Q3 2021 PepsiCo Inc Earnings Call

October 5, 2021

During todays program. Please press star zero.

Good morning, and welcome to Pepsico's 2021 third quarter earnings question and answer session.

Your lines have been placed on listen only until it is your turn to ask a question.

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>.

<unk> senior Vice President of Investor Relations. Mr. P. N Army you may begin.

Thank you operator, I hope 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 statement. We may make forward looking statements on today's call, including about our business plans and updated 2021 guidance and the potential impact.

The COVID-19 pandemic on our business.

Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today October five 2021, and we are under no obligation to update when discussing our results we refer to non-GAAP measures, which exclude certain items from reported results.

Please refer to our Q3 2021 earnings release in Q3, 2021 Form 10-Q 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 me today are pepsico's, chairman and CEO, Ramon Laguardia, and Pepsico's, Vice Chairman and CFO Hugh Johnston.

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

[noise]. Thank you once again in order to ask a question or make a comment. Please press star followed by one on your Touchtone phone at any time. Our first question comes from Dara <unk> with Morgan Stanley.

Hey, good morning, guys.

Good morning.

Very strong.

Topline results again here in Q3 and for the full year, you don't expect 8% organic sales growth.

Would be the best result, we've seen in recent history. So can you just discuss some of the key drivers behind the recent acceleration in top line growth how sustainable. They are as you look out longer term and then also just near term are you confident you can sustain mid single digit organic sales growth in line with the long term algorithm, particularly as maybe you can.

Catch up on supply or.

As we look specifically at 2022, you know could there be some risk as you cycle. These difficult comparisons from 2021, how you guys think about that conceptually it would be helpful.

Yeah, Hi, there good morning.

Listen I think we're very pleased with the.

The performance of the business overall.

I think it is driven by <unk>.

Got it worries are healthy both our beverage and food category snacks categories are growing faster than food and beverage overall in the U S but globally. So.

We're playing in categories that are.

It's been very well I would say dynamic now as.

As we are exiting.

And they're making many markets around the world. So that's one thing the other component of our success is I think we're becoming much more competitive across both our categories in most of the markets, where we operate and thats been a consequence of the investments we've been making in the brands I think pretty good innovation.

Obviously the investments we've made in our go to market capacity new capabilities talent everything as we've been talking to you for the last couple of years. So we're seeing the.

The momentum across the business and we're seeing that momentum continuing into.

The buyers of the year, that's why we are.

And validating our our guidance for top line and we've seen that that momentum will continue.

Well into the into.

Each of the 2022, thank you.

Good afternoon, gentlemen, what parts of the question.

Specifically on 22, and I know, obviously, there's there's always going to be watching questions on that and you.

Historically, you've been with us for a long time you you know we typically don't talk about the following year until we get to February but given the level of question and given the level of volatility.

I think we thought it was prudent at least to give some indication of where we are on on 22.

In short, we expect our organic revenue growth in our core constant currency EPS growth.

To be in line with our long term objectives in 2022.

No that's good to sort of create a lot of additional questions and candidly, we're not ready to get into all of the details of that because frankly, we're still early in our planning process, but I think we can say with confidence that we expect both revenue and core EPS core constant currency EPS to be in line with our long term objectives for 20 years, So hopefully that gives everyone.

Some level of comfort that as we emerge from Q4, where merge with a lot of momentum in the top line as well as a business that is.

Got it supply chain, while manage then.

On good footing to deliver another good year next year.

Thanks very helpful.

And we will take our next question from Bonnie Herzog with Goldman Sachs.

Alright. Thank you good morning, everyone.

I guess I have a bit of a follow on question as it relates to top line and that's.

I think Ryan on innovation, where we're starting from some of our industry contacts that you know your innovation pipeline for next year.

From what we've seen and what we've heard it looks very robust. So just love to hear some color from you in terms of you know if you are in fact stepping up your innovation significantly versus prior years and it's.

Do you think you're going to need to also step back here.

Spend to really support that.

That pipeline and ensure that these are innovations really get the support they need and the bond market.

Thank you Bonnie.

Well, it's good that you are hearing from our customers that innovation is good it's always a good feedback.

Lisa.

It's more seriously I think we've always seen innovation is a key driver of our competitive advantage in the marketplace and we've been investing a lot in R&D. We are investing a lot in insights and connect them better I think insides with R&D and the whole commercial execution to to get the maximum return on those innovations.

I think that machine is is ready and it gets it keeps getting better year. After year. So he is our pipeline is strong I would say our pipeline in 2021 was very strong as well and we're seeing the return from that from that innovation that garage the way I would tend to be much more local much more.

Mid term or lunch or much more incremental in the way, we think about it about our innovation so yes.

When it comes to the investment behind the innovation I think we have the right level of A&M and money in our business to support innovation in a big way and he is not only A&M, but as you know we have a very strong push them that allows us to give innovation a lot of visibility in separate.

<unk> from the rest of the category and make sure that the trial levels are higher and their repeat levels are good so I would say yes.

There will be a strong innovation across beverages and snacks, we think it's going to be quite incremental.

How do we think we have the right level of resources to support that innovation, we see in our current algorithms.

I would not expect a higher A&M in next year.

Thank you.

Our next question comes from Andrea Teixeira with Jpmorgan.

Thank you and good morning to all I just wanted to go back to the balance of cost supply chain and labor.

In the prepared remarks, you did talk about those off obviously, that's no surprise to anyone but it was a 14 percentage point impact on EBITDA.

And I and I understand that your cost inflation that had been running around the mid single digits.

And sites and as such I think like the pass and Youre, having to pricing coming through also in the fourth quarter.

Strongly so should we read the EPS flow of $5.47 of a fraction of those of increase.

Yeah, you said and not necessarily for 2022, but perhaps you are not going to flow all of the upside that we saw so find a year into the EPS for the year just because of.

These investments.

It's just that you are quite strong to anytime soon or is that the way we should read.

Yeah, Andrew Good question.

I think I would think about it this way obviously, we've given you some pretty specific guidance in terms of where we would expect EPS to land for for Q4.

You know that we forward by six to nine months those hedges that we had in beginning of the year are starting to roll off and new ones that are in place are higher cost.

We had shared on the last call as well as in the prepared remarks today that we expect to be able to price through the inflation that were facing whether it be commodities inflation or other types of operating expense inflation.

Some of that pricing.

Curt in the summer Ah much more of it is occurring in the fall and the beverage business and substantially.

