Q2 2024 PepsiCo Inc Earnings Call - Q&A

July 11, 2024

Operator: Good morning, and welcome to PepsiCo's 2024 second quarter earnings question and answer session. Your lines have been placed on listen only until it's your turn to ask a question.

Good morning, and welcome to Pepsico's 'twenty 'twenty four second quarter earnings question and answer session. You lots of them 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 Dot Pepsico Dot com. It is now my pleasure to introduce Mr. Ravi <unk> Senior Vice President Investor Relations. Mr. <unk> you may begin.

Operator: 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, Investor Relations. Mr. Pamnani, may

Ravi Pamnani: Thank you, operator. 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 updated 2024 guidance. Such forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, July 11, 2024. And we are under no obligation to do so. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results.

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.

Ravi Pamnani: 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 2020 for guidance.

Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today July 11, 2024, and we are under no obligation to update.

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

Ravi Pamnani: Please refer to our second quarter 2024 earnings release and second 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 Chairman and CEO, Ramon Laguarta, and PepsiCo's Executive Vice 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. In order to ask a question or make a comment, please press star followed by 11 on your touchtone phone at any time.

Ravi Pamnani: Please refer to our second quarter 2024 earnings release, and second 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 Pamnani: Looking statements.

Speaker Change: Joining me today are pepsico's, chairman and CEO, Ramon Laguardia, and Pepsico 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.

Speaker Change: Thank you in order to ask a question or make a comment. Please press star followed by one on your Touchtone phone at any time, we will pause, while we compile our Q&A roster.

Speaker Change: Okay.

Operator: We will pause for a moment while we compile our Q&A roster. Our first question comes from Dara Mohsenian with Morgan Stanley. Your line is open.

Our first question comes from Dara <unk> with Morgan Stanley. Your line is open.

Dara Warren Mohsenian: Hey, good morning, guys. [inaudible] So, I just wanted to focus on the implied organic sales growth guidance for the back half of the year in the mid-single digits to get to the approximate 4% guidance. You've obviously had a great longer-term track record, Ramon, under your tenure, but in this softer U.S. consumer environment, we've seen low single-digit growth in the last couple of quarters. So, what gives you confidence at the corporate level that you can get back there? And specifically, I wanted to dial down into Frito-Lay North America, which is presumably a piece of that. Obviously, a pretty soft volume result in Q2. You would take in some initial actions.

Hey, good morning, guys.

Speaker Change: Good morning there.

Dara Warren Mohsenian: So I just wanted to focus on the implied organic sales growth guidance in the back half of the year.

Speaker Change: Mid single digits to get to the approximate 4%.

Speaker Change: Guidance, you've obviously the great longer term track record Ramon under your tenure, but in this softer U S consumer environment, we've seen low single digit growth in the last couple of quarters. So what gives you confidence at the corporate level you can get back there and specifically I wanted to dial down into Frito lay North America, which is presumably a piece of that.

Speaker Change: Obviously, a pretty soft volume result in Q2, you had taken some initial action so help us understand the incremental actions from here what gives you confidence you get.

Ramon Luis Laguarta: So, you know, help us understand the incremental actions from here and what gives you confidence that you get a volume payback and a top-line payback from that, and how sort of Frito-Lay North America fits into that implied top-line recovery also. That's great.

Speaker Change: Volume payback in the topline payback from that and how sort of Frito lay North America fits into that.

Topline recovery also.

Ramon Luis Laguarta: All right. So I think it's an important area to focus on. Then, you know, when we were saying at least four, we were really talking about around five in our minds. Now we're talking around four.

That's great So I think.

Speaker Change: It's an important area is fabulous.

Speaker Change: When we're saying at least for we're talking more about a around five in our minds now we're talking around four so thats. The Beaver, we're making there is an adjustment and it is related to specifically.

Ramon Luis Laguarta: So that's the pivot we're making. There is an adjustment, and it is related specifically to the consumer in the U.S., and we can talk a little bit more now. Why do we feel good about our guidance?

Speaker Change: The consumer in the U S and we can talk a little bit more now.

Speaker Change: Why do we feel good about our guidance.

Ramon Luis Laguarta: And it cannot be disconnected from our earnings performance because I think the work we've been doing on productivity and cost reduction gives us the optionality to reinvest back in half in a way that we feel much more comfortable about the performance. So there are a couple of elements that give us confidence. Now, one is Quaker.

Speaker Change: We kind of be disconnected from our earnings performance because.

Speaker Change: I think the work we've been doing on on our productivity.

Speaker Change: Our cost reduction gives us the optionality to reinvest back in half two in a way that we feel much more comfortable about the performance.

Speaker Change: A couple of I would say elements that give us confidence now one is Quaker Quaker youre, all familiar with the situation where recovery in the supply chain by Q4 will be almost 100% supply and obviously the business at that point, we will be growing materially because we're just revealing.

Ramon Luis Laguarta: You're all familiar with the situation. We're recovering the supply chain by Q4. We'll be in almost 100% supply, and obviously, the business at that point will be growing materially because we're just refilling the shelves on the pipeline. So that should be out of the picture, and it will be a positive impact for us. The second is mathematical, but it's lapping.

Speaker Change: The shelves in the pipeline so that should be out of out of the picture and it will be a positive impact for us.

Speaker Change: Second is mathematical about us lapping and we think.

Ramon Luis Laguarta: And we think obviously the laps are much better in the second half, and that gives us confidence that we can get back to a mid single digit type of growth in the second half. The third element is international. International is an area we've been investing in for the last few years and is delivering for us. So first half of the year, 7%. We think that we'll continue that same level of growth in the second half of the year.

The labs are much better in second half and that has a.

Speaker Change: It gives us confidence that we can get back to a mid single digit type of growth in the second half.

Speaker Change: The third element is international International is an area we've been investing for the last few years materially and is delivering for us. So first half of the year, 7% within that.

Speaker Change: We will continue that same level of growth in the second half of the year pluses or minuses around the world.

Ramon Luis Laguarta: Pluses and minuses around the world, that the portfolio is diverse enough, scaled enough, profitable enough in multiple parts of the world that we believe that we can deliver. And then, now in the US, there is clearly a consumer that is more challenged. And it's a consumer that is telling us that in particular parts of our portfolio, they want more value to stay with our brands. But that is not for all consumers.

Speaker Change: The portfolio is diverse enough scaled enough profitable enough around multiple parts of the world that we believe that we can deliver and then now in the U S. There is clearly a consumer that is that is more challenged and as a consumer that is telling us that in particular parts of the portfolio of our portfolio they want more value to <unk>.

Speaker Change: With our brands that is not for all the consumers. Some consumers that is not for all the portfolio. Some parts of the portfolio and we have been.

Ramon Luis Laguarta: It's some consumers that are not for all the portfolio. It's some parts of the portfolio. And we have been working on different tactics to give the consumer what they want, and we see that it's working. And that's why we feel comfortable about, given the oxygen that we have in the P&L, that we'll be able to deploy in a very targeted way, thinking long-term about the category, making sure that it has good ROI, that we'll be able to turn around the, especially when you were referring to the food business, to positive volume.

Speaker Change: Working different tactics to give the consumer what they want and we see that is working.

Speaker Change: That's why we feel comfortable about.

Speaker Change: Given the oxygen that we have in the P&L that will be able to deploy in a very targeted way thinking long term about the category, you're making sure that it has good ROI they will be able to turn around.

Speaker Change: Especially when you were referring the food business to positive volume and with that a higher higher level of net revenue. So that's how we're thinking about the second half.

Ramon Luis Laguarta: And with that, a higher level of net revenue. So that's how we're thinking about the second half. Again, we have green shots with some of the activities we've been executing. And July 4th has been very strong for us.

Speaker Change: Again.

Speaker Change: We have.

Speaker Change: Green charged with some of the activities we've been executing and July 4th has been very strong for us and we feel we feel good about the business now and then.

Ramon Luis Laguarta: And we feel good about the business. Now, the North America beverage business is also to be highlighted. It's a business that, over time, we want to stay with, deliver profitable growth, make sure we compete well in the category, but at the same time, improve our margins. We think we're executing the playbook.

With America beverage business is also.

Speaker Change: To be highlighted it's a business that we said over time, we want to stay with delivered profitable growth make sure we compete well in that category, but at the same time improve our margins.

Speaker Change: We think we're executing the playbook.

Ramon Luis Laguarta: Well, actually, we've been accelerating profitable growth, you know, delivery of the business. And it should continue. In the second half, we're investing in advertising and marketing even more in the platforms that are growing. And that's what, overall, you put it all together, we feel good about the second half of the year and the momentum that will start on 25. Thank you.

Speaker Change: Well actually we've been accelerating profitable growth.

Speaker Change: <unk> of the business.

Speaker Change: And that it should continue.

Speaker Change: In the second half, we're investing in advertising and marketing even more in the platforms that are growing and thats. What overall you put it all together we feel good about about the second half.

Speaker Change: The year and the momentum that we will start 2005 with that.

Thank you. One moment for our next question.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Okay.

Unknown Executive: Our next question comes from Bonnie Herzog with Goldman Sachs; your line is open. All right, thank you. Good morning, everyone.

Operator: One moment for our next question. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open. All right, thank you. Good morning, everyone.

Speaker Change: Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open.

Bonnie Lee Herzog: I actually had a question on PB&A, Ramon. I know you just touched on it a bit, but I'd be, you know, curious to hear if you're satisfied with some of the progress you might be making to reinvigorate the business and maybe what green shoots you are seeing, you know, within PB&A. And then I guess I'm hoping for some color on the initiatives you highlighted in terms of the discipline. Commercial investments should be assumed, and this will also mean a potential step up in promotions for PB&A. And do you maybe see a need for some brand repositioning? Are there structural opportunities? You know, essentially, what will be the drivers to reaccelerate growth at PB&A? Thanks. Yeah, it's really good.

Alright. Thank you good morning, everyone I actually had a question on <unk> line of laser touch on a bit.

Bonnie Herzog: I actually had a question on TVNA Ramon. I know you just touched on a bit, but I'd be sure to hear if you're satisfied with some of the progress you might be making to reinvigorate the business and maybe what green suits you are seeing within TVNA.

Speaker Change: Yes sure.

Speaker Change: Thank you Todd Clyde with some of the progress you might be making to reinvigorate the business.

Speaker Change: And maybe what green shoot you are seeing within <unk>, and then I guess I'm, hoping for some color on the initiatives you highlighted in terms of the difficulty of congressional investments should we assume this will also mean a potential step up in promo for <unk> and do you maybe see a need for some brand reposition.

Bonnie Herzog: And then I guess I'm hoping for some color on the initiative you highlight in terms of the different commercial investments. Should be assumed this will also mean a potential step-up in promos for TVNA, and do you maybe see a need for some brand-repositioning or their structural opportunities? You know, essentially what will be the drivers, you know, to re-accelerate growth at TVNA.

Meaning are there structural opportunities essentially what will be the drivers.

Speaker Change: To reaccelerate growth at <unk>.

Ramon Laguarta: Yeah, it's good. Bonnie, I'll give you a couple of data points that I think are relevant. Gatorate, for example, has been gaining share, you know, these year year, today in meaningful, it's accelerating. That's a core part of our portfolio and a very profitable portfolio, so that's one data point we've been investing in Gatorade. Not so much on, as you were saying, promos on discount, but more on innovation, execution, and branding, and that's paying back. The same with Propel, so all that functional hydration space, I think it's a focus for us, it's always been a focus, but now, I think that part of the portfolio is working well.

Yeah. Good morning, I'll give you a couple of data points that I think are relevant.

