Q1 2024 PepsiCo Inc Earnings Call
Operator: Good morning, and welcome to PepsiCo's 2024 first quarter earnings question and answer session. Your lines have been placed on listen only until it's your turn to ask a question. Today's call is being recorded and will be archived at www.pepsico.com. It is now my pleasure to introduce Mr. Ravi Pamnani, Senior Vice President of Investor Relations. Mr. Pamnani, you may begin.
Good morning, and welcome to Pepsico's 'twenty 'twenty four first quarter earnings question and answer session. Your lines have been placed on listen only until it is your turn to ask a question 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. Pat I'm, not even maybe begin.
Ravi Pamnani: Thank you, operator, and good morning everyone. 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 2024 guidance. Forward-looking statements inherently involve risks and uncertainties and only reflect our view. As of today, April 23, 2024, and we are under no obligation to update.
Pat: Thank you operator, and good morning, everyone. 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.
Ravi: We may make forward looking statements on today's call, including about our business plans and 2024 guidance forward looking statements inherently involve risks and uncertainties and only reflect our view as of today April 23, 2024, and we are under no obligation to update.
Ravi Pamnani: When discussing our results, we refer to non-GAAP measures that exclude certain items from reported results. Please refer to our first quarter 2024 earnings release and first quarter 2024 Form 10-Q, available on PepsiCo.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 Laguarta, and PepsiCo's Executive Vice President and CFO, Jamie Caulfield. 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. Thank you.
Ravi: When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results.
Ravi: Please refer to our first quarter 2024 earnings release, and first quarter 2020 for 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.
Ravi: Looking statements.
Ravi: Joining me today are pepsico's, chairman and CEO, Ramon like water and Pepsico as executive Vice President and CFO, Jamie Caulfield.
Speaker Change: 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.
Operator: Thank you. In order to ask a question or make a comment, please press star followed by 1 1 on your touchtone phone. One moment for our first question. Our first question comes from Dara Mohsenian with Morgan Stanley. Your line is open.
Speaker Change: Thank you in order to ask a question or make a comment. Please press star followed by one one on your Touchtone phone.
Speaker Change: One moment for our first question.
Speaker Change: Our first question comes from Dara <unk> with Morgan Stanley. Your line is open.
Dara: Hey, guys. Good morning, good morning.
Dara Warren Mohsenian: Hey guys, good morning. So, really strong international profit results for the third quarter in a row. Can you just take a step back, Ramon, and maybe give us some perspective on that international performance over the last few quarters? And A, just looking forward short-term, how confident are you in the sustainability of that and the balance of the year? But B, also just long-term, as you think about international development over the last few quarters, give us some perspective looking out over the next few years, both from a top-line perspective and in the Thanks.
Dara: Good morning, there so.
Dara: Strong international profit results for the third quarter in a row here.
Dara: Can you just take a step back Ramon and maybe give us some perspective on that international performance over the last few quarters.
Dara: Hey, just looking forward short term how confident are you in the sustainability of that in the balance of the year, but B also just long term as you think about international development over the last few quarters give us some perspective looking out over the next few years, both from a top line perspective, and then the margin flow through thanks.
Ramon Laguarta: Great. Thank you, Dara.
Speaker Change: Great. Thank you Dara and.
Ramon Laguarta: Yeah, we're very pleased with the performance of our international businesses in Q1 but also in the last few quarters, as you mentioned, and this has been an area of investment for us now for a few years, both in snacks and in beverages, trying to build scale businesses, you know, in most of the markets were, or the scale in terms of population and profitable growth. So I feel very good about our ability to continue to outperform our categories in international markets and to keep our categories growing, both food and beverages, in the future.
Speaker Change: Yes, we're very pleased with the.
Speaker Change: Performance all the international businesses in.
Speaker Change: In Q1 at bet about also in the last few quarters as you mentioned and this has been an area of.
Speaker Change: Of investment for US now for a few years.
Speaker Change: Both in snacks, and beverages and trying to build scale businesses.
Speaker Change: Yeah.
Speaker Change: And most of the markets were.
Speaker Change: Where the scale in terms of preparation and profitable growth. So.
Speaker Change: I feel also.
Speaker Change: Very good about our ability to continue to outperform our categories in international.
Speaker Change: And to keep our categories are growing above food and beverages and the year.
Speaker Change: In the future.
Ramon Laguarta: You know, our innovation is strong, our ability to understand local rituals and local food and beverage occasions is better than ever. We're adapting our portfolio to that. And our ability to attract the best talent in the markets where we participate and build really capable teams is better than ever. We've been investing in capacity where, you know, right now, we're in the process of opening factories in Vietnam, and in China, and in India, and in Mexico, and we just opened one in Poland.
Speaker Change: Our innovation.
Speaker Change: Is strong our ability to understand local.
Speaker Change: We chose our local.
Speaker Change: Food and beverage.
Speaker Change: <unk> is better than ever.
Speaker Change: We're adapting our portfolio to that our ability to.
Speaker Change: Attract the best talent in the markets, where we participate in and build really capable teams is better than ever.
Speaker Change: We've been investing in capacity, where right now we're in the process.
Speaker Change: Opened new factories in Vietnam, and in China, and in India and in there.
Speaker Change: In Mexico and in.
Speaker Change: We just opened one in Poland. So we keep expanding our our manufacturing and our go to market capabilities in those markets. So we feel good and I think that it was going to continue to be a big source of growth for us as we mentioned in Cagny.
Ramon Laguarta: So we keep expanding our manufacturing and our go-to-market capabilities in those markets. So we feel good, and I think that is going to continue to be a big source of growth for us. As we mentioned in Cagney, I think our international business is already $36 billion, and it's growing at a very high single-digit level, and with very good profitability. So it is part of the future growth story for PepsiCo, for sure
Speaker Change: Our international business already $36 billion and is growing at.
Speaker Change: Very high single digit level and with very good profitability.
Speaker Change: Is it is part of the.
Speaker Change: Are the future growth story for Pepsico for sure.
Operator: Thank you. One moment for our next question. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open.
Bonnie Lee Herzog: All right. Thank you. Good morning, everyone.
Alright. Thank you good morning, everyone.
Bonnie Lee Herzog: I had a question on Frito-Lay operating margins, which were a little soft in the quarter. So, I'm hoping you could talk through some of the key puts and takes on your margins in the quarter and then moving forward. And then, is it realistic to assume Frito-Lay's operating margins will expand in 2024? And I'm thinking about that in the context of, you know, the commodity cost pressures easing a bit. Or, you know, how do we think about, you know, your level of reinvestment as, you know, these cost savings, you know, maybe, you know, are in an effort to drive faster top-line growth? And then, ultimately, curious to hear if Frito-Lay margins can ultimately return to the low 30 percent range. And if so, you know, by when? How do we think about that? Thank you.