All of it for 2021 in the snack food business is occurring really as we speak during during these weeks right now.

You also know that we forward buy.

That six to nine months out so we will have a better handle on where exactly 2022 costs are going to land as we get into the first quarter of 2022, and I would expect us to price a bit more could be reflective of of some of that that sort of finalization of costs.

During the course of 2022 so.

Q4 <unk>.

Some of the pricing coming through the balance of it coming in in Q1 of 2022 and the EPS guidance is reflective of all of that.

Great. Thank you I'll pass it on.

We will take our next question from Lauren Lieberman with Barclays.

Great. Thanks.

Just to follow up on that I mean, the your comments on <unk>.

Lower by six to nine months until you have more visibility to get out in the first quarter onto the cost base.

That suggests a lot of pricing.

And so I was hoping you could just comment on elasticity, whether what you're seeing in terms of your your models, if you're seeing less elasticity than traditionally because the innovation has been so strong and if it has.

To really get a range because of all of the Covid comparisons that are they're flowing through consumer behavior right now, but I'm curious on the elasticity piece because it does imply a lot a lot of pricing. Thanks.

Yes.

I'll take I'll take a first go at this and then maybe you can add some more comments.

We're seeing across the world has much lower elasticity in the pricing that we've seen historically.

And that applies to developing markets.

Western Europe, and the U S. So.

Crosby, well the consumer seems to be.

Looking at pricing a little bit differently than.

And then before it could be several hypotheses I think in our case, our brands are stronger and I think our innovation is stronger as you were saying so that could be a factor that could be also some behaviors as consumers are shopping.

Faster in store and they might be paying less attention to pricing as a decision factor in there it might be even more relevant to the brands or brands that they feel more of it.

Closer to a more closely.

Yeah, I would say closer more and more emotionally attached to it as our brands. So we're seeing less elasticity.

Adjusting our models.

As we go and that's obviously informing our decisions as we price.

Patterns of the year and into 2022.

And we will take our next question from Bryan Spillane with Bank of America.

Hey, good morning, everyone.

Yes.

My question My question is around.

EMEA and APAC and.

If we look at the year to date profit contribution from those two segments, it's contributing about a quarter of the of the operating profit just incremental dollars right. If you look at it on a currency neutral basis, you've got a pretty healthy gap right on currency neutral operating profit growth versus what the.

The currency neutral organic sales growth and so.

I guess my question is just are we at a point in those two segments where there.

There is enough scale, where you can really start to see a sustained.

Improvement in profit contribution to the total.

Going forward or is there something just sort of unusual in the near term that's just driving those margins.

I think Brian.

Two hypotheses are valid I think there is a lapping effect so, especially in the Senate last year suffered a lot.

Given its geographies, so India Pakistan.

At least in Africa, clearly there were challenges last year. They are coming back is it is a very.

Every beverage focused business. So clearly it was more impacted by the Covid mobility restrictions. So we're seeing we're seeing.

Those visits coming back and we have high high scale and we have high share many of those markets and our advertising and marketing is doing very well.

Part of that is lapping.

Second question on scale, Yes scale is getting obviously every year you see that growth level on the top line, we're getting to scale levels there.

Pretty good in many of the critical markets in that in that region and Thats, giving us obviously.

The opportunity to do better in the marketplace and the flow through is also stronger so.

I think the two are relevant if you think about the business going forward those are very strategic markets for us going forward and we continue to invest in everything from technologies. So we can expand the portfolio, Thailand, obviously.

There is a war for talent in that part of it I think where we're a scaled company that does a good job with developing talent in that part of the World and then obviously our go to market being being very strong we have very good bottlers and whenever we have our own operations, especially in the food business were also in there.

And digitalization and everything that goes with being more precise and more agile.

Hopefully I'm answering in both the short term, but also motor, especially for me the long term of how we see that part of it will yeah.

And we will take our next question from Nora gradient with Guggenheim.

Hey, good morning, everyone and congrats on a strong quarter and that very vertically environments.

Thank you Laura.

Talking about innovation.

Good to see you, leading the company pushing to usual boundaries. So during the quarter you announced a partnership with the Boston Beer company to introduce a mountain dew either use. So the question is not so much about the potential of that initiative, but more.

On the route to markets you decided to choose so we'd like to understand why you decided to create your own distribution rather than rely on the Boston beer wholesaler network.

He is the end game here and by extension you are stretching out here in the U S and internationally. Thank you.

Thank you everyone listen if we have a good partnership with <unk>.

Boston Beer company.

They have the R&D and the knowledge in the space that we don't we have the brand.

As a mountain Dew I think it will play very well in that space. It will be quite differentiated in terms of the flavor profile and the emotional connections.

That's how we're thinking about it in terms of that first step into this market.

From the distribution point of view.

We think we have a.

An opportunity to create a.

A distribution system in the U S that is quite unique in the sense that it would be an integrated distribution system that can make ordinated decisions are grabbing up across multiple states for one decision point and that could be.

Think competitively advantaged.

We're starting with.

A number of states, where we had the license to operate.

And we'll take it from there we feel optimistic with it would be very incremental you would help us with the drop size. It will help us with the economics of their routes eventually and within the same as what we're doing with the chilled distribution system that goes very copier <unk> unique and it covers the whole country. We think we could eventually.

The.

In addition, a.

A distribution system that can be quite got dealer and quite integrated on the Milwaukee.

Our portfolio as well.

We will take our next question from Vivien <unk> from Cowen.

Hi, Yes, I was just hoping you actually got to a follow up on on the hard Seltzer question. Please just curious your impressions of the overall category. It's obviously been incredibly contingence the decelerating trend.

And whether you would all discussed perhaps introducing mountain dew is the cam cocktail as opposed to a heartfelt hard because it does seem that that's why the consumer is moving.

Sure.

Yeah.

Our view on the category is a very sizable I think so.

Almost $9 billion.

Retail values, now and growing 200% underweight high.

Good margins above the average of the categories. So clearly a space, where we should be playing and that's how we're thinking about about this we see consumer trends that favor that this category will continue to grow in its current form or with new innovation.

So that's why we decided to participate.

Our first entries with mountain Dew and mountain Dew is going to be a flavor malt beverage.

No no <unk> I think.

It will be a differentiated flavor.

They're very unique brand. So I think we can carve out our own space in that in that.