Ramon Luis Laguarta: Bonnie, I'll give you a couple of data points that I think are relevant. Gatorade, for example, has been gaining share this year and meaningfully is accelerating today. That's a core part of our portfolio and a very profitable part of our portfolio. So that's one data point we've been investing in Gatorade, not so much on, as you were saying, promos and discounts, but more on innovation, execution, and branding, and that's paying back. The same is true with Propel.

Gatorade for example has been gaining share.

Speaker Change: <unk>.

Speaker Change: This year year to date meaningfully is accelerating that's a core part of our portfolio and a very profitable part of our portfolio. So thats one data point, we've been investing in Gatorade not so much on.

Speaker Change: You were saying promos and discounts, but more on innovation execution and branding and that's paying back the same with propel so all of that functional hydration space I think it's a focus for US has always been a focus but now I think that part of the portfolio is working well I think some of the G to DSD.

Ramon Luis Laguarta: So all that functional hydration space, I think it's a focus for us, it's always been a focus, but now I think that part of the portfolio is working well. I think some of the G2DSD challenges that we had last year are behind us. I don't think we're all the way to perfection there, but we have much better service levels in this early part of the summer, which obviously is when the category peaks and where we have to be ready for perfection.

Speaker Change: At challenges that we had last year are behind US I don't think we're all the way to perfection, there, but much better service levels. In this in these early part of this summer, which obviously, where that's when the category peaks.

Speaker Change: <unk> and where we have to be ready for perfection. So that probably square if you think about the other brand and we've been talking for some time mountain view.

Ramon Laguarta: So that part is clear. If you think about the other brand we've been talking for some time, months and new, I'm months and new is on growth. Now it's back to growth. I think we made the aesthetic decision to have multiple flavors driving the brand and made Bahá a structural part of the portfolio versus the NLTO. That's driving consumers into the brand, incremental consumers, and again, better levels of execution. So yes, some examples: all the zero part of the portfolio is booming. If you think about consumer trends, clearly we know where they're going. We know that internationally, and we know that's going to eventually happen here in the US.

Ramon Luis Laguarta: So that part is clear. If you think about the other brand we've been talking about for some time, Mountain Dew, and Mountain Dew is on growth now, and it's back to growth. I think we made the strategic decision to have multiple flavors driving the brand and made Baja a structural part of the portfolio versus just an LTO. That's driving consumers into the brand, incremental consumers, and again, better levels of execution. So just some examples, all the zero part of the portfolio is booming. If you think about consumer trends, clearly, we know where they're going. We know that internationally, and we know that it's going to eventually happen here in the U.S.

Speaker Change: Mountain Dew is on growth now it's back to growth I think we made the strategic decision to have multiple flavors driving the brand that made by.

The structural part of the portfolio versus yes, and MTO, that's driving consumers into the brand incremental consumers and again better levels of execution. So there are some examples all the zero part of the portfolio is booming right. If you think about consumer trends.

Speaker Change: We know where they're going we know that internationally and we know that's going to eventually happen here in the U S. So zero not only oncology not only on soft drinks, but also on Gatorade.

Ramon Luis Laguarta: So zero not only on colas, not only on soft drinks, but also on Gatorade, on teas, on coffees. We're seeing that consumers are going. And then the last part is our food service business is becoming stronger, and we're better at where the profitability is, which is in the fragmented restaurant, the local restaurant, where consumers have a lot of interaction every day. And that part of the portfolio we've been investing in, we're getting additional distribution, we know we're becoming a better execution company in that particular channel, and we're feeling good about that. Thank you.

Ramon Laguarta: So zero, not only on call as, not only on soft drinks, but also on Gatorade, on teas, on coffees, that we're seeing that consumers are are going.

Speaker Change: On tes on coffees.

Speaker Change: We're seeing that consumers are going and then the last part is our foodservice business is becoming stronger and were being better at.

Ramon Laguarta: And then the last part is our food service business is becoming stronger and we're being better at the, where the profitability is, which is on the fragmented restaurant, local restaurant and, you know, we're consumers, you know, have a lot of interaction every day. And that part of the portfolio we've been investing, we're getting additional distribution; we know we know we're becoming a better execution company in that, in that particular channel. And we're feeling good about about. Revenue.

Where the profitability is which is on the.

Speaker Change: <unk> mentioned restaurant local restaurant and where consumers.

Speaker Change: Have a lot of interaction everyday in that part of the portfolio. We've been investing we're getting additional distribution we know.

Speaker Change: We're becoming a better a better execution company in that in that particular channel and we are feeling good about about that.

Speaker Change: Thank you one moment for our next question.

Okay.

Operator: One moment for our next question. Our next question comes from Lauren Lieberman with Barclays. Your line is open. Great. Thanks so much.

Speaker Change: Our next question comes from Lauren Lieberman with Barclays. Your line is open.

Lauren Rae Lieberman: Ramon, I wanted to go back to Frito, if I may. Because you commented on some consumers and, you know, being more value to stay with our brands. But one thing we've been doing a lot is trying to parse through the data that's available to us, and it looks like the category, the salty snack category as a whole, is really pressured. It's not just your brands.

Lauren Rae Lieberman: Great. Thanks, so much.

Ron I wanted to go back to Frito, if I may.

Lauren Rae Lieberman: Because you commented on.

Lauren Rae Lieberman: Some consumers and.

Speaker Change: Being more value to stay with our brands, but one thing we've been doing a lot in trying to parse through the data that's available to us and it looks like the <unk>.

Category, the salty snack category as a whole is really pressured it's not just your brands I know given your share there is sort of one and the same but it looks like there is a broader category issue.

Ramon Luis Laguarta: I know, given your share, they're sort of one in the same, but it looks like there's a broader category issue. Again, some of the data we've looked at, it feels like the category is not proving terribly responsive to promotion. So I just was hoping you could comment on that, if that is or isn't consistent with what you're seeing and how what you're going to be doing will be different. Because, again, from what we've seen so far, it doesn't look like there's a lot of response, and it feels like the category is proving more discretionary. So I would just love your thoughts on that. Thanks. Yeah, I think so.

Speaker Change: So again some of the data we've looked at it feels like the category is not proving terribly responsive to promotion.

Speaker Change: So I just was hoping you could comment on that if that is there is inconsistent with what youre seeing and how what youre going to be doing will be different because again, what we've seen so far it doesn't look like there's a lot of response.

Speaker Change: Deals like the category is proving more discretionary.

Speaker Change: Just love your thoughts on that thanks.

Speaker Change: I think.

Ramon Luis Laguarta: I feel that the issue is an issue of value and not an issue of anything else and We have a lot of data, obviously. Now, how do you address that value gap versus what consumers want to do? I think it's the...

Speaker Change: Right.

Speaker Change: We feel that.

Speaker Change: The issue is an issue of value is not an issue of.

Speaker Change: Anything else in.

Speaker Change: Yeah.

Speaker Change: We have a lot of data obviously now how do you address that value gap versus where consumers want to do I think it's the.

Ramon Luis Laguarta: It's the..., is where the know-how will come, and the sweet spot for us is not to promote, but to promote to those who need it in their products that need it versus a blanket approach to promotion. So that's where we're investing a lot of time. I think we're much more capable from the insights and diagnostic point of view and also from our ability to execute all these interventions more granularly, be it digital, be it with particular channels or customers.

Speaker Change: Is it.

Speaker Change: Is where they know how it will come in the sweet spot for US is not to promote that is to promote to who needs. It in their products that needed versus a blanket approach to promotion.

So that's where we're investing a lot of time I think we're much more capable from the insights on diagnostic point of view and also from our ability to execute more granularly. All these interventions be digital bid with particular channels our customers to give you an example.

Ramon Luis Laguarta: To give you an example, we feel that the unsalted part of our portfolio, if you think about potato chips or tortilla chips, that needs some value reset and value intervention for some consumers. But when we think about flavored potato chips or other parts of our portfolio, no.

Speaker Change: We feel that the.

Speaker Change: Unsalted part of our portfolio right. If you think about potato chips or our tortilla chips that needs some value reset and value intervention for some consumers. When we think about flavor potato chips or other parts of our portfolio no I mean consumers are stay.

Ramon Luis Laguarta: I mean, consumers are staying in the category, staying in our brands, and they're buying with pretty high frequency as in the past. There are other parts of the portfolio that are growing, growing very fast, especially the permissible part of what we call the permissible portfolio, positive choices. This is a, you think about brands like SunChips and Popcorners.

Speaker Change: In the category are staying in our brands and thereby with pretty high frequency as in the past there are other parts of the portfolio that are growing and growing very fast, especially the permissible part of what we call permissible portfolio positive choices.

Speaker Change: This is a.

Speaker Change: When you think about brands like Sun chips, but corners, smart food or simply range off the eaten path those brands are growing.

Ramon Luis Laguarta: Smart Food, or the Simply range of the Eat'n Path, those brands are growing, and it is not about value. There, I think, is more about, and the way we're going to approach it, is more marketing, investment, awareness, execution, availability. So there are different tools that we'll be using to drive category growth. To your point on is it the category, or PepsiCo brands?

Speaker Change: There is not about value there I think it's more about and the way we're going to approach. It is more marketing investment awareness execution availability. So there is different.

Speaker Change: Theres different tools that will be using.

Speaker Change: Two to drive the category growth.

Speaker Change: To your point on is it the categories at Pepsico brands I think given given our massive.

Speaker Change: Participation in the category through many multiple brands.

Speaker Change: It's our responsibility to manage this category for the long term providing value to consumers in different ways and continue to have that.

Speaker Change: Savory snacks category growing about food structurally as as we have done in the past now there is nothing in terms of consumer.

Speaker Change: Long term trends that tells us that that's not possible I think as a small adjustments in value.

Speaker Change: Execution, and it investment and new innovation areas that will drive it and we feel very strong about our ability to do that not in the long term, but actually in the short term in Q3, and Q4 and Thats why our guidance reflects a little bit that inflection because we're already testing in executing some of these levers and we see the.

Ramon Luis Laguarta: And we feel very strong about our ability to do that, not in the long term, but actually in the short term, in Q3 and Q4. And that's why our guidance reflects a little bit that inflection because we're already testing and executing some of these levers, and we see the returns it has in volume and that. Thank you.

Speaker Change: Returns <unk> has in volume and net revenue.

Unknown Executive: Thank you. One moment for our next question.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Okay.

Brian Spillane: Our next question comes from Brian Spillane with BFA; your line is open. Hey, thanks, Operator. Good morning.

Operator: One moment for our next question. Our next question comes from Bryan Spillane with B of A. Your line is open. Thanks, operator. Good morning, Ramon. Good morning, Jamie.

Speaker Change: Our next question comes from Bryan Spillane with Bofa. Your line is open.

Bryan Douglass Spillane: I just wanted to circle back on Frito. And I guess, you know, stepping back, you're able to sort of reset the margins and fund it with just deep, you know, drilling deeper into some of the reservoirs of productivity in other places in the organization. So I guess just if you can comment on two things related to that one. Given that you're tapping more productivity this year, does that affect next year? Does that affect maybe not having as much productivity to flow through? Or is that reservoir deep?

Speaker Change: Hey, Thanks, operator, good morning, good morning, Jamie.

Unknown Executive: Good morning, Jamie.

Brian Spillane: I'm just wanted to circle back on Frito, and I guess, you know, stepping back. You know, you're able to sort of reset the margins and fund it with just deep, you know, drilling deeper into some of the reservoirs. There's a productivity other places in the organization.

Bryan Douglass Spillane: Just wanted to circle back on Frito, and I guess stepping back.

James T. Caulfield: You were able to sort of reset the margins.

Speaker Change: <unk> with DB.