Bonnie Lee Herzog: I had a question on Frito lay up margins, which were a little soft in the quarter. So hoping you could talk to some of the key puts and takes on your margin in the quarter and then moving forward and then is it realistic to assume Frito Lay's op margins will expand in 'twenty, four and I'm thinking about that the con.
Bonnie Herzog: Tax of.
Bonnie Herzog: The commodity cost pressures easing a bit or how do we think about your level of reinvestment as these cost savings maybe.
Bonnie Herzog: In an effort to drive faster top line growth and then ultimately curious to hear if frito lay margins can ultimately return to the low 30% range and if so by win how do we think about that thank you.
James T. Caulfield: Hey Bonnie, it's Jamie. How are you?
Bonnie Herzog: Hey, Bonnie it's Jamie how are you.
James T. Caulfield: You know, on Fredo, when you look at the Q1 profit, the thing to keep in mind is last year we're lapping 24% growth in the first quarter of last year. I think we had 180 basis points of margin improvement last year and, you know, we don't want to push the P&L that hard, you know, that the growth last year, growth this year, part of that has to do with investment timing, the flow of productivity, but, you know, I think you'll see margin improvement over time at Fredo, but, you know, this is a business that has very healthy margins already and we want to make sure that we're investing back in the business to sustain growth.
Jamie Caulfield: On <unk> when you look at the Q1 profit the thing to keep in mind is last year, we're lapping 24% growth in the first quarter of last year I think we had 180 basis points of margin improvement last year.
Jamie Caulfield: We don't want to push the P&L that hard.
Jamie Caulfield: The growth.
Jamie Caulfield: Growth last year growth. This year part of that has to do with investment timing the flow of productivity.
Jamie Caulfield: But I think youll see.
Jamie Caulfield: Margin improvement overtime at Frito, but this is a business that has very healthy margins already.
Jamie Caulfield: We want to make sure that we're investing back in the business.
Ramon Laguarta: Yeah, Bonnie, on top of what Jamie said, for the long term... The key goal for Frito in the U.S. is to continue to grow the salty, savory category at a very high rate and continue to get locations from other parts of macro snacks into the savory category and from meals into the savory category and continue to gain share of that category as it has been doing, including in Q1. So that's the ultimate goal because if you think about the high margin that we have in that business and the impact it would have on the overall PepsiCo margins, that's the role that Frito-Lay has in the portfolio.
Jamie Caulfield: Sustained growth.
Speaker Change: Yeah, Bonnie it's India.
Speaker Change: Top of what Jamie said for the long term.
Speaker Change: Key.
Speaker Change: <unk> goal for Frito in the U S is to continue to grow the salty savory category.
Speaker Change: Very high grade and continue to get locations from other parts of micro snacks into into the savory and from meals into savory.
Speaker Change: And continue to gain share of that category as it has been doing.
Speaker Change: Including included in Q1, so thats the.
Speaker Change: Ultimate goal.
Speaker Change: Because if you think about.
Speaker Change: The high margin that we have in that business and the impact it would have in the overall Pepsico margins.
Speaker Change: That's the role that <unk> has in their portfolio.
Operator: Thank you. One moment for our next question. Our next question comes from Bryan Spillane with B of A. Your line is open.
Speaker Change: Thank you for.
Speaker Change: Our next question.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Bryan Spillane with Bofa. Your line is open.
Bryan Douglass Spillane: Thanks, operator, good morning, everybody.
Bryan Douglass Spillane: Thanks, operator. Good morning, everybody.
Bryan Douglass Spillane: Ramon I guess, a question on <unk> and specifically on Gatorade Mountain Dew.
Ramon Laguarta: Ramon, I guess a question on PB&A and, specifically, Gatorade and Mountain Dew. You know, the volumes are still weak. Gatorade was noticeably weak in the quarter. And so, can you just talk about, one, how much of the quarter might have been affected by the weather? And then, second, I guess, as we're thinking about volume recovery for the whole, for the enterprise at PB&A, just what's on tap for both Mountain Dew and Gatorade to stabilize the volume?
Bryan Douglass Spillane: Volume volumes are still weak data rate noticeably weak in the quarter.
Bryan Douglass Spillane: And so can you just talk about one how much in the quarter might have been affected by the weather and then <unk>.
Bryan Douglass Spillane: Second I guess as we're thinking about volume recovery for the whole for the enterprise at <unk>.
Bryan Douglass Spillane: What's on tap for both mountain Dew and Gatorade.
Bryan Douglass Spillane: Stabilize the volume trend.
Ramon Laguarta: That's good, Bryan. This isn't actually... We feel good about those two brands. Those two brands actually gained share in Q1. So Mountain Dew and Gatorade in their own category. So that's a meaningful, you know, good performance, I would say.
Speaker Change: That's good Brian.
Speaker Change: Actually.
Speaker Change: We feel good about those two brands those two brands actually gained share.
Speaker Change: In Q1, so mountain dew and Gatorade in their own categories.
That's a that's a meaningful.
Speaker Change: <unk> performed good good performance I would say.
Ramon Laguarta: Now, Gatorade, as you mentioned, has a little bit of weather impact. So, you know, we're not concerned about Gatorade this year. As the weather improves, I think we have the right investments, the right... Commercial Programs. Our G2DSZ was impactful to us last year operationally. I think we've learned a lot about how to deal with a very seasonal product and category and give better service to our customers and maintain the product in stock and available, so we feel good about we have the platform to take Gatorade to higher market share in a faster growing category now with regard to doing. The launch of Baja Blast has been very, very good for the brand.
Speaker Change: Now Gatorade is you mentioned a little bit of weather impact so.
Speaker Change: We're not concerned about Gatorade this year as the weather improves I think we have the right investments to ride.
Speaker Change: Commercial programs, our GTO DSD was impactful to us last year operationally I think we've learned a lot on how to deal with a very.
Speaker Change: Hi, seasonality product and category and give them better service to our customers and maintain the product in stock and available. So we feel good about we have the platform to take.
Speaker Change: Gatorade to too higher market share.
Speaker Change: In our faster growing category now.
Speaker Change: With regards to do.
Speaker Change: The launch of <unk> has been very very good to the brand we launched it as a permanent additional flavor to the portfolio early in the year it's been.
Ramon Laguarta: We launched it as a permanent additional flavor to the portfolio early in the year. It's been, you know, obviously successful. We knew it was a successful LTO, and therefore, it's a successful permanent product. And it's been bringing incremental consumers to the brand and helping us gain share now. Obviously, we will keep investing in the portfolio and the brand, and we have strong programs for the summer. Hopefully, that will deliver as we expect, and we'll continue to build Mountain Dew in the category. So I am feeling good about those two brands. Thank you.
Speaker Change: It's been obviously successful we knew it was a successful LTR and therefore as a successful permitting product.
Speaker Change: It's been bringing in incremental consumers to the brand and help us gain share it out.
Speaker Change: Obviously, we will keep investing in the portfolio and the brand and we have strong programs for the summer hopefully that will deliver as we expect and we will continue to build <unk> in the category. So feeling good about those two brands.