Relatively crowded market and we will take it from there obviously, we have a pipeline of ideas that we will be disclosing as we as we go.

We will take our next question from Kevin Grundy with Jefferies.

Hey, good morning, everyone and congratulations on the strong result.

Ramon I wanted to ask you about the decision to sell the the juice business is in the sort of overall satisfaction with the portfolio. So the drop business of course has been with the company for but not mistaken over over two decades. You go back over the years you know the Quaker business has had a nice balance I think theres been some discussion in the marketplace about a potential divestiture.

There from time to time, maybe you could just sort of walk us through the decision to sell the juice business what went into it can you maybe comment on the preliminary thoughts on uses of the proceeds when the deal closes and then remote just broadly overall satisfaction and potential other areas of divestiture. Thank you.

Yeah, Kevin Good morning, listen I think we've been looking obviously at our portfolio since I started with you on the team and we've added.

Some assets to the company in high growth spaces long term.

We've added assets in Africa was added assets in.

China was added assets here in the U S and allow us to grow into new spaces are already at a day rate or energy or healthier snack. So.

Hey.

Some decisions over the last few years to add assets that will give us accelerated growth at the same time, we've been looking at other parts of the portfolio, where you know.

Probably the long term growth in the long term margin creation is less exciting and in that context is where we see the juice is a good business.

But it's probably not a business that we think we can grow at this speed and with the margins that we're gonna grow Pepsico overall, and that's why we decided to make this.

Decision, we found a great partner in <unk>, they have very good experience.

With previous similar partnerships with other large food companies, we believe we have.

A way for these JV that we're creating to continue to create synergies on the operational side for the juice business.

To innovate and make sure that our brands because we are going to be 40% of that JV.

Continue to thrive and compete in a better way that they would probably do.

In our portfolio.

A lot of choices, where to invest and where to focus.

Kevin.

Logic behind this.

Now if you can tell you about more of the financial bar and which is also very attractive I would say, yes, Kevin no change to what we had previously communicated on use of proceeds.

Number one will you use it to reduce debt, obviously were losing some EBITDA. So we'll adjust our debt levels to reflect that.

Number two is we have been we will use the funds to invest in organic capex back into the business.

Obviously it begs the question and I can see where people might go into what does it mean for share repurchase in 2022.

And the answer is we will talk about share repurchase in February on on all of that to me. That's a broader question on guidance, so, but I don't know that questions out there. So wanted to at least say, we'll deal with that when we get to 'twenty two.

We will take our next question from Wendy Nicholson with Citi.

Hi, and my question is a follow up but not not specifically share repurchases. This year a sense of what you said you wouldn't be buying back as much stock because you wanted to invest.

And some of the acquired businesses and I have two questions on that number one we haven't as of the nine months seen capex actually ticked up meaningfully so and I'm wondering what sort of the investments you are making is it still capex to come in some of those acquired businesses. But also you cited those acquired businesses as being a primary <unk>.

Reasons for your gross margin erosion in the quarter and I'm wondering how long that will persist.

Those businesses just structurally lower gross margin do you think that's going to be something in perpetuity or are there things you can do either pricing or restructuring wise to get the gross margins in those acquired businesses.

Yeah Wendy.

Address both of those questions.

Regarding the investments.

I think the indication was that we're going to invest broadly back in the business not just specifically into those acquired businesses as it relates to Capex clearly they are a part of that mix, you're absolutely right, but but it was a broader comment about around capex.

And you know Capex is at a higher sustained level than it was perhaps a few years ago as we're driving a faster rate of growth in the company and making our supply chain more resilient as well so.

Think from that standpoint.

<unk> are pretty consistent with what the strategic intent that we had articulated a bit earlier.

Regarding the.

The balance of.

We wish them internationally.

In terms of the international M&A piece.

We're through the.

The overlap period, the biggest driver on that obviously it was pioneer to some degree via Curie as well, it's the lower gross margin business.

We really are through that as of the end of the second quarter. So that's not an impact in in mixing our margins down any further.

We're past that as of the Q3 results.

We will take our next question from Nik Modi with RBC capital markets.

Yeah. Thanks, Good morning, everyone. Ramon I was hoping you can comment on just general strength in packaged beverage I mean, I think all of us have been pretty surprised by the strength, especially with all the pricing in the marketplace. So I was wondering just from a consumer insight standpoint, what do you think is driving that despite the mobility improvement.

Yes.

Yes, clearly the categories.

Very healthy.

Across the World, obviously the U S.

Western Europe, but also in developing markets.

We're seeing obviously.

The away from home business picking up.

<unk>.

We are seeing.

In Q3 or.

Away from home business is 90% indexed to <unk>.

<unk> 19, it keeps going up with every month that goes by so.

Clearly that's a very positive sign now.

Our convenience store business continues to do very well and as consumers are having higher mobility.

The remarkable thing is that the in home consumption continues to be quite high.

So consumers are not are still using the homeless a hub and continue to entertain at home and continue to do more things at home and that's driving additional consumption at home versus the previous 1919 level. So.

I think we're in a very good plays where consumption at home is higher.

Sanction on the go is increasing.

And most of the channels.

Foodservice business are picking up so pretty good momentum we expect.

Those strengths to continue for a while and we've seen that consumers have changed some of their habits from what we're reading in our insights and we think that the beverage category is in a.

In a very positive situation for the for the upcoming future. We see the same with snacks by the way so.

The snack business, which is obviously a big part of our.

Growth in sales and profit, we see that category very.

Very consistent across the world and it was during the pandemic. It is now.

It's growing very fast.

At base.

As consumers are gaining mobility as well so I think as I said at the beginning are two categories, where we operate.

Significantly higher than the food and beverage categories overall.

That is a <unk>.

Vantage that we have as a company as we play into categories. There from the consumer point of view a very preferred here.

Our next question comes from Robert <unk> with Evercore.

Great. Thank you very much and apologies.

If somebody asked this my phone dropped for a few minutes, but I was wondering if you can give us a any kind of update.

And in terms of yourself shelf space and in North America on beverages.

There was obviously resets.

<unk> were delayed in 2020, we've had some this year.

And particularly on the C store side, where I think.

You were really focused on improving your position there with the energy drink offerings. Thank you.

Great.

Yes listen.

We'll go into a lot of specifics.

It's widely available information that I would say that.

We're gaining space.

Both inconvenience.

Saying he was at <unk> and we.

States to gain additional space not only for our energy business back.