Speaker Change: Drilling deeper into some of the reservoirs of a productivity other places in the organization. So I guess, just if you can comment on two things related to that one.

Brian Spillane: So I guess just if you can comment on two things related to that. One, given that you're tapping more productivity this year, how does that affect next year? Does that affect maybe not having as much productivity to flow through, or is that reservoir very deep?

Speaker Change: Given that Youre tapping more productivity. This year does it how does that affect next year does that affect maybe not having as much productivity to flow through or is that reservoir very deep.

Brian Spillane: And then the second is we're thinking about Frito margins stepping back, you know, in the back half of the year. Should we be thinking about that now as the new base to maybe grow off of gradually, or is that a major step down and then you'd expect Frito to have another, you know, maybe step change up in the future?

Ramon Luis Laguarta: And then the second is, as we're thinking about Frito margins stepping back, you know, in the back half of the year, should we be thinking about that now as the new base to maybe grow off of gradually, or is that a major step down, and then you'd expect for you to have another, maybe, step change up in the future? We don't think that we will slow down our productivity in the coming years.

Speaker Change: And then the second is as we're thinking about frito margins stepping back.

Speaker Change: In the back half of the year should.

Speaker Change: Should we be thinking about that now as the new base to maybe grow off of gradually or is that a major step down and then you would expect for you to have another maybe step change up in the future.

Ramon Laguarta: Yeah, so Brian, let me tell you, I think we've talked about these in the past. We're managing total PepsiCo, a pretty margin, and as you've seen, we keep improving the margin. This, this quarter was, you know, almost 100 babes of operating margin improvement, and it's been consistent for the last few years.

Speaker Change: Yes, so Brian let me tell you I mean, I think we've talked about this in the past, we're managing total Pepsico operating margin and.

Speaker Change: As you've seen we keep improving the margin this quarter was.

Speaker Change: Almost 100 bps of operating margin improvement.

Speaker Change: It's been consistent for the last few years, we feel good about our productivity pipeline is not tactical it's super strategic and it's multi year and is based on automation is based on digitalization and simplification of the company is standardization different service models to the business. So there is there is a whole.

Ramon Laguarta: We feel good about our productivity pipeline; it is not tactical. It's super strategic, and it's multi-year, and it's based on automation, is based on digitalization, simplification of the company, standardization, different service models to the business. So there is a, there is a whole portfolio of productivity ideas that are multi-year in nature and you know, we don't think that we will slow down our productivity in the coming years. Now, as you think about our overall margin, international has, you know, continued to grow its margin.

Speaker Change: <unk> portfolio of productivity ideas that are multiyear in nature.

Speaker Change: We don't think that we.

Speaker Change: We will slow down our productivity in the coming years now as you think about our overall margin international has.

Ramon Luis Laguarta: Now, as you think about our overall margin, international has, you know, continued to grow its margin. PB&A has been very vocal on our side that we want to have that business going, moving into the mid-teens, and we're delivering on that. And we've always said that the big value of Frito for us is not so much whether it's a 26 or 26 12 or 27 12. That is very relevant, I would say.

Continued to grow its margin.

Ramon Laguarta: PBNA has been very vocal from our side that we want to have that business going, moving into meetings, and we're, we're, we're living on that. And we've always said that the big value of Frito for us is not so much whether it is a 26 or 26 and a half or 27 and a half. That is very relevant, I would say it's always tremendously equity for us on term and the biggest value creation for Frito is make sure that he grows at a 4 or 5% levels and that is going to be our continuous to be ours, the design focus.

Speaker Change: <unk> has been very vocal from our side that we want to have that business going moving into mid teens and we're delivering on that and we've always said that the big value of Frito for US is not so much whether is it 26 or 26 and a half of $27 five that is very relevant.

Speaker Change: I would say, it's always tremendously accretive for us long term and the biggest value creation for Frito is to make sure that he grows at a four or 5% levels and that is going to be our continues to be our strategic focus how do we get frito to continue to grow above the category make the category very healthy in terms of <unk>.

Ramon Luis Laguarta: It's always tremendously accretive for us long-term. And the biggest value creation for Frito is to make sure that it grows at 4% or 5% levels. And that is going to be our, continues to be our strategic focus. How do we get Frito to continue to grow above the category, make the category very healthy in terms of growth, keep bringing consumers, locations, and channels new opportunities for channel expansion to Frito?

Ramon Laguarta: How do we get Frito to continue to grow? Both the category make the category very healthy in terms of growth, keep bringing consumers, occasions and channel new new opportunities for channel expansion to Frito and that will continue to be our focus. We'll keep investing until we get it right. We feel good about getting it right, you know, rather soon and, you know, that's the way we'll keep managing the overall profitability of the company.

Speaker Change: Both keep bringing consumers locations on channel and the opportunities for channel expansion to Frito and that will continue to be our focus we will keep investing until we get it right.

Ramon Luis Laguarta: And that will continue to be our focus. We'll keep investing until we get it right. We feel good about getting it right, you know, rather soon.

Speaker Change: We feel good about getting it right rather soon.

Ramon Luis Laguarta: And you know, that's the way we'll keep managing the overall profitability of the company. And Frito, PB&A, and international, in particular, with different SAP strategies, and obviously, that ties down to every market around the world when you talk about international. We have a very good playbook for every country and every line of business in every country, expectations for profitability, and roadmaps to deliver that kind of product. Thank you.

Speaker Change: Sure.

Speaker Change: That's the way, we'll keep managing the overall profitability of the company and Frito PVA in international in particular with different SAP strategies, and obviously that triggers down to every market around the world. When you talk about international but we have very good playbook for every country and every at every.

Ramon Laguarta: And Frito, pvna, and international and particular with different staff strategies and obviously that triggers down to every market around the world. When we talk about international, but we are very good playbook for every country and every line of business in every country. Expectations on profitability and roadmaps to deliver that kind of plan. And that kind of girl.

Speaker Change: Line of business and every country expectations on profitability on roadmaps to deliver deliver that kind of that kind of growth.

Unknown Executive: Thank you. You want to owe me for our next question.

Speaker Change: Thank you one of them before our next question.

Kamil Gajrawala: Our next question comes from Camille Gajrawala: would you have freezer lines open?

Operator: One moment for our next question. Our next question comes from Kaumil Gajrawala with Jeffries. Hi, good morning, everybody. Do you believe that the prices at Frito are too high, given the increases over recent years? Do you think, Kaumil, I...

Speaker Change: Our next question comes from <unk> <unk> with Jefferies. Your line is open.

Ramon Laguarta: Hi, good morning everybody. Do you believe that the prices at Rio are too high, given the increases of a recent year? I think I kind of touched on the point earlier, but some parts of the portfolio need value adjustments; some parts of the portfolio don't; some parts of the portfolio need to be a four-particular consumers. We need some new enterprise points and probably some new promotional kind of mechanics that don't speak for the consumer to invest so much cash in a purchase of salty. So there's an adjustment that we have to make for certain consumers, some parts of the portfolio.

Speaker Change: Hi, good morning, everybody.

Speaker Change: Do you believe that the prices at Frito are too high given.

Speaker Change: Given the increases over recent years.

Speaker Change: Isn't coming.

Speaker Change: I think I kind of touch on the point earlier, but.

Kaumil S. Gajrawala: I think I kind of touched on this point earlier, but... Some parts of the portfolio need value adjustments, and some parts of the portfolio don't. Some parts of the portfolio need to be, for particular consumers, we need some new entry price points and probably some new promotional kind of mechanics that don't expect the consumer to invest so much cash in a purchase of salt. So there are adjustments that we have to make for certain consumers, some parts of the portfolio. I don't think the overall portfolio needs a reset. I think this is going to be about granularity. It is going to be about, you know, good execution of that granularity.

Speaker Change: Some parts of the portfolio need value adjustments some parts of the portfolio darned.

Speaker Change: Some parts of the portfolio needs to be for particular consumers, we need some new.

Entry price points, and probably some new promotional.

Speaker Change: Kind of mechanics that Don.

Spec for the consumer to invest so much cash in our purchase of <unk>. So there is adjustments that we have to make to.

Speaker Change: For sure the consumer some parts of the portfolio I don't think the overall portfolio is.

Ramon Laguarta: I don't think the overall portfolio needs a reset. I think this is going to be about a granularity. It's going to be about good execution of that granularity, and that's what I think we're well prepared to do throughout the full value chain. So yes, there is some value to be given back to consumers after three or four years of a lot of inflation. Our cost allows us to do that wherever we choose to do, and that will be one of the interventions that will be making in the second half, but not the only one. It's going to be investments in marketing.

Speaker Change: His needs.

Speaker Change: Needs a reset.

I think this is going to be about and granularity is going to be about.

Ramon Luis Laguarta: And that's what I think we're well prepared to do throughout, you know, throughout the full value chain. So, yes, there is some value to be given back to consumers after three or four years of a lot of inflation. Our cost allows us to do that wherever we choose to do it.

Speaker Change: Good execution of that granularity and Thats whats I think we're well prepared to do throughout.

Speaker Change: Throughout the full value chain so yeah.

Speaker Change: Yes, there is some.

Speaker Change: Value to be given back to consumers after three.

Speaker Change: Four years of a lot of inflation.

Speaker Change: Our cost allows us to do that wherever we choose to do and that will be one of the interventions that we'll be making.

Ramon Luis Laguarta: And that will be one of the interventions that we'll be making in the second half, but not the only one. I mean, there's going to be investments in marketing, there's going to be investments in better execution that overall will drive business growth to where we think it will be structurally in the coming years. Thank you. One moment for our next question. The next question comes from Peter Grom with UBS. Your line is open. Thanks, operator. Good morning, everyone. So I was hoping to get some color on Latin America.

Speaker Change: In the second half, but not the only one.

Speaker Change: It's going to be investments in marketing, there's going to be investments in better execution that overall will derive.

Ramon Laguarta: It's going to be investments in better execution. That overall will drive the business, the business for a to where we think it will be structurally in the coming years.

Business the business growth to where we think it will be structurally in the coming years.

Unknown Executive: Thank you. One moment for our next question.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Yeah.

Peter Grom: Our next question comes from Peter Grom with UBS; your line is open. Thanks, operator. Good morning, everyone. So I was hoping to get some color on Latin America. Organic revenue was the weakest we've seen in some time here. And I think in the prepared remarks, you know, Brazil and Mexico have seen solid. So just curious, kind of what drove the weakness in the quarter. And then remote, just as we look ahead, you mentioned you still have strong growth in our national on the back after a year. How does Latin America fit into that equation? Would you anticipate improvement?

Speaker Change: Our next question comes from Peter Grom with UBS. Your line is open.

Peter K. Grom: And I think in the prepared remarks, you know, Brazil and Mexico seem solid. So just curious kind of what drove the weakness in the quarter. And then Ramon, just as we look ahead, you mentioned you still expect strong growth from international in the back half of the year. How does Latin America fit into that equation?

Peter K. Grom: Thanks, operator, good morning, everyone. So I was hoping to get some color on Latin America.

Peter K. Grom: Organic revenue was the weakness we've seen in some time here and I think in the prepared remarks, Brazil, and Mexico has seen solid so just curious kind of what drove the weakness in the quarter and then Ramon just as we look ahead, you mentioned that you still expect strong growth from international in the back half of the year, how does Latin America fit into that equation would you anticipate improvement or should we.

Peter Grom: Or should we expect more muted performance to continue? Thanks.

Speaker Change: We expect more muted performance to continue thanks.

Ramon: No I think the.