Operator: Thank you. One moment for our next question. Our next question comes from Lauren Lieberman with Barclays. Your line is open.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from Lauren Lieberman with Barclays. Your line is open.
Lauren Rae Lieberman: Great. Thanks, good morning.
Lauren Rae Lieberman: Great, thanks. Good morning.
Ramon Laguarta: In the prepared remarks, I noticed in the discussion of PB&A and plans to improve profitability there, there were two new bullets. The first two talked about de-emphasizing certain product and package combinations, and the second around revenue management and an increasingly precise consumer value proposition. So I was curious if you could just, I know there's new management for that business as well, so I would love to get a little bit more color maybe around those two points. It would be helpful. Thanks. Yeah, Lauren, I think so.
Lauren Rae Lieberman: In the prepared remarks, I noticed in the discussion of Pbms and plans to improve profitability. There there were two new bullets.
Lauren Rae Lieberman: The first two talking about deemphasizing certain products.
Lauren Rae Lieberman: Product and package combinations in the second around revenue management.
Lauren Rae Lieberman: An increasing increasingly precise consumer value proposition. So I was curious if you could just I know there is new management for that business as well, so we'd love to get a little bit more color maybe around those two points.
Speaker Change: That would be helpful. Thanks.
Ramon Laguarta: Yeah, Lauren, I think... The, I don't know, maybe we have..., put a bit more detail in, but the intentionality was always there. And I mentioned last time, on the last couple of calls, that we're making choices in PB&A in terms of making sure that we deliver profitable growth, and we'll continue to make those choices, emphasizing the parts of the portfolio where there is a better return on the investments for us, and, you know, eliminating those parts of the portfolio where the margins are not that attractive, and they're probably not going to get much better over time.
Speaker Change: Alright, I think.
Speaker Change: The.
Speaker Change: And then maybe you would have.
Speaker Change: Put a bit more detail, but the intention was always there and I mentioned last time. The last couple of calls that we're making choices MPV in a in terms of.
Speaker Change: Making sure that we deliver profitable growth and we will continue to make those choices.
Speaker Change: Emphasizing their parts of their portfolio were.
Speaker Change: There is a better.
Speaker Change: The return on the investments for us and eliminating those parts of the portfolio, where the margins are not that attractive and they're going to get probably not not that better over time. So.
Ramon Laguarta: So, you know, we've been referring to categories like back, you know, backwater, or, you know, some of the less profitable take-home formats where we will be making choices. We feel good about both the productivity at PB&A and the margin expansion of PB&A, and we feel that that will continue based on the ideas that we have and the organizational focus that the team has been putting under the new management but also the old management at PB&A. There's much more focus on becoming a better operating machine in the supply chain and sales and expanding margin, so we feel good about PB&A's margin expansion and profitable growth delivery this year.
Speaker Change: We've really referring to.
Categories like back.
Backwater or some of the less profitable take home formats, where.
Speaker Change: <unk>.
Speaker Change: We will be making choices, we feel good about both the productivity.
Speaker Change: <unk> and their margin expansion at <unk>, and we feel that that will continue based on the ideas that we have on the organizational focus that the team has been putting under the new management, but also the old management in PVA theres much more focus on becoming a better operating.
Speaker Change: The machine.
Speaker Change: And the supply chain and sales and expanding the margin. So we feel good about about <unk> margin expansion and profitable growth delivery this year.
Operator: Thank you. One moment for our next question. Our next question comes from Andrea Teixeira with JP Morgan. Your line is open.
Speaker Change: Thank you <unk> next question.
Okay.
Speaker Change: Our next question comes from Andrew <unk> with Jpmorgan. Your line is open.
Andrea Faria Teixeira: Hi, good morning. Thank you.
Hi, good morning, Thank you.
Ramon Laguarta: So, Ramon, if you can please comment on overall consumption, in particular for SNACs, and how consumer behavior has evolved in the context of your comments about normalization. And then some clarification for Jamie on the margin outlook. On the prepared remarks, you mentioned a more benign commodities environment, but that has recently changed, in particular for oil and looking at DSD, hoping to get some clarification on the diesel impact, or this is going to be further down and perhaps not even impacting 2024.
Andrew: Ramon you.
Andrew: Please comment on the overall consumption.
Andrew: And particular for its next and how consumer behavior evolved in the context of your comments about normalization.
Andrew: And then a clarification for Jamie on the margin outlook on the prepared remarks, you mentioned, a more benign commodity environment, but that has recently changed.
Andrew: Particular for Io and looking at our DSD.
Speaker Change: Hoping to get some clarification on the DSD impact this is going to be more further down.
Speaker Change: And perhaps not even impacting 2024. Thank you.
Ramon Laguarta: Yeah, so listen, uh, Andrea, hi, the, um... I would say that the consumer globally. We think it's very resilient, and we see it, as you saw from our international business performance, and it's basically supported by two facts, very low unemployment or quite low unemployment globally, and wages growing at a good pace in the majority of the countries where we participate. So those two things make us feel, quite good about the consumer. Now, when you double click, there are probably two areas that were, that probably surfaced.
Speaker Change: Yeah, so listen that Andre.
Speaker Change: I would say the consumer globally.
We think it's very resilient and we see it and as you saw from our international business performance.
Speaker Change: Got it.
Speaker Change: Basically.
Speaker Change: Buoyed by two facts, very low unemployment or quite low unemployment globally and wages growing at a good good phase in majority of the countries, where we participate so those two things make us feel.
Speaker Change: Quite good about the consumer now when you double click there is probably two areas that we're that.
Speaker Change: Debt.
Speaker Change: All of these surface one is Chinese consumers I think Chinese consumers are.
Ramon Laguarta: One is Chinese consumers. I think Chinese consumers are being very cautious, and we're seeing the savings rate really going very high in China. Our category is still resilient in China, but especially, we're delivering growth through share of market gains in China. So that's a good performance by the team, but an area to watch out for us.
Speaker Change: Being very cautious and we are seeing the savings rate really going very high in China.
Speaker Change: Our categories still.
Speaker Change: <unk> in China, but especially we're delivering growth through share of market of games in China. So that's a good performance by the team, but but an area of watch out for us. The other doubleclick is in the I would say the lower income consumer in the U S. The lower income consumer in the U S is stretched.
Ramon Laguarta: The other double click is in the, I would say, lower income consumer in the U.S. The lower income consumer in the U.S. is stretched, is making a lot of, and is strategizing a lot to make their budgets get to the end of the month. And that's a consumer that is choosing what to buy, where to buy, and making a lot of choices. That's a consumer that we're emphasizing in our commercial programs.
Speaker Change: Making a lot of.
Speaker Change: Is strategizing a lot too to make.
Speaker Change: Their budgets get through the end of the month and Thats a consumer that is.
Choosing what to buy where to buy.