Making sure that our innovation was incremental in space, that's what really makes a difference in the overall output of the company.

We have if you can.

Think about the other variable, which is secondary displays or overall inventory on the floor.

Because we've had some supply chain constraints in some of our products.

We've pulled back on some of the inventory on the perimeter during the summer.

Voluntarily I would say.

Just to make sure that we were able to service the customers at the right level.

That's something temporary that obviously, we will.

We'll push back as we are as we improve our.

Reliability of the supply chain.

Nearly is.

It's a positive.

Positive element I would say of our of our mix of our topline growth the additional space, there, where we're driving for both our beverages and snacks that grows if it goes all the channels, that's where we see the value of our push model toward DSD is really helping us to execute with precision and not just muscle that we're putting more and more into.

<unk>, where we drive this space, how do we execute that space and how all of the positive.

Feedback loop that we created with our.

People on the ground our associates on the ground to make that a.

A differentiation for our company.

Well take our next question from Stephen powers with Deutsche Bank.

Hey, thanks.

Going back to the topline remote.

Look across the strength.

Cross your emerging market business is I wonder if there's anything you could.

Speak to in terms of where that strength is coming from from a channel perspective.

Whether it's balanced and whether youre seeing outside strength, perhaps in places where you may not expected when the year began.

And I guess, if that answer varies of all by key market those insights would be helpful as well. Thanks.

Yeah, Steve a couple of things I would say.

Especially specifically to develop new markets, we're seeing a.

Higher mobility that we were expecting earlier in the year. So we've seen maybe we're a bit conservative as we were planning the year in terms of how it would impact some of the developing markets clearly.

Consumers have found ways to increase their mobility on going back to their routines of work or school or whatever so.

It's helped us the other thing we've seen positives as I mentioned earlier is that the elasticity to pricing has been better than we had initially.

Our models as well so we're seeing consumers.

Staying with our brands better I think Thats, a consequence of the investments we've been putting in our brands and the way we're executing our pricing decisions are much more informed by data and granularity and we were able to execute different strategies by channel by brand and very in very nuanced way I think those two elements are.

Reducing the elasticity impact on our on our business and making our international business I think more and more competitive and thriving in the majority of the markets. So those two will be the elements, Steve if I, if I had to single out.

Whats being differential versus our original estimation.

And Steve just to add to Ramon to answer with a few numbers.

Overall DNA markets were up 19%. So we saw good strong growth across DNA.

And then some of the biggest markets for US, Brazil, Russia, India, China, and Mexico were all up either in the teens or 20%. So so very broad based growth across all of the big key.

D in a markets for us.

And we will take our next question from Kumar.

<unk> <unk> with credit Suisse. Your line is open.

Everybody. Good morning can we would you guys mind, giving us an update on soda stream. Obviously you owned it for a comparative time, you're mentioning it a bit more now it feels extend them. It could have been Ah Ah moment that really very structurally changed with the feature of this business might look like so maybe just starting with how big is it now.

With household penetration looking like and perhaps some of your plans there I think that'd be useful thank you.

Yeah, Let me let me take.

Going to the specifics.

But clearly the business has.

As we continue to invest in that business.

Very successful and is a key strategic.

Drivers of our future growth as a company.

In terms of.

The performance I would say, we keep gaining penetration and what other core markets core markets being essentially Europe, Northern Europe and Canada.

In the U S and parts of the U S. Certainly penetrate household penetration is increasing retention of those of those.

Households is improving.

Few things, we're doing is structurally with that business that I think will even accelerated growth. One is we're building a direct to consumer.

Our business with solid stream that is very relevant as it gives us a lot of first party data and it allows us to have a lot of individuals connection with consumers understand their behaviors and we've added weekend we can.

New products and we can also in.

Increase the switching.

The lifetime value of those consumers. So that's one big driver the other thing we're doing especially in.

In Europe.

We're putting our brands in this other street models, so we're giving consumers the opportunity not only to drink sparkling water back to the <unk> sparkling water.

Best refer flavors, and the best brands or their favorite brands.

Bubbly bid.

<unk> <unk> whatever.

International market, so thats, a big driver of the.

How we think we can increase the lifetime value of those households, and generate additional additional value. If you think about the or.

Positive commitments and how we've seen we can change the.

The footprint environmental footprint of our categories saw their stream is a big driver.

All of that of that future consumption model.

We will take our next question from Sean King with UBS.

Great. Thanks for the question.

Just a question about energy drinks I guess you mentioned in the in.

In the 10-Q seeing double digit volume growth not necessarily what we're seeing in the Nielsen data is that how youre defining the category or just channels that were not that we're not capturing in the tracked channel data.

Okay.

Yes, Sean I think it's the latter it's more channels that were youre not capturing in the Nielsen data. Obviously energy is is big in.

The unmeasured CMG channel and given the DSD strength that we have.

We probably over indexed in those channels. So you're just not seeing the data relative to what we have.

Great. Thank you very much.

And our final question comes from Chris Carey with Wells Fargo.

Hi, Thanks, so much just a bit of a higher level question that relates to prior answer is can you just maybe discuss how positive is going to shape. This.

Portfolio over the longer term I mean, clearly Tropicana had financial aspects as you noted right.

Other concepts such as health and wellness that are clearly relevant.

Clearly a desire to scale businesses with no single use packaging, but obviously, that's counter too much of your business today.

I imagine, there's pushes innovation stream, even more into health and wellness.

So I guess the question is just out.

Positive is going to shape this portfolio over the longer term beyond just what are obvious financial considerations of some of your recent transactions. Thanks, so much.

Yes.

I mean, there are three pillars to paucity of one of them is precisely on the portfolio of positive choices and I think you could envision visualized as multiple vectors. One is yes, we want to make sure that our products current products are much better so imagine.

That's a mistake ladies for example, you should imagine lays continuing to have this.

Same great taste that having the lowest sodium levels in the market and being being coped with the with.

With the best.

Cooking oils, I mean that is our commitment when it continued to review.

Stacy and products in.

Better in better, let's say nutritional forums now you should also imagine new consumption models they were saying.

Gatorade in Orange.

<unk> tablets, that's clearly better for the done it and probably easier for consumers as well.

Think about southern stream as a consumption model or you should think about sort of extreme professional in the offices. So we move consumption too.

Refillable reusable models.

And then you should also think about innovation in a way that we.

The range of the consumer products that are better for the consumer a better product line for example.