Ramon Laguarta: No, I think the again, I would look at Latin and all the international business in like six months rather than a three months and three months. There's a lot of moving pieces between first quarter, second quarter, and Chinese New Year. In particular, the Latin situation in our case is related to Mexico and Mexico because of the elections that have been some changes in this possible income given to the families by the government that created some, I would say, some normalities in the way in the way those funds were distributed. And that's impacted the man in Mexico in the last three weeks.

Speaker Change: Again, I would look at Latam.

Speaker Change: All the international business.

Speaker Change: Like that.

Speaker Change: Six months, rather than a three months and three months Theres a lot of moving pieces between first quarter second quarter Chinese new year.

In particular, the Latam situation in our case is.

Speaker Change: <unk>.

As related to Mexico, and Mexico because of the elections there have been some changes in disposable income given to their families by the government that created some some.

Speaker Change: I would say some.

Speaker Change: Normality in the way in the way those funds were distributed and that's impacted demand in Mexico in the last what we've seen in the last three weeks in Mexico that as those funds have been.

Ramon Laguarta: In Mexico, that as those funds have been and given back to consumers again, that the demand has come back to our category. So, we don't foresee any issue in a lot of time. Again, value continues to be a factor as it's always been in a lot of time. We'll see plasma minuses between the different countries as a region.

Speaker Change: Back to consumers again.

The demand has come back to our to our category. So we don't we don't foresee any issue in Latam in Latam.

Speaker Change: Again, I mean value continues to be a factor as it has always been in Latam we will.

Speaker Change: C pluses or minuses between the different countries that as a region Latam continues to be a.

Ramon Laguarta: A lot of them continues to be a high-performing region for us, where we keep developing the categories, and we keep expanding our margins and building scale businesses, not only Mexican Brazil, but better across multiple markets.

Speaker Change: High performing region for us where we keep.

Speaker Change: Developing the categories and we keep expanding our margins and building scale businesses, not only in Mexico, and Brazil, but that across multiple markets.

Unknown Executive: Thank you. One moment for our next question.

Speaker Change: Thank you one moment for our next question.

Filippo Falorni: Our next question comes from Filippo Falorni with City; your line is open. Hey, good morning, everyone. So, just staying on international business from on your Sunday, pretty confident on the growth in international. Maybe you can talk more about what regions do you see?

Ramon Luis Laguarta: Would you anticipate improvement, or should we expect more muted performance to continue? Thanks.

Speaker Change: Our next question comes from Philip <unk> with Citi. Your line is open.

Ramon Luis Laguarta: No, I think the, again, I would look at LATAM and all the international business in like, [inaudible] Unknown Executive, Filippo Falorni, Ravi Pamnani, Callum Elliott, James Caulfield, Brett Cooper, given back to consumers again, that the demand has come back to our category. So, you know, we don't foresee any issue with LATAM. LATAM, again, I mean, value continues to be a factor, as it's always been in LATAM. We'll see pluses and minuses between the different countries.

Speaker Change: Hey, good morning, everyone. So just staying on international on the international business from on you sounded pretty confident on the growth.

Ramon Luis Laguarta: But as a region, LATAM continues to be a high-performing region for us, where we keep developing categories, and we keep expanding our margins and building scale businesses, not only in Mexico and Brazil but across multiple markets. Thank you.

Speaker Change: International maybe you can talk more about like what regions do you see.

Filippo Falorni: The greater growth potential in that business, and going back to the question on guidance on top by for the second half, is the improvement in organic sales mainly driven by an improvement in North America, or an acceleration in international? If you can give some color there, we'll be helpful. Yeah, Filippo, you should assume that most of the incremental, the incremental acceleration of the business comes from mostly North America, and two factors I mentioned: Quaker will get back to growth. The labs get better from North America, and then some of the interventions we're making both in value, adding additional AMM should drive additional volume.

Speaker Change: The greater growth potential in that business and going back to the question on guidance on top line for the second half is the improvement in organic sales, mainly driven by an improvement in North America or an acceleration in international if you can give some color that will be helpful.

Operator: One moment for our next question. Our next question comes from Filippo Falorni with Citi. Your line is open. Hey, good morning, everyone.

Yes Filippo.

Filippo Falorni: So just staying on international business, Ramon, you sounded pretty confident about the growth in international business. Maybe you can talk more about, like, what regions do you see the greater growth potential in that business? And going back to the question on guidance on top for the second half, is the improvement in organic sales mainly driven by an improvement in North America or an acceleration in international, if you can give some color there? Hope it helps. Yeah, Filippo, hi.

Filippo: You should assume that most of the incremental.

Speaker Change: Incremental acceleration of their business comes from mostly North America.

Speaker Change: And the.

Ramon Luis Laguarta: The two factors I mentioned, Quaker, we'll get back to growth. [inaudible] Accelerating parts of the portfolio, kind of stabilizing some of them, being a little bit softer. But overall, the portfolio at this point is broad enough, we have enough scale across multiple markets that, you know, we're kind of hedged geographically. So that's what we're assuming. And we're seeing that, you know, the per capita growth of the category will continue; we continue to invest meaningfully in both execution and brand development.

Speaker Change: Two factors I mentioned Quaker.

Get back to growth.

Speaker Change: The labs to get better for North America, and then some of the interventions we are making both in value, adding additional A&M should drive additional volume. Those are those are the three factors internationally, we're assuming that.

Ramon Laguarta: Those are the three factors. Internationally, we're assuming that the rate of growth for the first half, we're continuing the second half. And again, we're seeing parts of the portfolio accelerating, parts of the portfolio kind of stabilizing, some of them being a little bit softer, but overall, the portfolio at this point is broad enough. We have enough scale across multiple markets that we were kind of hedge geographically. So that's what we're assuming, and what we're seeing, that the forecast growth of the category will continue. We continue to invest meaningfully incremental funds to both execution and brand development.

Speaker Change: The rate of growth for the first half will continue in the second half and again, we're we're seeing parts of the portfolio.

Speaker Change: Accelerated in parts of the portfolio kind of stabilizing some of them being a little bit softer, but overall the portfolio. At this point is broad enough we have enough scale across multiple markets that we're kind of hedge geographically.

Speaker Change: So that's what we're assuming and we're seeing that.

Speaker Change: The per cap growth of the category will continue we continue to invest meaningfully incremental funds to both execution and brand development and we we don't see any reason why now of course, it could be big geopolitical reasons, why we change our mind later in the year, but with information we have today about geopolitics.

Ramon Laguarta: And we don't see any reason why; of course, it could be big geopolitical reasons why we change our mind later in the year, but with the information we have today about geopolitics and the stability of countries, that's our best guess today. Thank you.

Ramon Luis Laguarta: And we, you know, we don't see any reason why not, of course, there could be big geopolitical reasons why we change our mind later in the year. But with the information we have today about geopolitics and the stability of countries, that's our best, our best guess.

And its stability of countries, that's our best our best guess today.

Ramon Luis 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 of them before the next question.

Robert Ottenstein: One more moment for our next question. Our next question comes from Robert Markdown with TV Cow in your line of open. Hi. A couple questions.

Speaker Change: Our next question comes from Robert Dodd with BD Cowen Your line is open.

Robert Bain Moskow: Hi, thanks. A couple questions. One is, I was hoping you'd give a little more color on the energy drinks category. You know, growth has slowed dramatically in the U.S. I just wanted to get your perspective and ask, like, do you think that consumers there are making a value decision as well? There's a lot of premium priced drinks there. Do you see any evidence of trading down to maybe higher caffeine carbonated drinks? Thanks.

Speaker Change: Hi, Thanks, a couple questions. One is I was hoping you could give a little more color on the energy drinks category growth has slowed dramatically in the U S and just wanted to get your perspective in and ask like do you think that consumers there are making a value decision as well, there's a lot of premium priced drinks.

Robert Ottenstein: One is, I was hoping you'd give a little more color on the energy drinks category. You know, growth has slowed dramatically in the US, and just wanted to get your perspective and ask, like, do you think that consumers there are making a value decision as well? There's a lot of premium price drinks there. Do you see any evidence of trading down to maybe higher caffeine carbonated drinks? This is, you know, I think from the mental of the energy category continues to provide long-term good prospects for our industry. I think it's a consumer need that will continue to be there, and whether we're able to satisfy that through multiple options, you know, that will continue to grow.

Speaker Change: Sure.

Speaker Change: See any evidence of trading down to maybe higher caffeine carbonated drinks.

Speaker Change: This is.

Ramon Luis Laguarta: And you know, I think fundamentally the energy category continues to provide good long-term prospects for our industry. I think it's a consumer need that will continue to be, and whether we're able to satisfy that through multiple options, you know that that will continue to grow. There are always small ups and downs of subcategories within LRB that you could argue about. Is it because of channel dynamics, is it because it's very hot, and people are moving to other parts of the portfolio?

Speaker Change: I think fundamentally the energy category continues to provide.

Speaker Change: Long term good prospects for our industry I think it's a it's a consumer need that we will continue to.

Speaker Change: To be there and whether we are able to satisfy that.

Speaker Change: There are multiple options.

Speaker Change: That will continue to grow.

Ramon Laguarta: You know, there's always small, you know, ups and downs of subcategories within LRB that you could argue. Is it because of channel dynamics, is it because it's very hard, and people are moving to other, you know, parts of the portfolio. Like we're seeing, for example, in our case, in the recent six weeks, a massive growth in our hydration portfolio, because obviously it's been very hard in the US. So I guess there is some cannibalization between energy and hydration for some consumers. And they prefer to do that, so I would then all read into the short term of the category.

Speaker Change: There's always small ups and downs of subcategories within LRB that you could that you could argue.

Speaker Change: Is it because of channel dynamics as you because it is very hard and people are moving to other.

Ramon Luis Laguarta: We're seeing, for example, in our case, in the recent six weeks, a massive growth in our hydration portfolio because, obviously, it's been very hot in the US. I guess there is some cannibalization between energy and hydration for some consumers, and they prefer to do that.

Speaker Change: Parts of the portfolio like we're seeing for example in our case in the recent six weeks and massive growth in our hydration portfolio, because obviously, it's been very hot in the U S.

Speaker Change: I guess there is some.

Kind of a validation between energy and hydration for some consumers and they prefer to do that so I wouldn't over read into the short term of the category I would I would try to think about this.

Ramon Luis Laguarta: I wouldn't over-read into the short term of the category. I would try to think about this as a consumer needs energy if we're able to provide energy in a consumer-friendly way, including price, probably, as you mentioned, but I would say functionality, and clean labels. A lot of the things that I think the category has been working on, there should be a good runway for that segment of the category. It's been creating value for a lot of us that participate in it and their retailer partners. Thank you.

Unknown Executive: I would try to think about this as a consumer needs energy; if we're able to provide energy in a, you know, in a consumer friendly way, including price, probably, as you mentioned, but I would say functionality, clean labels, I mean, like a lot of the things that I think the category has been working on, this should be a good runway for, for that segment of the category, and it's been value creating for a lot of us that participate in it, including the retailer partners and, and the brand owners. Thank you. One moment for our next question.

Speaker Change: And the consumer needs energy, we're able to provide energy.

Speaker Change: <unk>.

Speaker Change: In a consumer friendly way, including price, probably as you mentioned, but I would say functionality clean labels I mean, a lot of the things that I think the category has been working on this should be.

Speaker Change: Good runway for that segment of the category and it's been value, creating for a lot of eyes that participate in it.

Speaker Change: Including our retailer partners.

Speaker Change: And the brand owners.

Speaker Change: Thank you one moment for our next question.

Andrew Texher: Our next question comes from Andrew Techshare. Would you, if you Morgan, your line is open. Thank you, good morning.

Operator: One moment for our next question. Our next question comes from Andrea Teixeira with J.P. Morgan. Your line is open. Thank you. Good morning, everyone, Ramon, and Jamie.