Speaker Change: And making a lot of choices that's a consumer that we are emphasizing in our commercial programs I think we're learning how best to keep that consumer in our categories at the frequency that we want that consumer and we are.
Ramon Laguarta: I think we're learning how best to keep that consumer in our categories at the frequency that we want that consumer, and we're pivoting our commercial plans, our innovation, giving that consumer the right innovation, the right value at different parts of the month, through different channels, digital and physical, making sure that the ROIs on the investments are the best ROIs. So those two are the consumers that I would say we're paying more attention to in terms of specific commercial programs, but I would say the consumer is very resilient everywhere else, and our teams, I think, are pivoting to keep our brands top of mind in their baskets, at the frequency that we want, and continue to gain market share. So it applies to beverages and to snacks. Your question was more about snacks, but I think it applies to both categories. So now, Jamie.
Speaker Change: Building, our commercial plans are innovation, given that consumer they're right innovation the right value.
Speaker Change: In different parts of the month through different channels.
Speaker Change: <unk> and physical.
Speaker Change: Making sure that the Rois on the investments are the best Rois. So those two are the consumers that I would say, we're paying more attention in terms of.
Speaker Change: Specific commercial programs about I would say the consumer is very resilient everywhere else on our team.
Speaker Change: I think our people team to maintain our brands top of mind.
Speaker Change: Their baskets of the frequency that we won.
Speaker Change: And continue to gain market share so it applies to beverages and snacks. Your question one more it was more on snacks, Matt I think it applies to both categories to know Jamie.
James T. Caulfield: Yeah, and Andre, on commodities, really no change in the outlook. There are a couple of points I just want to emphasize. One is the diversity of the inputs in the basket, so no single commodity accounts for more than 10% of the total, so that diversification kind of smooths things out. And the other point I'd make is that we do tend to forward buy and hedge so that we've got good visibility for the year. That helps us with planning the business overall and so forecasting Q2 through Q4, still relatively benign inflation and not a lot of volatility in the rate of inflation quarter to quarter. Thank you.
Speaker Change: I'm very on commodities really no change in the outlook a couple of points I just want to emphasize one is the diversity of the inputs in the basket.
Speaker Change: Simple commodity accounts for more than 10% of the total so that diversification kind of smooth things out.
Speaker Change: And the other point I'd make is we do tend to forward buy and hedge so that we've got good visibility for the year that helps us with.
Speaker Change: Planning the business overall and so.
Speaker Change: Outlook Q2 through Q4 still relatively benign inflation and not a lot of volatility in the rate of inflation quarter to quarter.
Operator: Thank you. One moment for our next question. Our next question comes from Peter Grom with UBS. Your line is open.
Speaker Change: Thank you in a moment for our next question.
Okay.
Speaker Change: Our next question comes from Peter Grom with UBS. Your line is open.
Peter K. Grom: Thanks, operator. And good morning, everyone.
Peter K. Grom: Thanks, operator.
Peter K. Grom: And good morning, everyone. So Bryan Bryan I was hoping to get an update on that.
Ramon Laguarta: So I was hoping to get an update on the Celsius agreement and kind of just your broader energy drink strategy at this point. In the release, you spoke positively about the partnership. But I think there were some changes to the incentive structure, you know, a few weeks ago. So maybe first, just, you know, any thoughts on how the brand is performing as part of your energy drink portfolio, and then just like anything you can share in terms of what, you know, changes with the agreement, but maybe specifically, how does it really help Pepsi? And maybe, what benefit does it provide for Celsius, if anything?
Peter K. Grom: Lcs agreement and kind of just your broader energy drink strategy at this point in the release you spoke positively about the partnership but I think there were some changes to the incentive structure a few weeks back. So maybe first just any thoughts on how the brand is performing.
Your energy portfolio and then just like anything you can share in terms of what changed with.
Peter K. Grom: The agreement, but maybe specifically how does it really help Pepsi and maybe what benefit does it provide for Celsius if anything.
Ramon Laguarta: Thanks. Yeah, thank you, Peter.
Speaker Change: Yes, Thank you Peter.
Ramon Laguarta: We'll not talk too much about the agreement other than saying that it's... It's a good alignment of the long-term interests of both companies, and it's great for PepsiCo shareholders. The partnership with Celsius is strong, and it's helping us to gain scale in our go-to markets, specifically in some channels where we need volume to justify some of the economics of the call. So that role continues. We're pleased with the partnership. Energy is a fast-growing category, and it's profitable. That would be great for our portfolio. So that's what I would say. We remain pleased with the partnership, and we'll continue to build on the partnership going forward.
Speaker Change: We will not talk too much about the agreement other than saying that is it.
Speaker Change: It's a good alignment of the long term interest of both companies and integrate for Pepsico shareholders.
Speaker Change: Yes.
Speaker Change: The partnership with Celsius is strong and it's helping us.
Speaker Change: To gain scale in our in our go to market specifically in some channels were.
Speaker Change: We.
Speaker Change: We need volume to justify some of the economics of the cause of that draw continues we're pleased with the partnership.
Speaker Change: <unk> is a fast growing category profitable that is great for our portfolio. So that's what I.
Speaker Change: What I would say we remain pleased with the partnership.
Speaker Change:
Speaker Change: We'll continue.
Speaker Change: To build a partnership going forward.
Operator: Thank you. One moment for our next question. Our next question comes from Filippo Falorni with Citi. Your line is open.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Yes.
Speaker Change: Our next question comes from Philippa for learning with Citi. Your line is open.
Filippo Falorni: Hey, good morning everyone. So I wanted to go back to Frido, but on the top line trends. Clearly, you guys were cycling the toughest comp of the year in Frito-Lay. You mentioned you expect consequential improvement. So maybe you could talk about the volume trajectory, particularly for the business. And, Ramon, you spoke in the past about the cyclical nature of this shift toward smaller pack sizes. So maybe you can give us an update on that and also any potential impact from the reduction in SNAP benefits from last year. Thank you.
Philippa: Hey, good morning, everyone.
Philippa: So I wanted to go back to freedom, but on the top line trends.
Philippa: Clearly you guys were settling the toughest comp of the year in Sweden.
Philippa: Delay.
Philippa: You mentioned that you expect some sequential improvement. So maybe you could talk about volume trajectory, particularly for the business and Ramon you spoke in the past about.
Philippa: The cycling of the shift towards smaller pack sizes. So maybe you can give us an update on that and also any potential impact from cycling the reduction in snap benefits from last year. Thank you.
Ramon Laguarta: Yeah, I would say so. The Frito-Lay brand continues to outperform the category and the... As I said earlier... The big opportunity for Frito-Lay is to continue to create occasions for our savory category, bringing them from broader micro-snacks or, as snacks and meals overlap, how do we bring more categories towards, more occasions towards snacking? So those are the two big strategic objectives of Frito-Lay, and all our innovation and pricing and channel mix and everything else is against that large objective, and we do it faster than others so that we continue to gain shares.
