't give specific cash flow guidance, but I think generally speaking the profile of our cash flow will be similar to what you saw in 2020.

Yeah.

Great question, no how long I mean, let me just say a few words on the Gatorade I think Gatorade.

We're seeing in Gatorade, clearly growing very fast part of it is our innovation, especially zero has been an amazing innovation is crossing the 1 billion dollar retail sales value already for a year I mean, that's a meaningful size civil innovation and we're seeing obviously people.

You know exercising more and and obviously, that's helping us drive additional consumption as we think about the future of Gatorade, we couldn't be more excited about what we see obviously moving into.

Other spaces like I said.

Natural.

Obviously, you mentioned energy those could be space, it, but where we see the biggest opportunity for Gatorade is in creating more of a personalized solutions for for athletes and you know kind of amateur athletes like most of us are.

And in creating a much more engaged relationship where we become advisors all of the athletes all of their hydration needs of all day or their their nutrition needs and we see an opportunity to create much more of a a.

They are in a full ecosystem of.

The engagement with the consumer we provide solutions, we provide products and we provide information and I think that that's the real future off day rate.

Which is you know.

A massive massive.

My favorite brand that has so much strength from consumers and I think we can leverage that trust in providing much more than just a titration.

[noise].

Your next question comes from the line of Robert <unk> of Evercore.

Great. Thank you very much just first a follow up question.

On energy and that is can you talk about.

As you look at your guidance for 2021, how much does.

Does your energy strategy bear into it what is the impact.

What you're modeling for Rockstar and mountain Dew on your 2021 guidance.

So that's the just kind of follow up question and then you know.

The the the bigger picture question is is how how do you assess.

The impact of people staying spending more time at home on the snacks business you know how much.

Increased demand did you see in 2020.

From that particularly in the U S and the likelihood of that continuing thank you.

Yes.

Hugh you want to start with the energy energy Yeah happy to.

Robert in terms of.

Being one of the big impact items for P. B N. A quickly introduce strategy is important to us.

It's broad based it's Rockstar, it's what what we might do with mountain Dew and obviously.

Contributor as well.

In terms of overall of Pepsico.

It matters, but I wouldn't call. It a you know.

Ah Baker break type of item for the company. This year, if things don't go as well as we expect I think we've got enough other levers that will be fine, but it's important for people to be sure.

Yeah.

On the impact of the kind of a new morbidity habits on snacks I would say.

We've lost a lot of high profit volume in both the convenience channel in the away from home channel I mean.

It would always talk about beverages bad snacks had a pretty good impulse and away from home opportunity that we've lost and I know that was high margin on the opposite side, we've obviously seen them.

More consumption at home both odd.

Indulgence.

In terms of you know I'm kind of at the end of the day. There's you know people need a break during the day some breaks and we're seeing more shallow consumption. So more multi five small portion.

The small portion.

Format.

At the end, probably a bit of a net positive for the category bad are not not massively in terms of you know what we what we're seeing across the world maybe a bit more developed in developed markets, where we have more in home consumption, maybe a more positive impact, but in developing markets, where there's more of an away.

From home consumption and negative impact. So that's how you know full company those are the drivers depending on.

How that broke up per capita consumption is bill between eating at home on out of home in different locations.

Yeah.

Your final question comes from the line of Chris Carey of Wells Fargo Securities.

Okay.

Hi, good morning.

I just wanted to follow up a little bit on on P. D N a.

And specifically around pricing and promotion right. So.

Three quarters running of strong net pricing in the division.

And I guess you know it.

And you can see this showing up in the data as well I mean are you getting more comfortable around the concept of using price as more of a lever and P. DNA overtime.

And then maybe specifically.

We're at record low promotions.

Across the categories, including for your portfolio in North America.

Do you think that you can keep these promotional levels lower.

As a strategy.

And just in general how sustainable you think these low promotions are or whether we're going to see some sort of reversal in 2021 and that is factored in your outlook. Thanks.

Yeah, I think I think strategically we see.

In the beverage category trying to understand better the consumer and give the consumer what he or she needs for every location with the right back in the right price that's a huge lever.

Growth for our partners retail partners them for that so I was trying to build a kind of a profitable growth.

Along the lines of the value we create for the consumer for the particular location, but that's a big driver of of opportunity I think we have we're getting better at that at Frito at PV in Asia and globally across the world and they stand in the north.

The drivers of relocation and in what is best and what is the portion of what is the sizing what is the you know the.

What will drive purchasing and consumption, so that sort of strategic driver and in terms of the AR.

The promotional effort I think we've simplified promotional calendars, you know with our customers everywhere given that given the simplification of the supply chain that we had to do I think we've all learned that there are some opportunities there, but I'm sure there will be a little bit of additional.

Promotional efforts.

That's it.

As the world opens up again.

But I think we've all learned that their relative fries off of the beverage category in some formats in the U S. Even you compared to other markets around the world was very very low and so.

So I think we you know there there is a strategic journey to make these category a bit more higher valued and in general terms and that's the journey that we're all in and that will obviously drive additional value for our retail partners and for ourselves.

Ladies and gentlemen, this concludes our question and answer session I would now like to turn the call back over to him on Laguardia for any closing remarks.

I just wanted to thank you all of you for your support during the year and you know.

For your investments in Pepsico, and hopefully everybody stays safe and and all the best to all of you. Thank you.

Thank you for participating in Pepsico's fourth quarter earnings question and answer session. You may now disconnect your lines and have a wonderful day.

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