Speaker Change: Our next question comes from Andrew <unk> with Jpmorgan. Your line is open.

Andrea Faria Teixeira: My question is on the bridge to the mid-single-digit organic sales growth in the second half. Assuming international, Ramon you just mentioned, goes the same kind of single digits into the second half, and of course, understanding the easy corpse for Quaker, it still implies a good inflection into Afrito and PB&A. How do you think, like, we should be thinking about the progress and perhaps, you know, related to that, from a channel perspective, being away from home, for you, growing from what seems to be like a distribution, what is the like for like?

Andrew <unk>: Thank you good morning, everyone Ramon Jamie My question is on the bridge to the mid single digits organic sales growth in the second half assuming.

Andrew Texher: Everyone, I'm Raymond Jamie. My question is on the bridge to the meets and goages at the organic sales growth in the second half. Assuming international, Ramon, you just mentioned, growth the same kind of meets and goages at the second half. And of course, understanding the easy quotes for clicker. If you implies a good inflection into a crypto and TBA, how do you think, like, we should be thinking about the progress and perhaps, you know, related to that, from much channel perspective, the away from home. For you growing from what it seems to be like a distribution, what, what is the like for like, in, in sales basically by by channel, if you would think about away from home and at home.

Speaker Change: Assuming international Remortgages Mason goes the same kind of mid single digits in the second half of question understanding the easy comps for Quaker assuming implies a growth inflection into sito and mtdna.

Speaker Change: How do you think like we should be thinking about the progress and perhaps related to that so much channel perspective, the away from home.

Speaker Change: <unk>.

Speaker Change: For you.

Speaker Change: Growing from what it seems to be like a distribution what is the like for like.

Speaker Change: Or is this basically by by channel if you think about away from home and at home.

Andrea Faria Teixeira: in sales basically buy by channel if you would think about away from home and Hey Andrea, it's Jamie. You know, on the acceleration in the back half, as Ramon mentioned, that that's going to come mostly from North America for reasons we cited and, We're making the investment primarily focused on North America. We've got the easier ladder, and Quaker.

Jamie Caulfield: And, right, Jamie, you know, on the acceleration in the back half, as Ramon mentioned, that's going to come mostly from North America for reasons we cited, and we're making the investment, primarily folks North America. We've got these year laughs and and Quaker, so that that gives us a lot of confidence. On on channels, you look away from home has been a focus area for us. We've put investment behind that, and it's outgoing; the balance of our portfolio, so we'd expect that to continue. Thank you.

James T. Caulfield: Andrei it's Jamie.

Yes on the acceleration in the back half as Ramon mentioned.

Speaker Change: <unk> going to come mostly from North America for the reasons we cited in.

Speaker Change: Making the investment primarily focused in North America, we've got the easier laps.

James T. Caulfield: So that gives us a lot of confidence in channels. Look, away from home has been a focus area for us. We've put investment behind that, and it's outgrowing the balance of our portfolio. So we'd expect that to continue. Thank you.

And Quaker so that gives us a lot of confidence.

One channels look away from home has been a focus area for us we put investments behind that and it's outgrowing.

Speaker Change: The balance of our portfolio, so we'd expect that to continue.

Speaker Change: Thank you one moment our next question.

Unknown Executive: One more for our next question.

Chris Carey: Next question comes from Chris Carey, who both Fargo Securities are line is open. Hi, good morning everyone. I know you mentioned international to be looked at on six months paid in. I was wondering, however, if you could comment on some specific regions, just in Europe. Why do your mind have trends been so resilient? I don't think it's just your portfolio; I think the region in general has been more resilient for longer than many expected. In Asia, I think you were clear last quarter that there was some timing benefits clearly. We saw that normalizes quarter. What's the right run rates for this division, and do you have any comment on the progress in China?

Operator: One moment for our next question. Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open. Hi, good morning, everyone. Um, Ramon, I know you mentioned international could be looked at on a six month cadence. I was wondering, however, if you could comment on some specific regions just in Europe.

Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open.

Speaker Change: Hi, good morning, everyone.

Christopher Michael Carey: I know you mentioned international if you look at on six months Peter I was wondering however, if you could comment on some specific region just in Europe.

Christopher Michael Carey: Why, to your mind, have trends been so resilient? I don't think it's just your portfolio. I think the region, in general, has been more resilient for longer than many expected. And then in Asia, I think you were clear last quarter that there was some timing benefit. Clearly, we saw that normalized this quarter. What's the right run rate for this division?

Why to your mind have trends been so resilient I don't think it is just your portfolio. Thank you.

Speaker Change: Region in general has been more resilient for longer than many expected and Asia. I think you were clear last quarter that there was some timing benefit clearly we saw that normalize this quarter, what's the right run rate for this division and you have any comments on that.

Ramon Luis Laguarta: And do you have any comments on the progress in China? Thank you. Yeah, so listen, again, we're looking at international is a portfolio of geographies and markets. And yeah, we see the portfolio kind of when it's not growing so much here. So in the end, historically, we've learned that the portfolio is quite diversified, and that gives us the opportunity to talk about an international business as a whole. Obviously, we run the business locally.

Speaker Change: The progress in China. Thank you.

Ramon Laguarta: Thank you. Yeah, so listen again we're looking at international as a portfolio of geographies and markets, and we see, you know, the portfolio kind of when it's not growing so much here. So at the end, historically, we've learned that portfolio is quite diversified, and that gives us the opportunity to, you know, to talk about an international business as a total, obviously. We run the business locally now when you when you go down to different parts of the world Europe is very is resilient and is resilient in you know our business has been performing very well both on on top line and and and share and very importantly in margin improvement and and that has you know has been a focus of the of the management team for quite some time.

Speaker Change: Yeah, So listen again, we're looking at.

Speaker Change: International is a portfolio of geographies and markets.

Speaker Change: And.

Speaker Change: Yes.

Speaker Change: See the portfolio kind of when it's not growing so much here. So at the end and historically, we've learned that the portfolio is quite diversified and that gives us the opportunity to tour.

Speaker Change: About an international business.

Speaker Change: As a total obviously, we run the business locally now when you when you go down to.

Ramon Luis Laguarta: Now, when you go down to... different parts of the world, Europe is resilient and is resilient in. Our business has been performing very well, both on top line and share, and, very importantly, in margin improvement. And that has been a focus of the management team for quite some time. We're getting a lot of traction, and that's also giving the business the opportunity to reinvest, which also obviously drives the top line. And I think Europe, in our case, is in a very positive cycle, which we expect to continue in the coming years. Now, I talked about Latin America, so I will not mention it much.

Speaker Change: Different parts of the world.

Speaker Change: Europe is very resilient and is resilient.

Speaker Change: Our business has been performing very well both on top line and share and very importantly in margin improvement and that has.

Speaker Change: Has been a focus of the management team for quite some time.

Ramon Laguarta: We're getting a lot of traction that's also giving the business the opportunity to invest, which also obviously drives the top line. I think Europe, in our case, is in a very positive cycle, which we expect to continue in the coming years. Now I talked about a lot of America, so I will not mention much. We continue to see a lot of growth in many parts of our Amisa region; in particular, India is a big growth space for us and is an investment area for sure. The opportunity is massive. You think, you know, you take a decade perspective, and we're putting infrastructure on the ground and we're putting a lot of, you know, we're investing in the brands to make sure that we build the scale to capture what is going to be.

Speaker Change: Getting a lot of traction that's also giving the business the opportunity to reinvest which also obviously drives the top line and I think Europe in our case is in a in a very positive cycle, which we expect to continue in the coming years now I talked about North America. So I will not mention much we continue to see a lot of.

Ramon Luis Laguarta: We continue to see a lot of growth in many parts of our MISA region. In particular, India is a big growth space for us. And it's an investment area, for sure. The opportunity is massive if you take a decade perspective.

Growth in many parts of our EMEA.

Speaker Change: Region in particular, India is a big growth space for us and.

Is an investment area for sure the opportunity is massive you think.

Speaker Change: You could take a decade.

Speaker Change: Perspective, and we're putting infrastructure on the ground and we're putting a lot of.

Ramon Luis Laguarta: And we're putting infrastructure on the ground, and we're investing in the brands to make sure that we build the scale to capture what is going to be, I think, a highly demanded market for many, many years. Then when it comes to Asia, we're seeing a very cautious consumer in China. The consumer is clearly saving more than spending, and that has an impact on many categories. Our category is a low-ticket item.

Speaker Change: We're investing in the brands to make sure that we build the scale to capture what is going to be I think a high demand and market for many many years.

Ramon Laguarta: I think a high demand market for many, many years; then when it comes to Asia, we're seeing a, you know, a very cautious consumer. In China, the consumer is clearly, you know, saving more than spending, and that has an implication for many categories. Our category is a low ticket item. So we continue to see good performance of our categories, and we're gaining share is is is quite an advantage business what we have in China, special in the food sites. We continue to invest in different regions of the country, continue to get more penetration, additional distribution that has been a big driver. So additional penetration, additional consumers coming to our brands, coming to the habit of snacking, and that has been very positive.

And then when it comes to Asia, we're seeing.

Speaker Change: A very cautious consumer in China, the consumer is.

Speaker Change: Clearly.

Speaker Change: <unk>.

Speaker Change: Saving saving more than spending and that has an implication for many categories. Our categories is a low ticket item. So we continue to see good performance of our categories.

Ramon Luis Laguarta: So we continue to see good performance in our category, and we're gaining share. It's quite an advantaged business what we have in China, especially on the food side. And we continue to invest in different regions of the country, continue to get more penetration, and additional distribution. That has been a big driver.

Speaker Change: We're gaining share is quite an advantage business, where we have in China, especially on the food side and we continue to invest in different regions of the country. We continue to get more penetration additional distribution that has been a big driver. So additional penetration of additional consumers coming to our brands come into the habit of snacking.

Ramon Luis Laguarta: So additional penetration, additional consumers coming to our brands, and getting into the habit of snacking, and that has been very positive. So in spite of a cautious consumer, we have levers to continue to grow the business. Some of that is physical availability; some of that is share of the market and better penetration of our brands. I think we have advantaged products there. We have a very strong R&D center in China that develops technology for East products. And that is giving us an advantage versus other companies. So that's how we see different parts of the world.

Speaker Change: And that has been very positive. So in spite of a cautious consumer we have levers to continue to grow the business some of that physical availability. Some of that is share of market and better penetration of our brands I think we have advantage products. There. We've been we have a very strong R&D center in.

Ramon Laguarta: So in the spite of a cautious consumer, we have levers to continue to grow the business. Some of that is physical availability, some of that is a share of market and better penetration of our brands. I think we have advantage products there. We've been we have a very strong and dissentering in China that develops is for East products, and that is giving us an advantage versus other company. So that's how we're how we're seeing the different parts of the world. And again we'll continue to invest; for us, this is a business that you think about. Our international business is almost 40 billion dollars already, right? So it's been growing very fast over time. It's almost 40 billion dollars; it's a credit to PepsiCo.

Speaker Change: In China that develops is for Easter product and that is that is giving us an advantage versus <unk> versus other companies. So.

Speaker Change: That's how we're seeing the different parts of the world.

Speaker Change: Again, we will continue to invest for US. This is a business that you think about our international business is almost $40 billion already right. So it's been growing very fast over time, it's almost $40 billion.

Ramon Luis Laguarta: And again, we'll continue to invest for us. This is a business that, if you think about our international business, is almost $40 billion already. So it's been growing very fast over time. It's almost $40 billion is a credit to PepsiCo.

Speaker Change: It's accretive to Pepsico, it's higher margin than the average of Pepsico and its clearly the.