Speaker Change: Yes, I would say.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Frito lay continues to.
Speaker Change: From the category and.
Speaker Change: As I said earlier, the big opportunity for Frito lay has continued to create locations for our savory category.
Speaker Change: Bringing them from broader macro snacks or as.
Speaker Change: Maxim meals overlap how do we.
Speaker Change: Bring more categories stores more locations stores, knocking so those are the.
Speaker Change: Two big strategic.
Speaker Change: Objectives of freely and all of our innovation and <unk>.
Speaker Change: Pricing and channel mix and everything else is against that large objective and do it faster than others. So.
Speaker Change: Although we continue to gain shares.
As we as we look at the business performance. As you said this is the toughest lap I think last year, we grew over 16% in Q1 and that the lab is still high in Q2, but then it gets much better than half two so we should expect.
Ramon Laguarta: So as we look at the business performance, as you said, this is the toughest lap. I think last year we grew 16% in Q1, and that number is still high in Q2, but then it gets much better in the second half too. So we should expect a gradual sequential improvement in our volume for Frito-Lay, especially in the second half of the year, and we'll continue to be the guardians of the savory category, make sure it's valued appropriately, and it generates growth for our customers ahead of what food generates for our customers, and we continue to capture a disproportionate share of that very fast-growing and profitable business.
Speaker Change: Gradual sequential improvement of our volume for Frito lay especially in the second half of the year.
Speaker Change: And we will continue to be the guardians of the <unk> category to make sure. It is.
Speaker Change: Its.
Speaker Change: Valued it properly and it generates growth for our customers ahead of what food.
Speaker Change: Generates for our customers and we continue to.
Speaker Change: Capture a disproportionate share of that of that vary.
Fast growing and profitable business.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from Camilo Guard your wallet with Jefferies. Your line is open.
Operator: Thank you. One moment for our next question. Our next question comes from Kaumil Gajrawala with Jeffries. Your line is open.
Camilo Guard: Thanks, Good morning, everyone just you.
Camilo Guard: You mentioned multiple times on gaining share within the category could you just give us some.
Camilo Guard: Multiple regions can you just give us some context on what the categories are growing or at least what maybe what they're expected to grow as you think about the next.
Kaumil S. Gajrawala: We, we. Yeah, I mean, like what I said is that our goal is always for our categories to grow faster than overall food and beverages. I think that makes us a very attractive partner with our retail partners, and we deliver growth for them, and our categories are profitable, so it's a good combination of growth and profitability for our customers. So that's what we're trying to do. I think our categories will continue to grow faster than food and beverages in the majority of countries around the world given the trends of urbanization and the secular trends that we've been talking about both for convenient foods and beverages.
Camilo Guard: Next year or so.
We.
Camilo Guard: <unk>.
Speaker Change: Yes, I mean like what.
Speaker Change: I would say is that our goal is always for our categories to grow faster than overall food and beverages I think that makes us.
Speaker Change: A very attractive part.
Speaker Change: <unk> with our retail partners and we deliver growth for them in our categories are profitable.
Speaker Change: It's a good combination of growth and profitability for our customers. So that's why we're trying to do I think our categories will continue to grow faster than food and beverages in the majority of the other countries around the world given the trends on your organization and the secular trends that we've been talking about both for us.
Kaumil S. Gajrawala: So we feel good about that, and our commercial programs, innovation, and investments are to deliver that for our partners. Obviously, there are countries around the world where we do better, others where we do less well, and our goal is to keep emphasizing the ones we do better and improve the ones that we don't do so well, and that's how we run the company.
Speaker Change: Convenient foods and beverages, so we feel good about that and our commercial programs innovation and.
Speaker Change: <unk> investments are in to deliver that for our partners.
Speaker Change: Obviously, there is countries around the world, where we do better others.
Speaker Change: Where we do less well.
Speaker Change: Our goal is to keep emphasizing the ones, where they will do better and improve their ones that we don't do so well.
Speaker Change: And that's how we're how we're managing the company.
Ramon Laguarta: Thank you. One moment for our next question. Our next question comes from Robert Moskow with TD Cowen. Your line is open.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Robert Moskow with TD Cowen Your line is open.
Robert Bain Moskow: Hi, thanks for the question. The 4% price mix benefit in Frito-Lay North America is pretty impressive in a food industry where there's just not a lot of price left. And I imagine a lot of it is from price pack architecture, or maybe even consumers shifting to different pack sizes. Can you help delineate a little bit more, like which of those is driving it more than the other, or if it's about the same? And how do you expect it to evolve for the rest of the year? Do you expect it to be pretty constant?
Robert Bain Moskow: Hi, Thanks for the question.
Robert Bain Moskow: The 4% price mix benefit in Frito lay North America is.
Robert Bain Moskow: Pretty impressive in a food industry, where theres just not a lot of pricing left and I imagine a lot of it is from price pack architecture, or maybe even consumers shifting to different.
Robert Bain Moskow: Different pack sizes.
Speaker Change: Can you help delineate a little bit more like what's with which of those is driving it more than the other or if it's about the same and how do you expect it to evolve for the rest of the year do you expect it to be pretty constant.
James T. Caulfield: Robert, it's Jamie, and the majority is price, but there's an element of mix in there. I'd put it at probably two-thirds price and one-third mix. And yeah, if I comment earlier on our inflationary trends, we expect them to be fairly moderate for the balance of the year, fairly smooth for the balance of the year, so I wouldn't expect a lot of volatility in that volume revenue relationship.
Speaker Change: Yeah, Hey, Robert it's Jamie and its sub majority is price, but theirs.
Jamie Caulfield: Element of mix in there I would put it at probably two thirds price and one third mix and.
Jamie Caulfield: Yes.
Speaker Change: <unk> comment earlier on or inflationary trends, we expect them to be.
Jamie Caulfield: Fairly moderate for the balance of the year fairly smooth through the balance of year. So I wouldn't expect a lot of volatility in that volume.
Jamie Caulfield: Revenue relationship.
Operator: Thank you. One moment for our next question. Our next question comes from Robert Ottenstein with Evercore ISI. Your line is open.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from Robert <unk> with Evercore ISI. Your line is open.
Robert Edward Ottenstein: Great, thank you very much. Two kinds of follow-ups, if I may. Can you please talk about the spring shelf sets?
Robert Bain Moskow: Great. Thank you very much.
Robert Bain Moskow: To kind of follow ups. If I may can you. Please talk about the spring shelf sets is that pretty much done.
Ramon Laguarta: Is it pretty much done? And, you know, how do you feel about what you're seeing both on the free-to-life side and on the beverage side? And I understand on the beverage side you're discontinuing some SKUs, so are you gaining shelf space where you want to? And then, just a follow-up to an earlier question about Celsius, maybe you could give us an idea of how your energy drink strategy overall is evolving and, you know, what's going on with Rockstar, Starbucks, and Mountain Dew in terms of the overall energy drink strategy? Thank you.