The model <unk>.

We're adding <unk> stores Max portfolio mediums are.

We used it can be used to cover crops that clearly impact better agriculture, but at the same time, our nutritional to consumer fees and others.

You'd think about.

Innovations like we were working on with our beyond meat.

Meet partnership where we're going to have.

Protein solutions that are none from animals and therefore.

We'll be better for consumers and better for the planet. So multiple levers of how we're planning to evolve the portfolio with a lot of emphasis on making our current portfolio, which is beautiful.

In a more let's.

Let's say meretricious innovating in new consumption models and also innovating in new platforms that will be better for consumers.

Better for the client that's how you should be utilized.

<unk> of the portfolio.

In the coming years.

So thank.

Thank you everybody.

Body for your.

Question is on your engagement and and for your confidence that you've placed in us with your investments and we wish you all.

Stay safe and healthy and look forward to our next interactions. Thank you.

This does confirm.

This does conclude today's pepsico.

Quarter, three 2021 earnings conference call you may disconnect at any time and have a wonderful day.

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Good morning, and welcome to Pepsico's 2021 third quarter earnings question and answer session. Your lines have been placed on listen only until it is your turn to ask a 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.

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

The COVID-19 pandemic on our business.

Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today October 5th 2021 and we are under no obligation to update when discussing our results we refer to non-GAAP measures, which exclude certain items from reported results.

Joining me today are pepsico's, chairman and CEO, Ramon Laguardia, and Pepsico's, Vice Chairman and CFO John <unk>.

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

Hey, good morning, guys.

We're in there we should see very strong.

Topline results again here in Q3 and for the full year, you don't expect to 8% organic sales growth.

Would be the best result, we've seen in recent history. So can you just discuss some of the key drivers behind the recent acceleration in top line growth how sustainable. They are as you look out longer term and then also just near term are you confident you can sustain that mid single digit organic sales growth in line with the long term algorithm, particularly as maybe you can.

Catch up on supply or as we look specifically at 2022, you know could there be some risk as you cycle. These difficult comparisons from 2020, what how you guys think about that conceptually it would be helpful.

Yeah, Hi, there good morning.

Yes, listen I think we're very pleased with the.

With the performance of the business overall.

I think it's driven by.

Got it worries are healthy both our beverage and food categories snacks categories are growing faster than them.

Sweet and beverage overall in the U S, but globally so.

We're playing in categories that are doing.

Doing very well I would say dynamic now.

We are exiting.

Pandemic in many markets around the world. So that's one thing the other component of our success is I think we're becoming much more competitive as it grows both our categories in most of the markets, where we operate and that's been a consequence of the investments we've been making in the brands.

Pretty good innovation.

Obviously the investments we've made in our go to market capacity.

Ability is talent everything else will be talking to you for the last couple of years. So we're seeing the.

The momentum across the business and.

We're seeing that momentum continuing into.

The buyers of the year, that's why we are.

Elevating our guidance for top line and we've seen that that momentum will continue.

Well into the <unk> into.

Each of the 2022, thank you.

Good afternoon, gentlemen, what parts of the question.

Specifically on 22, and I know obviously there is there is always going to be watching questions on that end.

Historically, you've been with us for a long time.

Typically don't talk about the following year until we get to February but given the level of question and given the level of volatility.

I think we thought it was prudent at least to get some indication of where we are on on 22.

In short, we expect our organic revenue growth in our core constant currency EPS growth.

To be in line with our long term objectives in 2022.

No thats going to sort of create a lot of additional questions and candidly, we're not ready to get into all of the details of that because frankly, we're still early in our planning process, but I think we can say with confidence that we expect both revenue and core EPS core constant currency EPS to be in line with our long term objectives for 'twenty curious so hopefully that gives everyone.

Some level of comfort that as we emerge from Q4, where merge with a lot of momentum in the top line as well as a business that is.

Got it supply chain, while managed and on good footing to deliver another good year next year.

Thanks very helpful.

And we will take our next question from Bonnie Herzog with Goldman Sachs.

Alright. Thank you good morning, everyone.

I guess I have a bit of a follow on question as it relates to top line.

I think Ryan on innovation.

We're hearing from some of our industry contacts that you know your innovation pipeline for next year.

From what we've seen and what we've learned it looks very robust. So just love to hear some color from you in terms of you know.

If you are in fact stepping up.

Significantly you know versus prior years and you know.

I think you're going to need to also step back here.

Spanish to really support that.

That pipeline and ensure that these are innovations really get the support they need and the bottom RK. Thanks.

Thank you Bonnie.

Well, it's good that you are hearing from our cash generation that innovation is good it's always a good feedback.

Lisa.

It's more seriously I think we've always seen innovation is a key driver of our competitive advantage in the marketplace and we've been investing a lot in R&D, we invested a lot in insights and connect them better I think insides with R&D and the whole commercial execution to that too.

Get the maximum return on innovation. So I think the machine is is ready.

It keeps getting better year after eight years out.

As our pipeline is strong I would say our pipeline in 2021 was very strong as well and we're seeing the return from that from that innovation across it. We're all we're trying to be much more local much more.

Midterm or lunch or much more incremental in the way, we think about a lot of innovation. So yes.

When it comes to the investment behind the innovation I think we have the right level of A&M and Bonnie.

In our business to support innovation in a big way and he is not on the A&M, but as you know we have a very strong push them that allows us to give innovation a lot of visibility and separated from the rest of the.

The category and make sure that the trial levels are higher than ever before.

So I would say yes.

There will be a strong innovation across beverages and snacks, we think it's going to be quite incremental.

We think we have the right level of resources to support that innovation within our current algorithms.

Would not expect.

Higher A&M in the next year.

Thank you.

Our next question comes from Andrea Teixeira with Jpmorgan.

Thank you and good morning to all I just wanted to go back to the balance of cost supply chain and labor.

In the prepared remarks, you did talk about those off obviously, that's no surprise to anyone but it was a 14 percentage point impact on EBITDA.

And I and I understand that your cost inflation that had been running around the mid single digits.

And sites and as such I think like the pass and Youre, having to pricing coming through also in the fourth quarter.

I strongly so should we read the EPS flow of $5.47 of a fraction of those of increase I E. M. You said and not necessarily for 2022, but perhaps you are not going to flow all of the upside that we saw so find a year into the EPS for the year just because of these.

These investments.

I just said you are quite strong 2022 is that the way we should read.

Yes Andrea.