Unknown Executive: It's fire margin than the average of PepsiCo, and it's clearly the largest growth opportunity for our company. If you think about the next decade, and that's where we're putting so much focus, so much investment. We believe that we, you know, both on the beverage side and on the food side, we have many years of growth in that particular part of the business.

Ramon Luis Laguarta: It's higher margin than the average for PepsiCo, and it's clearly the largest growth opportunity for our company if you think about the next decade, and that's why we're putting so much focus, so much investment into it. We believe that, both on the beverage side and on the food side, we have many years of growth in that particular part of the business. Thank you.

The largest growth opportunity for our company. If you think about the next decade and that's why we're putting so much focus how much investment we believe that we.

Speaker Change: Both on the beverage side and on the food side, we have.

Speaker Change: Many years of growth.

Speaker Change: In that in that particular part of the business.

Unknown Executive: Thanks. You want to move on for our next question.

Thank you one number for next question.

Robert Ottenstein: Our next question comes from Robert Ottenstein with Evercore I-FI. Lauren is open. Great, thank you very much.

Operator: One moment for our next question. Our next question comes from Robert Ottenstein with Evercore ISI. The line is open. Great, thank you very much.

Speaker Change: Our next question comes from Robert Hopkins sticking with Evercore ISI. Your line is open.

Robert Edward Ottenstein: I want to look at a more structural, strategic type question, and that is to get your thoughts around the Carlsberg-Britvick transaction, and maybe talk a little bit about why perhaps it made more sense for Carlsberg to buy Britvick rather than you, given the fact that you generally own your bottlers in the U.S., why not Britvick? Does that have any implications in terms of how you're thinking about the And does the fact that maybe combining beer and CSDs makes more sense outside of the U.S., obviously for regulatory reasons? How should we think about that component? Thank you. Yeah, I wouldn't; I wouldn't extrapolate too much.

Speaker Change: Great. Thank you very much.

Ramon Laguarta: I want to look at a more structural strategic type question, and that is to get your thoughts around the Karlsberg-Britvik transaction, and maybe talk a little bit why perhaps it made more sense for Karlsberg-Britvik rather than you, you know, given the fact that you generally own your bottlers in the US. Why not, why not, Britvik? Does that have any implications in terms of how you're thinking about the US bottlers, and does the fact that, you know, maybe combining beer and CSDs makes more sense outside of the US, obviously for regulatory reasons? You know, how should we think about that component.

Looking at more structural strategic type question.

Speaker Change: And that is to get your thoughts around that.

Speaker Change: Carlsberg Vic transaction.

Speaker Change: And maybe talk a little bit why why perhaps it made more sense for carlsberg to buy britvic rather than you.

Speaker Change: Given the fact that you generally owned bottlers in the U S.

Why not why not britvic.

Speaker Change: Does that have any implications in terms of how youre thinking about the U S bottlers.

Speaker Change: And does the fact that maybe combining beer and CSD makes more sense outside of the U S. Obviously for regulatory reasons.

How should we think about that component. Thank you.

Ramon Laguarta: Thank you. Yeah, I wouldn't stop all day too much. This is a decision by Karlsberg to make an investment in the UK business. It makes a lot of sense for Karlsberg for multiple reasons. And we are; we partner with Karlsberg and other geographies. We are very happy with the partnership. We trust them as a, you know, a partner to grow our business. And, you know, of course, we, you know, we supported its interaction.

Speaker Change: Yes, I wouldn't I wouldn't extrapolate too much of this is.

Kozberg: A decision by Kozberg.

To make an investment in the U K business. It makes a lot of sense for kozberg for multiple reasons, and where we partner with Carlsberg in other geographies. We are very happy with the partnership with <unk>.

Kozberg: As a partner to grow our business and of course, we.

Ramon Luis Laguarta: This is a decision by Carlsberg, which reported the transaction. So yeah, I wouldn't over extrapolate it. Let's make it a UK decision by Cosberg.

Kozberg: We supported the transaction so I wouldn't over <unk>.

Unknown Executive: So, yeah, I wouldn't over, let's make it a UK decision by Karlsberg, and we decided to endorse its transaction because we have a great relationship with Karlsberg and we trust them. Thank you.

Kozberg: Let's make it a UK this issue, Mike Osborn and we decided to endorse a transaction because we have a great relationship with cosmetic and we trust them.

Ramon Luis Laguarta: And we decided to endorse the transaction because we have a great relationship with Cosberg. Thank you. One moment for our next question. Our next question comes from Carlos Laboy with HSBC. Your line is open. Yes, good morning, everyone. Ramon, in keeping with the last two comments you've made and the Britvig deal... Can you discuss the International Franchise Doctrine of PepsiCo? In other words, how are you thinking in terms of the clarity of what each side is supposed to do and allow? Cheap, right?

Speaker Change: Thank you one moment for our next question.

Kamil Gajrawala: One moment for our next question. Next question comes from Karlsberg, with HSBC; your line is open. Yes, good morning, everyone. Raymond, in keeping with the last two, two comments you've made and the Britvik deal. Can you discuss the international franchise doctrine that PepsiCo, in other words, how are you thinking in terms of clarity of what each side is supposed to do? And allow the key, right? I'm trying to get a sense of how you're compelling independent bottlers in these great growth territories that you see. To step up investments for the purpose of accelerated system revenue growth and bottling returns.

Speaker Change: Our next question comes from Carlos Laboy with HSBC. Your line is open.

Speaker Change: Yes, good morning, everyone.

Speaker Change: In keeping with the last thought.

Carlos Laboy: Two comments, you've made and the Britvic deal can.

Speaker Change: Can you discuss the international franchise Doctor in the Pepsico in other words, how are you thinking in terms of clarity.

Speaker Change: What each side is supposed to do.

Speaker Change: And allowed the key right.

Carlos Alberto Laboy: I'm trying to get a sense of how you're compelling independent bottlers in these great growth territories that you see to step up investments for the purpose of accelerating system revenue growth and bottling. Yeah, Carlos, listen. We're very pleased with the relationship we have with most of the bottlers and the strategic alignment. Actually, our international beverage business has been one of the growth engines of the company for the last few years. So, you know, we keep innovating and building great products that have consumer appeal, and specifically, we've been very successful with our non-sugar business internationally. Our non-sugar Pepsi has been a great driver of growth for many years. Gatorade is also another great platform that we are moving around.

Speaker Change: I'm trying to get a sense of how you are compelling independent bottlers and these great growth territories that you see.

Speaker Change: To step up investments for the purpose of accelerating system revenue growth in bottling returns.

Ramon Laguarta: Yeah, Karlsberg, we're very pleased with the relationship we have with most of the bottlers on this strategic alignment. Actually, our international beverage business has been one of the growth engines of the company for the last few years. So, you know, we keep innovating and building great products that have consumer appeal and specifically within very successful with our non-sugar business internationally. Our non-sugar Pepsi is being a great driver of growth for many years. Gatorade is also another great platform that we're moving around. So, you know, the last is growing 10% historically in, you know, and we'll continue to invest.

Yes Carlos.

Carlos Laboy: We're very pleased with the relationship we have with most of the bottlers on this strategic alignment activity our international beverage business has been one of the growth engines of the company.

Carlos Laboy: For the last few years so.

Carlos Laboy: We keep innovating and building.

Carlos Laboy: Great products that.

Carlos Laboy: Yeah.

Have consumer appeal and specifically, we've been very successful with our non sugar.

Carlos Laboy: Business internationally, our non sugar Pepsi has been a great driver of growth for many years. Gatorade is also another great platform that we are moving.

Carlos Laboy: Around.

Carlos Laboy: So.

Carlos Laboy: The last.

Carlos Laboy: Growing 10%.

Ramon Luis Laguarta: So, you know, the last one, it's growing 10% historically, and we will continue to invest. Now, are there other opportunities to scale up some of our bottlers? Of course, there are always opportunities to improve the infrastructure, and we're working on that for the long term, but I think this is a part of our business that is going well. It's a part of our business that we are prepared to invest even more. The bottlers know we are obviously very aligned statistically on which markets and which platforms we're going to put our focus and our investments.

Historically.

Carlos Laboy: And we'll continue to invest now are there other opportunities to.

Ramon Laguarta: Now, other opportunities to scale up some of our bottlers are the; of course, there's always opportunities to improve the infrastructure. And we're working on that for the long term, but I think this is a part of our business that is going well. It's a part of our business that we are prepared to invest even more. The botlers know we obviously are very aligned with the physical and which markets and which platforms we're going to put our focus and our investments. And I think, as I said, it is part of our international story that I was referring to earlier.

Carlos Laboy: To scale up some of our bottlers are the of course, there is always opportunities to improve the infrastructure.

Carlos Laboy: And we're working on that for the long term, but I think this is a part of our business that is growing well is a part of our business that we are prepared to invest even more the bottlers. No. We obviously are very aligned strategically and which markets and which platforms were going to put our our focus on our our investments.

Carlos Laboy: I think as I said as part of our international story that I was referring to earlier.

Ramon Luis Laguarta: And I think, as I said, it's part of our international story that I was referring to earlier. There's a food story and there's a beverage story, and there's a combination of the two stories in some markets that we're playing long term. Hopefully, I'm answering your question, I don't know, some other, some other question. Thank you.

Ramon Laguarta: There's a food story, and there's a beverage story, and there's a combination of the two story in some markets that were playing, that were playing long term. So, hopefully I'm answering your question. Do you know if you had some other implications there?

Carlos Laboy: The food story and there is a beverage story and there is a combination of the two story in some markets that we're playing we're playing long term so.

Carlos Laboy: Hopefully I'm answering your question.

Speaker Change: You had some other some other kind of implications there.

Operator: One moment for our next question. Our next question comes from Nick Modi with RBC. Your line is open. Yeah, thank you. Good morning, everyone.

Unknown Executive: Thank you. One moment for our next question.

Speaker Change: Thank you one moment for our next question.

Nick Modi: Our next question comes from Nick Modi with RBC. Your line is open. Yeah, thank you. Good morning, everyone. Ramon, I was hoping you can just kind of share some perspective around overall food volume, right? Because a lot of questions have been asked about, you know, where's the volume going? It's not just salty snacks that's been under pressure; you know, pretty much across the board in terms of volumes. And so I was just curious on your thoughts. I mean, I don't think it's GLP-1. I know that's what, you know, some might suggest, but I'd love your views on kind of where you think the volume's actually migrating.

Speaker Change: Our next question comes from Nik Modi with RBC. Your line is open.

Sunil Harshad Modi: Ramon, I was hoping you could just kind of, share some perspective around overall food volume, right? Because, you know, a lot of questions have been asked about, you know, where's the volume going? It's not just salty snacks.

Sunil Harshad Modi: Yes. Thank you good morning, everyone. Ramon I was hoping you can just kind of.

Ramon: Sure some perspective around overall food volume right because a lot of questions have been asked about where's the volume going its not the salty snacks.

Ramon Luis Laguarta: That's been under pressure, you know, pretty much across the board in terms of volumes. And so I was just curious about your thoughts. I mean, I don't think it's GLP-1.

Speaker Change: <unk> been under pressure pretty much across the board.

In terms of volume.

Speaker Change: Curious on your thoughts I mean, I don't think DLP, one and that's what.

Ramon Luis Laguarta: I know that's what, you know, some might suggest, but I'd love your views on kind of where you think the volume's actually migrating. Yeah, listen, I, Nick, I don't know about that. All categories, I know that for many categories. The multiple-year inflation that we had to take because our input cost went up has created some perception and some reality in a lot of households that food is expensive, and consumers are making choices, and they can make choices to cook versus buy finished goods or finished products, or they can make a lot of decisions around how they spend their money and how they feed themselves every day with the lowest budget.