Robert Bain Moskow: And how.
Robert Bain Moskow: How do you feel good about what youre seeing both on the Frito lay side and on the beverage side and I understand on the beverage side.
Robert Bain Moskow: Discontinuing some skus. So are you gaining shelf space, where you want to.
Robert Bain Moskow: And then just a follow up to an earlier question on on Celsius, maybe.
Robert Bain Moskow: If you could give us an idea of how your energy drink strategy overall is evolving and what's going on with Rockstar Starbucks Mountain Dew in terms of the overall energy drink strategy. Thank you.
Robert Bain Moskow: Yeah.
Ramon Laguarta: Listen, I'll step back a little bit. I would say our customer negotiations have been good and completed all over the world, and especially Europe took a bit longer, but it had a very positive impact on our overall European business, and other parts of the world are less impacted by this type of negotiation, so we feel good, including the U.S. To your specific question on space gains, I think it's going to be a good reset time for us across snacks and beverages. It's not completed yet. It's in its way, normally, I would say, probably another six weeks or so, over 4% of our net revenue for this year.
al: This is al.
al: I'll step back a little bit I would say our customer.
al: Negotiations have been good uncompleted all over the world and especially Europe took a bit longer but very positive.
al: Impact to our.
Our overall, we'd say.
al: Our European business in.
al: Other parts of the world are less impacted by these type of negotiations are good we feel good including in the U S.
al: To your specific question on space gains I think it is going to be a good.
al: A good reset time for ads across snacks and beverages is not completed yet.
Its way normally.
al: I would say probably another six weeks or so with.
al: We're feeling good about it.
al: <unk> seen already resets the performance improvement in the business. So that's good and well done by the by the commercial teams. So yes.
Operator: Thank you. One moment for our next question. Our next question comes from Chris Carey with Wells Fargo Securities.
al: We feel good overall and Thats why we are reaffirming our guidance to grow at least over 4% and our net revenue for this year.
Speaker Change: Thank you one of them before the next question.
Speaker Change: Our next question comes from Chris Carey with Wells Fargo Securities.
Speaker Change: Great.
Speaker Change: Okay.
Christopher Michael Carey: Hi everyone. So one question on APAC's division. Ramon, I think you were a bit more cautious or balanced on the Chinese consumer and yet double-digit growth in the quarter. In China, I just wonder how APAC came in relative to your own expectations and whether there's any timing dynamic here or whether you see these results as perhaps a bit more durable going forward. And if I could just sneak in on at-home versus away-from-home consumption globally, as you see some of the weaker trends from the lower-income consumer, are you seeing any acceleration in that shift which might be helping your business on a global basis as well? Thanks. Two things.
Christopher Michael Carey: Hi, everyone.
Christopher Michael Carey: No.
Christopher Michael Carey: One question on APAC Division Ramon I think you were a bit more cautious or balanced on the Chinese consumer and yet double digit growth in the quarter.
Christopher Michael Carey: China I, just wonder how APAC came in relative to your own expectation that.
Christopher Michael Carey: Whether there is any timing dynamic here or whether you see these results.
Christopher Michael Carey: Perhaps a bit more durable going forward and if I could just sneak in from the at home versus away from home consumption globally as you see some of the.
Christopher Michael Carey: Weaker trends from the lower income consumer or are you seeing any acceleration in that shift which might be helping your business on a global basis as well.
Ramon Laguarta: Two things. Thanks.
Speaker Change: Two things thanks, good questions I think.
Ramon Laguarta: Good questions. I think... APAC performance is a little bit impacted by the timing of the Chinese New Year. So there is a bit of benefit in our Q1 numbers versus Q2. It was a bit earlier this year.
Speaker Change: The APAC performance is a little bit impacted by the timing of Chinese new year. So there is a bit of a benefit in our <unk>.
Speaker Change: Q1 numbers versus Q2.
Speaker Change: Earlier this year, but.
Ramon Laguarta: But the reality is that the APAC region is improving, I would say, outside of China. China, still, as I mentioned earlier, I think the consumer is cautious, and the consumer is saving a lot. And it might not impact so much the low price, let's say products such as ours; it might probably impact some other categories a bit harder than ours.
Speaker Change: The reality is that the APAC region is is improving I would say outside of China. China's steel as I mentioned earlier I think the consumer is cost shows on the consumer.
Speaker Change: Is saving a lot and it might not impact so much.
Speaker Change: The low price.
Speaker Change: <unk>.
Speaker Change: Let's say products as ours and my apology impacts some other categories.
Speaker Change: Higher than ours.
Ramon Laguarta: The truth is that in China, as I said earlier, our team has been gaining share and creating a very capable and profitable business in China we're very proud of. Now, to your other question on away from home, in the home, we're seeing mobility, obviously going back to pre-pandemic times, and I think we all forgot COVID anymore. And we're seeing, obviously, that impact in the consumption of food between home and away from home, especially in the US. I would say it's probably the country that is having more impact.
Speaker Change: Truth is that in China as I said earlier, our team is not only this year, but already consistently for the last four five years has been gaining share and creating.
Speaker Change: A very capable and profitable business in China, we're very proud of now.
To your other question on.
Speaker Change: Away from home in home, we're seeing mobility, obviously going back to.
Speaker Change: Pre pandemic times everything we all forgot.
Speaker Change: Kavita anymore, and we are seeing.
Speaker Change: Obviously that impacts in the <unk>.
Speaker Change: The consumption of food.
Speaker Change: Between home and away from home, especially in the U S. I would say, it's probably the country that is having more impact.
Ramon Laguarta: So, yes, away from home is growing faster than in home for us. And we're pivoting resources to away from home, both in our food business and our beverage business, and we're trying to capture as much as possible that, that, that consumption that is moving away from home. Internationally, as well, I would say that there is a huge, wide space for growth for our business, both in trying to improve the availability of our current products and also creating new solutions that are more targeted at meals and meal replacement, as consumers buy more food away from home.
Speaker Change: Yes away from home is growing faster than in home for us.
Speaker Change: And we're pivoting resources to.
Speaker Change: Away from home both in our food business in our beverage business and we're trying to capture as much as possible.
Speaker Change: <unk>.
Speaker Change: That consumption that is moving to away from home internationally as well I would say that is a.
Speaker Change: A huge wide space for growth for our business both in trying to.
Speaker Change: Improve the availability of our current products and also creating new solutions that are more targeting meals meal replacement as consumers.
By more food away from home and I think our brands belong in some of those locations and as I mentioned at Cagny, where we're building.
Ramon Laguarta: And I think our brands belong in some of those locations. And I mentioned at Cagney, we're building both innovation and business models that can help us capture this meal location away from home with some of our large brands, like Lays, Doritos, Tostitos, some of our, you know, well, well-known global brands.
Speaker Change: Both innovation and business models that can help us capture this relocation or away from home with some of our large brands like laser idose tostitos some of our.