Good question.

I think I would think about it this way obviously, we've given you some pretty specific guidance in terms of where we expect EPS to land for Q4.

You know that we forged by six to nine months those hedges that we had in the beginning of the year are starting to roll off and new ones that are in place are higher cost.

Some of that pricing.

Curt in the summer much more of it is occurring in the fall in the beverage business and substantially.

All of it for 2021 in the snack food business is occurring really as we speak during during these weeks right now.

You also know that we forward buy.

That six to nine months out so we will have a better handle on where exactly 2022 costs are going to land as we get into the first quarter of 2022, and I would expect us to price a bit more to be reflective of some of that that sort of finalization of costs.

During the course of 2022 so.

Q4.

Some of the pricing coming through the balance of it coming in in Q1 of 2022 and the EPS guidance is reflective of all of that.

Great. Thank you I'll pass it on.

We will take our next question from Lauren Lieberman with Barclays.

Great. Thanks.

Just to follow up on that I mean that.

Can you comment on <unk>.

Forward by six to nine months until you have more visibility to get that in the first quarter on our cost base.

That suggests a lot of pricing.

I was hoping you could just comment on elasticity, whether what you're seeing in terms of your your models, if you're seeing less elasticity than traditionally because the innovation has been so strong.

Tough to really get a range because of all of the COVID-19 comparisons that are flowing through consumer behavior right now, but I'm curious on the elasticity piece because it does imply a lot a lot of pricing. Thanks.

Yes.

I'll take I'll take a first go at this and then maybe you can add some more comments, what we're seeing across the world is much lower elasticity in the pricing that we've seen historically.

And that applies to developing markets.

Western Europe, and the U S. So across the world the consumer seems to be.

Looking at pricing, a little bit differently than than before it could be several hypotheses I think in our case, our brands are stronger and I think our innovation is stronger as you were saying so that could be a factor that could be also some behaviors as consumers are shopping.

Faster in store and they might be paying less attention to pricing as a decision factor in there it might be even more relevant to the brands or brands that they feel more.

Closer to a more.

Yes, I would say closer more and more emotionally attached to it as our brands. So we're seeing less elasticity.

Adjusting our models.

As we go and that's obviously informing our decisions as we price.

Patterns of the year and into 2022.

Yeah.

And we will take our next question from Bryan Spillane with Bank of America.

Hey, good morning, everyone.

My question My question is around.

EMEA and APAC and.

If we look at the year to date.

Profit contribution from those two segments, it's contributing about a quarter of the of the operating profit just incremental dollars right. If you look at it on a currency neutral basis.

<unk> got a pretty healthy gap right on currency neutral operating profit growth versus what the currency neutral organic sales growth and so.

I guess my question is just are we at a point in those two segments were.

There is enough scale, where you can really start to see a sustained.

Margin improvement and profit contribution to the total.

Going forward or is there something just sort of unusual in that.

In the near term, that's just driving those margins.

I think Brian.

Two hypotheses are valid I think there is a lapping effect, so, especially EMEA last year suffered a lot.

Given its.

As geographies so India.

Stan.

Middle East and Africa, clearly they were challenged last year. They are coming back is it is a very beverage focused business clearly it was more impacted by the COVID-19 mobility restrictions. So we're seeing we're seeing those visits coming back and we have high high scale and we have high share.

Of those markets.

Advertising and marketing is doing very well so far.

Part of that is lapping.

The second question on scale.

Scale is getting obviously every year you see that growth level on the top line, we're get into his pay levels there.

Pretty good in many of the critical markets in that in that region and Thats, giving us obviously.

The opportunity to do better in the marketplace and the flow through is also stronger so.

There is a war for talent in that part of the world.

Where we're a scaled company that does a good job with developing talent in that part of the World and then obviously our go to market being being very strong we have very good modelers and whenever we have our own operations, especially this was business. We're also investing in digitalization and everything that goes.

With being more precise and more agile.

Hopefully I'm answering in both the short term, but also more especially for me the long term of how we see that part of the world.

And we will take our next question from Murali <unk> with Guggenheim.

Hey, good morning, everyone and congrats on a strong quarter and that very vertically environments.

Thank you Laura.

Talking about innovation and it's great to see you leading the company pushing to usual boundaries. So during the quarter you announced a partnership with the Boston Beer company to introduce a mountain dew.

The U S. So the question is not so much about the potential of that initiative, but more.

On the route to markets you decided to choose so we'd like to understand why you decided to create your own distribution rather than rely on the Boston beer wholesaler network.

Are these the end game here and by extension you are stretching out a corner here in the U S and internationally. Thank you.

Thank you Don.

We have a good partnership with <unk>.

Boston Beer company and.

They have the R&D and the knowledge in the space that we don't we have the brand.

As a mountain Dew I think it will play very well in that space. It will be quite differentiated in terms of the flavor profile and the emotional connections.

That's how we're thinking about it in terms of that first step into these market.

From the distribution point of view.

We think we have.

An opportunity to create a.

A distribution system in the U S that is quite unique in the sense that it would be an integrated distribution system that can make coordinated decisions are ground mount across multiple states for one decision point and that could be.

Competitively advantage.

We're starting with.

A number of states, where we had the license to operate.

And we will take it from there we feel optimistic with it would be very incremental you would help us with the drop size. It will help us with the economics of their routes eventually and within the same as what we're doing with the chilled distribution system that goes very catheter and a unique and it covers the whole country. We think we could eventually.

The.

Mission.

A distribution system that can be quite caterpillar and quite integrated on the low alcohol.

Our portfolio as well.

We will take our next question from Vivien <unk> from Cowen.

Hi, Yes, I was just hoping actually got to a follow up on on the hard Seltzer question. Please.

We have your impressions of the the overall category, it's obviously been incredibly contingence dead the decelerating trend.

And whether you at all discussed perhaps introducing mountain dew is that they can't cross sale as opposed to a hartzell chart because it does seem that that's where the consumer is moving.

Sure.

Yeah.

Our view on the category as you know, it's a very sizable AIDS almost $9 billion.

Retail value now and growing 200% underweight high.

Good margins above the average of the categories. So clearly a space, where we should be playing there and that's how we're thinking about about days, we see consumer trends that favor that this category will continue to grow in its current form or with new innovation.

So that's why we decided to participate.

Our first entries with mountain Dew.

Mountain Dew is going to be a flavor malt beverage.

Nadal said Sir.