Speaker Change: I might suggest.

Speaker Change #100: I'd Love your views on kind of where you think the volumes actually migrating.

Ramon Laguarta: Yeah, I think I don't know about, you know, all the categories. I know that for many categories, the multiple year inflation that we had to take because our input cost went up has created some perception and some reality in a lot of households that food is expensive. And consumers are making choices, and they can make choices to cook versus buy finished goods or finished products. Or they can make a lot of decisions around how they spend their money and how do they feed themselves every day with the lowest budget.

Yes.

Nick: Nick I don't know about.

Nick: All of the categories I know that for many categories.

The multiple year.

Nick: Inflation that we had to take because our input cost went up.

Nick: <unk> created some.

Perception and some reality in a lot of households that food is expensive and consumers are making choices and they can make choices to cook versus by finished goods or finished products are are they can you can they can make a lot of.

Nick: Decisions around how they spend their money and how do they fit themselves every.

Nick: Every day with the with the lowest budget in that in that.

Ramon Laguarta: And I think that's the fundamental question to address for the food companies. Now that our costs are kind of normalizing, our input cost. And we've all been going at productivity. In our case, this has been a very, very strategic focus for us. Now how do we deploy those resources against what are the best levers to reignite growth? And again, it will not be a blanket approach. It will be a segmented approach. In our case, it will be very rational. It will be based on data. I think we have a lot of data, and we have great segmentation.

Ramon Luis Laguarta: And I think that's the fundamental question to address for food companies. Now that our costs are kind of normalizing, our input costs, and we've all been going at productivity, in our case, this has been a very, very strategic focus for us, now how do we deploy those resources against what are the best levers to reignite growth? And again, it will not be a blanket approach; it will be a segmented approach.

Nick: The fundamental question to address for the for the food companies now that our costs are kind of normalizing our input costs and we've all been going add productivity.

Nick: Our case this has been a very very strategic focus for US now how do we deploy those resources against what are the best levers to reignite growth and again it will not be a.

Blanket approach it will be a segmented approach in our case it will be very rationale based on data I think we have a lot of data and we have great segmentation and I think we can execute with again with with.

Ramon Luis Laguarta: In our case, it will be very rational, it will be based on data. I think we have a lot of data, and we have great segmentation, and I think we can execute, again, with precision so that we don't destroy value but we create value for the category as we increase the net revenue of the category. So that's how we're thinking about it. I don't think GLP at this point has a material impact on our category for sure, and we have a lot of panels, and we have a lot of conversations with consumers; it's not impacting us. At this point, it's an economic value relationship for our categories, and we will address them in the second half. Thank you.

Ramon Laguarta: And I think we can execute with, again, with precision so that we don't destroy value, but we create value for the category as we increase the net revenue of the category. So that's how we're thinking about it. I don't think you'll be at this point as material impact in our category for sure. And we have a lot of panels, and we have a lot of conversation with consumers. It's not impacting us. At this point, is an economic value relationship for our categories. And we will address them in the second half of the year.

Nick: With precision so that we don't destroy value by we create value for the category as we as we increase the net revenue off of the category. So that's how we're thinking about it I don't think <unk> at this point Nick.

Nick: Material impact in our in our in our category for sure and we have a lot of.

Nick: Panels, and we have a lot of conversation with consumers is not impacting us at this point is an economic value.

Nick: <unk> relationship for our for our categories and we will address them, India in the second half of the year.

Unknown Executive: Thank you.

Speaker Change #102: Thank you our last question comes from one moment.

Unknown Executive: Our last question comes from one moment.

Kevin Grundy: Comes from Kevin Grundy with BNV Parabiss. Relinas often. Great. Thank you.

Ramon Luis Laguarta: Our last question comes from Kevin Grundy with B&B Paribas. Your line is open. Great. Thanks. Good morning, everyone.

Speaker Change #103: Comes from Kevin Grundy with Bnb Paribas Your line is open.

Speaker Change #104: Great. Thanks, good morning, everyone.

Kevin Grundy: Good morning, everyone. Covered a lot of ground and not to be the dead horse, but just to drill down a couple areas from what we could on the demand weakness and snacks. So you mentioned some parts of the portfolio, but not all consumers. I apologize if I missed this. What do you see beyond the low income consumer? It's a lot of focus on where is the consumer and depends on which management call you're listening to or what industry, frankly. What do you think specifically with the middle and high-end consumer is the weakness also being seen among that cohort as well.

Kevin Michael Grundy: We covered a lot of ground, and not to beat a dead horse, but just to drill down on a couple areas, Ramon, if we could, on the demand weakness and SNAG. So you mentioned some parts of the portfolio, but not all consumers. I apologize if I missed this.

Kevin Grundy: Covered a lot of ground and not to beat a dead horse, but just to drill down a couple of areas remote if we could on the on the demand weakness and snack. So you mentioned some parts of the portfolio, but not all consumers I apologize if I missed this what are you seeing beyond the low income consumer so a lot of focus on where is the consumer and it depends on which management co.

Ramon Luis Laguarta: What are you seeing beyond the low-income consumer? There's a lot of focus on where the consumer is, and it depends on which management call you're listening to or what industry you're in, frankly. What are you seeing specifically with the middle and high-end consumer? Is the weakness also being seen among that cohort as well?

Speaker Change #106: Listening to what industry frankly, what are you seeing specifically with the middle and high end consumer is the weakness also being seeing among that cohort as well and then I think an important question as well is there anything youre seeing in your market research I know youre staying close to the consumer it gives you any pause with the longer term.

Ramon Laguarta: And then I think an important question as well. Is there anything you're seeing in your market research? I know you're staying close to the consumer that gives you any pause with the longer term outlook for the freedom of business, which has been so strong for so long. Is there anything there that kind of gives you pause, or do this to be entirely transitory? So thanks for that. Yeah, thanks. Listen, I think the this needs for value or more value consciousness. I think it's impacting every household in the US. So it is different levels of income.

Ramon Luis Laguarta: And then I think an important question as well: is there anything you're seeing in your market research that gives you pause with the longer-term outlook for the Frito business, which has been so strong for so long? Is there anything there that kind of gives you pause, or do you consider this to be entirely transitory?

Speaker Change #107: <unk> outlook for the freedom business, which has been so strong for so long is there anything there that kind of gives you pause.

Speaker Change #108: To do this to be entirely transitory. So thanks for that yes.

Ramon Luis Laguarta: So thanks for that. Yeah, thanks, Kevin. Listen, I think this need for value or more value consciousness is impacting every household in the U.S., so it's at different levels of income. I think it's impacting everybody, and we're seeing behaviors at different income levels. I would aggregate all that.

Speaker Change #109: Yes, thanks, Kevin.

Speaker Change #110: I think the.

Speaker Change #111: This need for value or more.

Speaker Change #111: Value consciousness I think is.

Is impacting every household in the U S. So it is it is.

Speaker Change #111: Different levels of income I think it's impacting everybody and we're seeing behaviors in.

Ramon Laguarta: I think it's impacting everybody. And we're seeing behaviors in different income levels. I would aggregate all that. The consumer is much more price conscious is looking for more value across. So maybe you see the higher income consumers that, you know, they're not going to expensive restaurants. They're adjusting their behavior to more affordable restaurants, or they stay at home. And then, you know, they create their own entertainment moments or fun moments at home. So you see different behaviors happening everywhere. I think the connecting line would be the consumer is more cautious. The consumer is more choiceful.

Speaker Change #111: And different income levels.

Speaker Change #111: I would I would aggregate all that the consumer is much more price conscious is looking for more value or cross. So maybe you see the higher income consumers.

Ramon Luis Laguarta: The consumer is much more price conscious, and is looking for more value. So maybe you see the higher-income consumers that they're not going to expensive restaurants; they're adjusting their behavior to more affordable restaurants, or they stay at home, and then they create their own entertainment moments or fun moments at home. So do you see different behaviors happening everywhere? I think the connecting line would be that the consumer is more cautious, the consumer is more choiceful, but the consumer is willing to spend in areas where they see value. We see it in our category, right?

Speaker Change #111: There are not going too expensive restaurants, they are adjusting their behavior to more affordable restaurant or they just stay at home and then.

Speaker Change #111: They create their own entertainment moments or fund moments at home. So do you see different behaviors happening everywhere.

The connecting the connect in line it would be.

Speaker Change #111: The consumer is more cautious that consumers more choice full.

Ramon Laguarta: But the consumer is willing to spend in areas where they see value. And we see it in our category, right? The more the parts of the category there was referring to. But also for other parts of the category, they're asking for more value, and they're willing to compromise in some of their decisions. So that's the problem to address. So I would stay there. And I think once we address that situation, we will be back in growth. And we feel pretty good about the tools and the resources we have, and the actions that we're taking. And we're quite encouraged by recent performance of the business.

Speaker Change #111: But the consumer is willing to spend in areas, where they see value when we see it in our category at ride them more.

Speaker Change #111: Part of the category there was referring to but also for other parts of the category there.

Speaker Change #111: They are asking for more value and they're willing to start to compromise in some of their decisions. So that's the problem to address.

Speaker Change #111:

Speaker Change #111: No.

I would stay there.

Speaker Change #111: I think once we address that situation we will be.

Speaker Change #111: We will be back in growth and we feel pretty good about the tools and the resources, we have and the actions that we're taking and we're quite encouraged by recent performance of the business.

Unknown Executive: Okay, so I think we, this is the last question.

Speaker Change #112: Okay. So I think we.

Speaker Change #113: This is the last the last question. So thank you everyone for joining us today and your thoughtful questions and also obviously for the confidence that you've placed in us with your investments and we hope everybody has a great summer and you buy a lot of Pepsico products. Thank you.

Unknown Executive: So thank you, everyone, for joining us today and your thoughtful questions. And also, obviously, for the confidence that you've placed in us with your investments. And we hope everybody has a great summer. And you buy a lot of PepsiCo products. Thank you.

Speaker Change #114: Thank you ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Unknown Executive: Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day. Thank you.

Speaker Change #114: [music].

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Unknown Executive: Michael Jackson, Andrew, good morning and welcome to PepsiCo's 2024 second quarter earnings question and answer session. Your lives have been placed on a list, and only until as your turn asks the question. Today's call is being recorded and will be archived at www.pepsico.com.

Speaker Change #114: Okay.

Speaker Change #114: Yes.

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Ramon Luis Laguarta: I would stay there, and I think once we address that situation, we will be back to growth, and we feel pretty good about the tools and the resources we have and the actions that we're taking, and we're quite encouraged by our recent performance. Okay, so I think this is the last question. So thank you everyone for joining us today and for your thoughtful questions. And also, obviously, for the confidence that you've placed in us with your investments.

Speaker Change #115: Good morning, and welcome to Pepsico's 2024 second quarter earnings question and answer session. Your lines have been placed on listen only until 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 Investor Relations. Mr. <unk> you may begin.

Ravi Pamnani: It is now my pleasure to introduce Mr. Ravi Pamnani, Senior Vice President, Investor Relations. Mr. Pamnani, maybe. Thank you, operator. Good morning, everyone. I hope everyone has had a chance this morning to review our press release and prepare remarks, both of which are available on our website.

Ramon Luis Laguarta: And we hope everybody has a great summer and that you buy a lot of PepsiCo products. Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good morning and welcome to PepsiCo's 2024 second quarter earnings question and answer session. Your lines have been placed on listen only until it's your turn to ask a question.

Thank you operator, and good morning, everyone.

Speaker Change #116: 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 Pamnani: Before we begin, please take note of our cautionary statement. We are under no obligation to update. When discussing our results, we refer to non-GAF measures, which exclude certain items from reported results.