Speaker Change: Well known global brands.
Operator: Thank you. One moment for our next question. Our next question comes from Steve Powers with Deutsche Bank. Your line is open.
Speaker Change: Yeah.
Speaker Change: Thank you one number for next question.
Speaker Change: Okay.
Speaker Change: Our next question comes from Steve Powers with Deutsche Bank. Your line is open.
Stephen Robert R. Powers: Hey, Thanks, and good morning.
Stephen Robert R. Powers: Hey, thanks and good morning. Ramon, maybe it ties to the pressures you mentioned earlier on the lower income consumers in the US, or maybe even your comments just now on being at home versus being away from home. But if I think back over the last six plus months, we've seen arguably unexpected slowing across many, many categories, but really in many immediate consumption categories where I think it was most unexpected. Across savory snacks, sweet snacks, and arguably a number of beverage categories as well.
Stephen Robert R. Powers: If.
Stephen Robert R. Powers: If you remember maybe it ties to the.
Stephen Robert R. Powers: The pressures you mentioned earlier on the lower lower income consumers in the U S or maybe even your comments just now on at home versus away from home, but.
Stephen Robert R. Powers: I think back over the last six months, we've seen arguably unexpected flowing across many.
Stephen Robert R. Powers: Many categories, but really in many immediate consumption categories, where I think it was most unexpected.
Stephen Robert R. Powers: Across.
Stephen Robert R. Powers: Savory snacks sweet snacks.
Stephen Robert R. Powers: Arguably number of beverage categories as well.
Stephen Robert R. Powers: Do you agree with that kind of unexpected slowing comment? And if so, how do you see the drivers? How do you stack up the drivers?
Speaker Change: Do you agree with that kind of unexpected slowing comments.
Speaker Change: And if so how do you see the drivers how do you stack up the drivers where you think we are in that cycle and how does that factor into your.
Ramon Laguarta: Where do you think we are in that cycle? And how does that factor into your expectations for momentum recovery across your North American beverages – sorry, North American businesses? I think the easing comps are obvious. I'm just curious about your expectations for demand itself sequentially improving.
Speaker Change: Expectations on.
Speaker Change: Momentum recovery across our North American beverages, I'm, sorry, Northern American businesses.
Speaker Change: Using comps are obvious I'm, just I'm curious about sort of the your expectations on demand itself sequentially improving.
Ramon Laguarta: That's great. Now, listen. It's a great question, and I think we need to step back and look at the bigger numbers. Obviously, there was huge inflation in our categories driven by input inflation over the last couple of years and operating cost inflation. Now, what makes us feel optimistic is a couple of data points. Number one, I think wages are growing above inflation, and we see that not only in the U.S. but across the world. It's a total CPI, you know?
Speaker Change: That's great now and this is a great question Ed.
Speaker Change: I think we need to step back and look at the bigger numbers. Obviously, there was huge inflation in our categories driven by input inflation over the last couple of years and operating cost inflation now what makes US feel optimistic is a couple of data number one I think wages are growing above inflation and we see that not only.
Speaker Change: In the U S, but across the world.
Speaker Change: And we see our consumer packaged food inflation below.
Ramon Laguarta: So those two numbers make us feel comfortable that consumers will start coming back to our categories at the same level of or higher frequency than in the past. So those are two big numbers.
Speaker Change: I think I would say.
Speaker Change: CPI, so those two numbers make us feel comfortable that.
Speaker Change: Consumers will.
Speaker Change:
Speaker Change: Will that start coming back to our categories.
Speaker Change: The frequency and with the same level of.
Speaker Change: Our higher frequency of that in the past. So those are two big numbers obviously.
Ramon Laguarta: Obviously, each one of us, with our commercial programs, our innovation, our channel strategies, is trying to accelerate that pivot back. But we feel good about the price-volume mix that we see in our business and how we think that we will continue to sequentially improve over the balance of the year and into subsequent years. Our North Star remains the same, and that is to make sure that, as I said earlier, we have innovation and consumer programs and channel programs that continue to drive savory snacks ahead of micro snacks and ahead of food.
Speaker Change: Each one of us with our commercial programs our innovation our channel strategy is trying to accelerate that vivo bag, but we feel good about the price volume mix that we've seen our business in that how how we've seen that we will continue to sequentially improve over the over the balance of the year into further years.
Speaker Change: Our North Star remains the same is to make sure that as I said earlier, we have innovation in consumer progress. Some channel programs that continue to drive savory snacks ahead of micro snacks ahead of food and the same with LRB ahead of you.
Ramon Laguarta: And the same with LRB, ahead of overall liquid consumption and ahead of food and beverages. So that drives value for our business, and that drives value for our customers, and that's how we think about driving the company long-term. Thank you.
Speaker Change: Overall liquid consumption and ahead of food and beverages.
Speaker Change: That drives value for our for our business and that drives value for our for our customers.
Speaker Change: And Thats, how we think about driving that.
Speaker Change: The company long term.
Operator: Thank you. One moment for our next question. Our next question comes from Brett Cooper with Consumer Edge Research. Your line is open.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Our next question comes from Brett Cooper with consumer is consumer edge research. Your line is open.
Brett Young Cooper: Thank you. Good morning.
Brett Young Cooper: Thank you good morning, a question on the international business on these calls over the years Pepsico spoken about managing international profit delivery to provide affordability to consumers and support recruitment and if we look at margins in the international business, they are up versus <unk> versus pre COVID-19 levels.
Ramon Laguarta: Question on international business. On these calls over the years, PepsiCo has spoken about managing international profit delivery to provide affordability to consumers and support recruitment. And if we look at margins in the international business, they're up versus pre-COVID levels. So can you help us understand, beyond the headline financial results that we can see, I guess, evidence of what you look at to ensure you're providing proper levels of affordability for category development to support the very long term for that business?
Speaker Change: So can you help us understand beyond the headline financial results that we can see.
Speaker Change: I guess the evidence of what you look at to ensure you are providing proper levels of affordability for category to development to support the very long term for that business. Thanks.
Ramon Laguarta: Yeah, and the We're always very conscious of the relative value of our products versus other potential substitute products in the categories that we participate in. So if you think about snacks, the big opportunity is to transform packaged snacks into packaged snacks or other macro snacks into savory snacks. And we always look at that value ratio in every market, in every geography, for different types of consumers. Now, the same with beverages, right? Moving from non-commercial beverages to commercial beverages is always an opportunity for us as an industry. We look at that very carefully.
Speaker Change: Yes in India.
Speaker Change: We're always very conscious of the relative value of our product versus other.
Speaker Change: Other potential substitute products in the categories that we participate so if you think about snacks.
Speaker Change: The big opportunities to transform and packaged snacks into packaged snacks or other macro snacks into into savory snacks, and we always look at that value ratio.
Speaker Change: In every in every market and every geography for different types of consumers now the same with beverages right moving from non commercial beverages to commercial beverages that is always the.