I think it will be a differentiated flavor and we they're very unique brand. So I think we can carve out our own space in that in that.

Deeply crowded market and.

We'll take it from there obviously, we have a pipeline of ideas that we will be disclosing as we as we go.

We will take our next question from Kevin Grundy with Jefferies.

Yes.

Hey, good morning, everyone and congratulations on the strong result.

Yeah, Kevin good morning.

I think we've been looking obviously at our portfolio since I started with you on the team and we've added.

Some assets to the to the company.

High growth spaces long term.

We've added assets in Africa was out assets in.

China was added assets here in the U S that allow us to grow engineered space as value added dairy or energy or healthier snack. So we've made some.

Decisions over the last few years to add assets that will give us accelerated growth at the same time, we've been looking at other parts of the portfolio where you.

The long term growth in the long term margin creation is less exciting and in that context is where we see the juice is a good business.

That is probably not a business.

Is that we think we can grow at this speed and with the margins that we're going to grow Pepsico overall and Thats why we decided to make this decision we found a great partner in <unk>. They have very good experience.

With previous similar partnerships with other large food companies, we believe we have a.

A way for these JV that we're creating to continue to create synergies on the operational side for the juice business continue to innovate and make sure that our brands because we wouldn't be 40% of that JV continues to thrive and compete in a better way that they would probably do.

<unk> in our portfolio, where we have a lot of choices where to invest and where to software. So that's the.

Kevin.

Logic behind this.

Now if you can tell you about that.

More of the financial bar, and which is also very attractive I would say, yes, Kevin no change to what we previously communicated on use of proceeds.

Number one will you use it to reduce debt, obviously were losing some EBITDA. So we will adjust our debt levels to reflect that.

Number two is we have been we will use the funds to invest in organic capex back into the business.

Obviously it begs the question and I can see where people might go into what does it mean for share repurchase in 2022.

And the answer is we'll talk about your purchase in February on on all of that to me. That's a broader question on guidance, so, but I know that questions out there. So wanted to at least say, we'll deal with that when we get to 'twenty two.

We will take our next question from Wendy Nicholson with Citi.

Hi, and my question is a follow up but not.

Specifically share repurchases this.

This year a sense of what you said you wouldn't be buying back as much stock because you wanted to invest in.

And some of the acquired businesses and I have two questions on that number one we haven't as of the nine months seen capex actually tick up meaningfully so and I'm wondering what sort of the investments you are making is it still capex to come in some of those acquired businesses. But also you cited those acquired businesses as being a primary <unk>.

For your gross margin erosion in the quarter and I'm wondering how long that will persist are those businesses just structurally lower gross margin do you think that's going to be something in perpetuity or are there things you can do either pricing or restructuring wise to get the gross margins and that was acquired businesses.

Yeah Wendy.

Address both of those questions.

Regarding the investment.

I think the indication was that we're going to invest broadly back in the business not just specifically in into those acquired businesses as it relates to Capex clearly, Dave they're a part of that mix, you're absolutely right, but but it was a broader comment about around capex.

And you know Capex is that a higher sustained level than it was perhaps a few years ago as we're driving a faster rate of growth in the company and making our supply chain more resilient as well. So I think from that standpoint, the numbers are pretty consistent with the with the strategic intent that we had articulated.

A bit earlier.

Regarding the.

The balance of.

We lose them.

Oh in terms of the international M&A piece.

We're through the.

The overlap period, the biggest driver on that obviously it was pioneer to some degree be a cheery as well just a lower gross margin business.

We really are through that as of the end of the second quarter. So that's not an impact in in mixing our margins down any further.

We're past that as of the Q3 results.

We will take our next question from Nik Modi with RBC capital markets.

Thanks.

Yes.

Yes, clearly the categories.

Very healthy.

Crosby World, obviously the U S.

Western Europe, but also a developing market.

We're seeing obviously.

The away from home business picking up.

We are seeing.

In Q3 or.

Away from home business is 90% indexed to <unk>.

19, he keeps going up with every month that goes by.

Clearly that's a very positive sign now.

Our convenience store business continues to do very well as consumers are having higher mobility.

The remarkable thing is that they've when consumption continues to be quite high.

So consumers are not are still using the home hub and continue to entertain at home and continue to do more things at home and Thats driving additional consumption at home versus the previous 1919 level. So.

I think we're in a very good place where consumption at home is higher.

Junction on the go is increasing in most of the channels.

Foodservice business are big enough, so pretty good momentum we expect.

Those strengths to continue for a while and we think that consumers have changed some of their habits from where we're reading in our.

Insights and we we think that the beverage category is in a.

Very positive situation for the for the upcoming future, we see the same with snacks by the way so.

The snack business, which is obviously a big part of our.

Growth in sales and profits, we would see that category very.

Very consistent across the world and it was during the pandemic. It is now.

It's really not a very fast pace.

As consumers are gaining mobility as well so I think as I said at the beginning are two categories, where we operate.

Significantly higher than the food and beverage categories overall.

That is a <unk>.

<unk> that we have as a company as we play into categories. There from the consumer point of view very preferred here.

Our next question comes from Robert <unk> with Evercore.

Great. Thank you very much and apologies.

If somebody asked this my phone dropped for a few minutes, but I was wondering if you can give us a any kind of update.

In terms of yourself shelf space and in North America on beverages.

There was obviously a resets were delayed in 2020, we've had some this year.

And particularly on the C store side, where I think you know.

You were really focused on improving your position there with the energy drink offerings. Thank you.

Great.

Yes listen.

I won't go into a lot of specifics.

It is widely available information that I would say that.

We're gaining space.

Both inconvenience.

Saying he was at <unk>.

That states to gain additional space not only for our energy business.

Making sure that our innovation was incremental in spades is thats, what really makes a difference in the overall output of the company.

We have if you think about the other variable which is secondary displays or overall inventory on the floor.

Because we had some supply chain constraints in some of our products.

Pull back on some of the inventory on the perimeter during the summer.

Voluntarily I would say.

Just to make sure that we were able to service the customers at the right level.

That's something temporary that obviously, we will.

Bush back as we are as we improve our.

The reliability of the supply chain, but it clearly is a.

Positive.

It is element I would say of our of our mix of our topline growth the additional space, there, where we're driving for both our beverages and snacks across if it goes all the channels, that's where we see the value of our push model, where DSD is really helping us to execute.