Speaker Change: The opportunity for us as an industry. We look at that very carefully now why are margins expanding internationally because as we gain scale and obviously that we are fixed cost leverage is it's much better and that's how we're getting to more profitable businesses in <unk>.
Ramon Laguarta: Now, why are our margins expanding internationally? Because as we gain scale, and, obviously, our fixed cost leverage is much better. And that's how we're getting to more profitable businesses in international markets, especially in large markets, once we keep affordability at the center of our strategy, because that's long-term, including other things that we do obviously with availability and with innovation. We make our categories continue to grow at a very fast pace. But as you mentioned, affordability and relative value in our category is a key KPI that we measure all the time in every market because it's the key source of continuous growth for our category.
Speaker Change: International markets, especially the large markets.
We keep affordability at the center of our strategy, because thats long term, including all of the things that we do obviously with availability in width with innovation, we make our categories.
Speaker Change: We continue to grow at a very fast pace, but yes.
Speaker Change: As you mentioned affordability on a relative value of our categories of key Kpis that we measure all the time in every market because its the.
Is the key source of continuous growth for our categories.
Operator: Thank you. One moment for our next question. Our next question comes from Gerald Pascarelli with Wedbush Securities. Your line is open.
Thank you one of them before our next question.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Gerald Pascarelli with Wedbush Securities. Your line is open.
Gerald John Pascarelli: That's great. Thanks very much.
Gerald John Pascarelli: Great. Thanks very much.
Ramon Laguarta: Question on Europe. Another really strong quarter here, like the seventh consecutive quarter, double-digit revenue growth. Looks like it accelerated on an underlying two-year basis. So maybe if you could provide some color on the driver markets, ones that maybe came in better than your expectations, and then how you would compare how developed markets in Europe are performing relative to what we're seeing in the U.S. Thanks.
Gerald John Pascarelli: On Europe another.
Gerald John Pascarelli: Another really strong quarter here like the seventh consecutive quarter of double digit revenue growth looks like it accelerated on a on an underlying two year basis. So maybe if you could provide some color on the on the driver markets ones that maybe came in better than your expectations and then how you would compare how developed markets in Europe are performing relative to what we're seeing.
Speaker Change: In the U S. Thanks.
Speaker Change: Yes.
Ramon Laguarta: Yeah, thank you and for your good observation. I think our team in Europe is doing fantastic work. It started with strong productivity, simplifying the business and driving cost control, eliminating duplication, and then reinvesting that money back into our brands and becoming more competitive, and also driving our availability and driving our brand preference. And that is a flywheel that is working for us across both developing and developed markets in Europe, obviously the developing markets a bit more.
Speaker Change: Thank you and good observation I think our team in Europe is doing a fantastic.
Speaker Change: Work.
Speaker Change: It has started with strong productivity.
Speaker Change: Simplifying the business and driving cost control, eliminating duplication and then reinvesting that money back into.
Speaker Change: Into our brands and became more competitive and also driving driving our availability and driving our our rent brand preference and that is a flywheel that is working for us.
Speaker Change: Across both developing and developed markets in Europe.
Speaker Change: Obviously developing markets have been more so if you think about.
Ramon Laguarta: So if you think about Eastern Europe markets, they are growing a little bit faster than Western Europe markets. Western European markets have been impacted a little bit in this first quarter by some of the negotiations, and that's not typical in Europe.
Speaker Change: Kind of eastern Europe markets are growing.
Speaker Change: Growing a little bit faster that western Europe markets.
Speaker Change: Western Europe markets have been impacted a little bit in this first quarter by some of the negotiations and that's not untypical in Europe.
Ramon Laguarta: But I think we have a good flywheel in Europe, and Europe will be expanding its portfolio along the lines of what the U.S. has been doing, which will give us additional consumers and additional penetration in households across developing markets. So we feel good about the European flywheel. But at the center of that is a very strong productivity, cost discipline, and reinvestment strategy that is, in a way, what we're trying to do across the full company, increasing our productivity and driving the reinvestments both into affordability, availability, better brand equity, and then reinvesting back into our future, digitalization, and sustainability at the center of that reinvestment. So it's a flywheel that we're Clearly, Europe is doing a good job at implementing it.
Speaker Change: But I think we have a good flywheel and you're in Europe.
Speaker Change: In Europe, we will be expanding its portfolio along the lines of what the U S has been doing and which will give us additional <unk>.
Speaker Change: Consumers and additional penetration in households across developed and developing markets. So we feel good about the flywheel in Europe, but at the center of that is a very strong.
Speaker Change: Productivity cost discipline and reinvestment strategy that is.
Speaker Change: What we're trying to do across the full company elevating our productivity and driving their investments both into affordability availability.
Speaker Change: Have better brand equity and then reinvest.
Speaker Change: We're investing back into our future digitalization and sustainability at the center of that reinvestment. So its a flywheel that we're trying to do for all.
Speaker Change: Of the world.
Speaker Change: Clearly Europe is doing a good job in implementing it.
Ramon Laguarta: Thank you, ladies and gentlemen. This concludes the question and answer session. I would like to turn the call back to Ramon Laguarta for any closing remarks.
Speaker Change: Thank you ladies and gentlemen, this does conclude the question and answer session I would like to turn the call back to Ramon Laguardia for any closing remarks.
Ramon Laguarta: Yeah, thank you everyone for joining us this morning and for the confidence that you've placed in us and in our stock. We hope that you all stay healthy and safe. Ladies and gentlemen, this does conclude today's conference.
Ramon Laguarta: Yes. Thank you everyone for joining us this morning and for the confidence that you've placed in us.
Ramon Laguarta: And our stock and we hope that you all stay healthy and safe. Thank you.
Speaker Change: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
Operator: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day. Thank you, gentlemen. I appreciate your help. You're welcome. That's Kevin, on to the next one.
Okay.
Speaker Change: Thank you gentlemen.
Speaker Change: Youre welcome.
Speaker Change: Kevin has been excellent.
Speaker Change: Okay.
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Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
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Speaker Change: Yes.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: Yes.
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Speaker Change: [music].
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Speaker Change: Okay.
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Speaker Change: Okay.
Speaker Change: Yes.
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Speaker Change: Yes.
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Speaker Change: Yes.
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Speaker Change: Okay.
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Speaker Change: [music].
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Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
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Speaker Change: [music].
Speaker Change: Alright.
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Speaker Change: Okay.
[music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
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Speaker Change: [music].
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Speaker Change: Sure.
Speaker Change: Sure.
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Speaker Change: Okay.
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Speaker Change: Yes.
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Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
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Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
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Speaker Change: Great.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
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Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: [music].
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Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Right.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thanks.
Speaker Change: Right.
Speaker Change: Okay.
Speaker Change: Got it.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Thanks.
Thank you.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].
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Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
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Speaker Change: Okay.
Speaker Change: Right.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Thank you.
Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Perfect.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yes.
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Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Thanks.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.