With precision and not just muscle that we're putting more and more intelligence and where we drive this phase how do we execute that space and how all of the positive.

Feedback loop that we created with our.

People on the ground our associates on the ground to make that a.

Differentiation for our company.

Well take our next question from Stephen powers with Deutsche Bank.

Yeah, Hey, thanks.

Going back to the topline remote as you as you look across the strength across your emerging market business is I'm wondering if there's anything you could.

Speak to you in terms of where that strength is coming from from a channel perspective.

Whether it's balanced and whether youre seeing outside strength, perhaps in places where you may not expected when the year began.

And I guess, if that answer their ease of all by key market those insights would be helpful as well. Thanks.

Yeah, Steve a couple of things I would say.

Especially specifically to develop new markets, we're seeing a.

The consumers have found ways to increase their mobility on going back to their routines of work or school or whatever so.

<unk> helped us the other thing we've seen positive as I mentioned earlier is that the elasticity to pricing has been better than we had in initially.

Models as well.

We're seeing consumers.

Staying with our brands better I think Thats, a consequence of the investments we've been putting in our brands and the way we're executing our pricing decisions are much more informed by data and granularity and we were able to execute different strategies by channel by brand in very in very nuanced way I think those two elements are in are reduced.

The elasticity impact on our on our business and making our international business, I think more and more competitive and thriving in the majority of the markets. So those two will be the elements, Steve if I, if I had to single out.

Whats the.

Being differential versus our original estimation.

Steve just to add to Ramon to answer with a few numbers.

Overall DNA markets were up 19%. So we saw good strong growth across DNA.

Then some of the biggest markets for Us, Brazil, Russia, India, China, and Mexico were all up either in the teens or 20%. So so very broad based growth across all of the big key DMA markets for us.

And we will take our next question from Kumar.

<unk> <unk> with credit Suisse. Your line is open.

Everybody. Good morning can we would you guys mind, giving us an update on soda stream. Obviously you owned it for a comparative time, you're mentioning it a bit more now it feels it's pandemic could have been Ah Ah moment that really very structurally changed.

The future of this business might look like so maybe just starting with how big is it now with household penetration looking like and perhaps some of your plans there I think that'd be useful. Thank you.

Yeah, Let me let me take.

We can go into the specifics.

But clearly the business has.

As we continue to invest in that business.

Very successful and is a key.

Strategic.

Drivers of our future growth as a company.

In terms of.

The performance I would say, we keep gaining penetration and what are the core markets core markets be in central Europe Northern Europe.

<unk>.

In the U S and parts of the U S. Certainly penetrate household penetration is increasing retention of those <unk>.

Those households.

Households is improving there.

Few things, we're doing is structurally with that business that I think will even accelerated growth. One is we're building a direct to consumer.

New products and weekend also.

Inquiries.

Which are the lifetime value of those consumers. So that's one big driver the other thing we're doing especially in <unk>.

In Europe.

We're putting our brands in the salvage street models, so we're giving consumers the opportunity not only to drink sparkling water back to the sparkling water.

Prefer flavors and the best brands or their favorite brands.

Bubbly bid.

<unk> <unk> whatever in our international markets, So thats, a big driver of that.

How we think we can increase the lifetime value of those households, and generate additional additional value. If you think about the big positives.

Positive commitments and how we've seen we can change the.

Yeah.

The footprint environmental footprint of our categories saw their stream is a big driver of that of that future consumption model.

We will take our next question from Sean King with UBS.

Great. Thanks My question.

Just a question about energy drinks.

And the.

And the 10-Q being double digit volume growth.

Not necessarily what we're seeing in the Nielsen data.

That how youre defining the category or just channels that were not that we're not capturing in the tracked channel data.

Okay.

Yes, Sean I think it's the latter it's more channels that were youre not capturing in the Nielsen data, obviously energy is as big in.

The unmeasured CMG channel and given the DSD strength that we have.

We we probably over indexed in those channels. So you're just not seeing the data relative to what we have.

Alright, Thank you very much.

And our final question comes from Chris Carey with Wells Fargo.

Hi, Thanks, so much just a bit of a higher level question that relates to prior answer is can you just maybe discuss how positive is going to shape. It.

Portfolio over the longer term I mean, clearly Tropicana had financial aspects as you noted right.

Other concepts, which has helped a lot in this area clearly relevant.

There's clearly a desire to scale businesses with no single use packaging, but obviously that's counter to much of your business today.

I imagine this pushes innovation seems even more into health and wellness.

I guess the question is just out.

How positive is going to shape this portfolio over the longer term beyond just what are obvious financial considerations with some of your recent transactions. Thanks, so much.

Yes.

I mean, there are three pillars to the paucity of one of them is precisely on the portfolio of positive choices.

I think you could envision visualized as multiple vectors. One is yes, we want to make sure that our products firm products are much better.

<unk>.

That's a mistake ladies for example, you should imagine lace continuing to have the same great taste that having the lowest sodium levels in the market and b being cooked we'd be at.

With the best.

Cooking oils, I mean that is our commitment and we continue to give you the best tasting products.

Even better a better let's say.

Nutritional forms now.

Could also imagine new consumption models, they were saying.

Gatorade in <unk> Oriental.

<unk> tablets is clearly better for the planet and probably easier for consumers as well.

Think about southern stream is that consumption model or you should think about sort of the stream professionally in the offices. So we move consumption too.

Refillable reusable models.

And then you should also think about innovation in a way that we.

The range of the consumer products that are better for the consumer and better for the planet for example.

More legumes.

We're adding legume storage snacks portfolio they games are.

Can we use it can be used to scarborough crops that clearly impact better agriculture, but at the same time, our more nutritional to consumer fees and others.

You should think about.

Innovations like we were working on with our beyond me.

Meet partnership where are we going to have.

<unk> solutions that are none from animals and therefore.

We'll be better for consumers and better for the planet. So multiple levers of how we're planning to evolve the portfolio with a lot of emphasis on making our current portfolio, which is beautiful.

In a more let's.

Say margaritaceous innovating in new consumption models, and also innovating in new platforms that will be better for consumers.

Better for the client that's how you should visualize.

<unk> of the portfolio.

In the coming years.

Joe Thank.

Thank you to everybody for your.

Question is on your engagement.

And for your confidence that you've placed in us with your investments and we wish you all to <unk>.

They are safe and healthy and look forward to our next interactions. Thank you.

This does confirm.

This does conclude today's pepsico.

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