Speaker Change #116: May make forward looking statements on today's call, including about our business plans and updated 2020 for guidance.

Speaker Change #116: Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today July 11, 2024, and we are under no obligation to update when.

Speaker Change #116: When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results.

Ravi Pamnani: Please refer to our second quarter 2024 earnings release and second quarter 2024 Form 10-Q available on PepsiCo.com for definitions and reconciliation 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.

Speaker Change #116: Please refer to our second quarter 2024 earnings release, and second 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.

Speaker Change #116: Statements.

Ramon Laguarta: Joining me today are PepsiCo's Chairman and CEO, Ramon Laguarta, and PepsiCo's Executive Vice President and CFO, Jamie Caulfield.

Operator: 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, Investor Relations. Mr. Pamnani may be, Thank you, operator. Good morning, everyone.

Speaker Change #117: Joining me today are pepsico's, chairman and CEO, Ramon Laguardia, and Pepsico 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.

Ravi Pamnani: 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 2024 guidance. Such forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, July 11, 2024. And we are under no obligation to do so. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results.

Unknown Executive: 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.

Ravi Pamnani: Please refer to our second quarter 2024 earnings release and second 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 Chairman and CEO, Ramon Laguarta, and PepsiCo's Executive Vice President We ask that you please limit yourself to one question.

Ravi Pamnani: And with that, I will turn it over to the operator for the first question. Thank you. In order to ask a question or make a comment, please press star followed by one one on your touchtone phone at any time.

Unknown Executive: Thank you.

Operator: We will pause for a moment while we compile our Q&A roster. Our first question comes from Dara Mohsenian with Morgan Stanley. Your line is open.

Unknown Executive: In order to ask a question or make a comment, please press star followed by 1-1 on your touchtone phone at any time. You'll pause for a moment while we compile our Q&A roster.

Speaker Change #118: Thank you in order to ask a question or make a comment. Please press star followed by one on your Touchtone phone at any time, we will pause for them, while we compile our Q&A roster.

Speaker Change #118: Okay.

Speaker Change #118: Yes.

Darren Mochite: Our first question comes from Darren Mochite, and with Morgan Stanley, your line is open. Hey, good morning, guys. Good morning, there. So I just wanted to focus on the implied organic sales growth guidance in the back half year of mid-single digits to get to the approximate 4% guidance. You've obviously had a great longer-term track record, Ramon, under your tenure, but in this softer US consumer environment, we've seen low single-digit growth in the last couple of quarters. So what gives you confidence at the corporate level you can get back there? And specifically, I wanted to dial down into Freedom of the North America, which is presumably a piece of that.

Speaker Change #119: Our first question comes from Dara <unk> with Morgan Stanley. Your line is open.

Speaker Change #120: Hey, good morning, guys.

Speaker Change #121: Good morning there.

Speaker Change #122: So I just wanted to focus on the implied organic sales growth guidance in the back half of the year of mid single digits to get to the approximate 4%.

Speaker Change #122: Guidance, you've obviously the great longer term track record Ramon under your tenure, but in this softer U S consumer environment, we've seen low single digit growth in the last couple of quarters. So what gives you confidence at the corporate level you can get back there.

Specifically I wanted to dial down into Frito lay North America, which is presumably a piece of that.

Darren Mochite: Obviously, a pretty soft volume resulting Q2, you would take in some initial action, so help us understand the incremental actions from here. What gives you confidence? You get a volume payback and a top line payback from that, and how sort of free a late North America fits into that implied top line recovery also.

Speaker Change #122: Obviously, a pretty soft volume result in Q2, you had taken some initial action so help us understand the incremental actions from here what gives you confidence you get.

Ramon Luis Laguarta: So, help us understand the incremental actions from here and what gives you confidence that you get a volume payback and a top-line payback from that, and how Frito-Lay North America fits into that implied top-line recovery also. That's great.

Speaker Change #122: Volume payback in the topline payback from that and how sort of Frito lay North America fits into that.

Speaker Change #122: Topline recovery also.

Ramon Laguarta: That's great, there.

Ramon Laguarta: So I think it's an important area to focus. You know, when we're saying at least four, we were talking more about around five in our minds; now we're talking around four. So that's the people we're making. There is an adjustment, and it's related to specifically the consumer in the US, and we can talk a little bit more. Now, why do we feel good about our guidance? And it cannot be disconnected from our earnings performance, because, you know, I think the work we've been doing on our productivity and our cost reduction gives us the optionality to reinvest back in half to in a way that we feel much more comfortable about the performance.

Speaker Change #123: That's great So I think.

Speaker Change #124: It's an important area to <unk>.

Speaker Change #125: When we're saying at least for we're talking more about a around five in our minds now we're talking around four so thats. The Beaver, we're making there is an adjustment and it is related to specifically.

Ramon Luis Laguarta: So that's the pivot we're making. There is an adjustment, and it is related specifically to the consumer in the U.S., and we can talk a little bit more. Why do we feel good about our guidance?

Speaker Change #125: The consumer in the U S and we can talk a little bit more now.

Speaker Change #125: Why do we feel good about our guidance.

Speaker Change #125: He cannot be disconnected from our earnings performance because.

I think the work we've been doing on on our productivity.

Speaker Change #125: Our cost reduction gives us the optionality to reinvest back in half two in a way that we feel much more comfortable about the performance. So a couple of I would say elements that gave us confidence now one is Quaker Quaker youre all familiar with the situation.

Ramon Laguarta: So a couple of, I would say elements that give us confidence. Now one is Quaker, Quaker; you know, you're all familiar with the situation. We're recovering the supply chain by Q4, you know, will be in almost 100% supply, and obviously the business at that point will be growing materially because we're just refilling the shelves and the pipeline. So that, that, that should be out of the picture, and it will be a positive impact for us. The second is mathematical, but it's lapping, and we think it, you know, obviously the labs are much better in second half, and that has a, you know, gives us confidence that we can get back to a, a mid single digit type of growth in the second half.

Ramon Luis Laguarta: Quaker, you're all familiar with the situation. We're recovering the supply chain by Q4. We'll be in almost 100% supply, and obviously, the business at that point will be growing materially because we're just refilling the shelves on the pipeline. So that should be out of the picture, and it will be a positive impact for us. The second is mathematical, but it's lapping.

Speaker Change #125: We're recovering in the supply chain by Q4 will be almost 100% supply and obviously the business at that point, we will be growing materially because we're just refilling the shelves in the pipeline so that should be out of out of the picture I mean, it will be a positive impact for us.

Second is mathematical about us lapping and we think obviously the labs are much better in second half and that has a.

Ramon Luis Laguarta: And we think it, obviously, the laps are much better in the second half. And that gives us confidence that we can get back to a mid single digit type of growth in the second half. The third element is international. International is an area we've been investing in for the last few years significantly and is delivering for us. So in the first half of the year, 7%. We think that we'll continue that same level of growth in the second half of the year.

Speaker Change #125: It gives us confidence that we can get back to a mid single digit type of growth in the second half.

Ramon Laguarta: The third element is international. International is an area we've been investing in for the last few years materially, and is delivering for us. So first half of the year 7%, within that, you know, we'll continue that same level of growth in the second half of the year. You know, plus some minuses around the world, but, you know, the portfolios diverse enough, scaled enough, profitable enough around multiple parts of the world that we believe that we can deliver. And then now in the US, there is clearly a consumer that is, that is more challenged, and it's a consumer that is telling us that in particular parts of the portfolio, they want more value to stay with our brands.

Speaker Change #125: The third element is international International is an area we've been investing for the last few years materially and is delivering for us. So first half of the year, 7% within that.

Speaker Change #125: We will continue that same level of growth in the second half of the year.

Ramon Luis Laguarta: Pluses and minuses around the world, but the portfolio is diverse enough, scaled enough, profitable enough in multiple parts of the world that we believe that we can deliver. And then now in the US, there is clearly a consumer that is more challenged. And it's a consumer that is telling us that in particular parts of our portfolio, they want more value to stay with our brands. But that is not for all consumers.

Speaker Change #125: Some minuses around the world.

Speaker Change #125: The portfolio is diverse enough scaled enough profitable enough around multiple parts of the world that we believe that we can deliver and then now in the U S. There is clearly a consumer that is that is more challenged and as a consumer that is telling us that in particular parts of the portfolio of our portfolio they want more value to.

Speaker Change #125: Stay with our brands that is not for all the consumers. Some consumers that is not for all the portfolio. Some parts of the portfolio and we have been working different tactics to give the consumer what they want and we see that is working and that's why we feel comfortable about.

Ramon Laguarta: That is not for all the consumers; it is some consumers that is not for all the portfolio; it is some parts of the portfolio, and we have been working different tactics to give the consumer what they want, and we see that it's working. And that's why we feel comfortable about, you know, given the oxygen that we have in the PNL, that we'll be able to deploy in a very targeted way, thinking long term about the category, and making sure that it has good ROI, that we'll be able to turn around the, especially when you were referring to the food business, to positive volume, and with that a higher level of net revenue.

Ramon Luis Laguarta: It's some consumers that are not for all the portfolio; it's some parts of the portfolio. And we have been working on different tactics to give the consumer what they want. And we see that it's working. And that's why we feel comfortable about, given the oxygen that we have in the P&L, that we'll be able to deploy in a very targeted way, thinking long term about the category, making sure that it has good ROI, that we'll be able to turn around the, especially what you were referring to as the food business, to positive volume. And with that, a higher level of. So, that's how we're thinking about the second half.

Speaker Change #125: Given the oxygen that we have in the P&L that will be able to deploy in a very targeted way thinking long term about the category, you're making sure that has it has good ROI they will be able to turn around.

Speaker Change #125: Especially what you were referring in the food business to positive volume and with that.

Speaker Change #125: A higher higher level of net revenue. So that's how we're thinking about the second half again we.

Ramon Laguarta: So that's how we're thinking about the second half. Again, we have green shots with some of the activities we've been executing, and July 4th has been very strong for us, and we feel good about the business.

Ramon Luis Laguarta: Again, we have, you know, green shots with some of the activities we've been executing, and July 4th has been very strong for us, and we feel good about the business. Now, the North America beverage business is also to be highlighted. It's a business that we said over time we wanted to stay with, you know, deliver profitable growth, make sure we compete well in the category, but at the same time improve our margins. You know, we think we're executing the playbook.

Speaker Change #125: <unk>.

Speaker Change #125: Green Green charged with some of the activities we've been executing and July 4th has been very strong for us and we feel we feel good about the business now than North America beverage business is also.

Jamie Caulfield: Now, the North America beverage business is also to be highlighted. It's a business that we said over time we want to stay with, you know, deliver profitable growth, make sure we compete well in the category, but at the same time improve our margins. You know, we think we're executing the playbook well. Actually, we've been accelerating the profitable growth, you know, delivery of the business, and it should continue in the second half. We're investing in advertising and marketing even more in the platforms that are growing, and that's what overall you put it all together. We feel good about the second half of the year, and the momentum that will start 20.

Speaker Change #125: To be highlighted it's a business that we said over time, we want to stay with deliver profitable growth make sure we compete well in the category, but at the same time improve our margins. We're seeing we're executing the playbook well actually we've been accelerating the profitable growth.

Ramon Luis Laguarta: Well, actually, we've been accelerating the profitable growth, you know, delivery of the business. And it should continue. In the second half, we're investing in advertising and marketing even more in the platforms that are growing. And that's what, overall, you put it all together, we feel good about the second half of the year and the momentum that will start. Thank you.

Speaker Change #125: Delivery of the business and that it should continue.

In the second half, we're investing in advertising and marketing even more in the platforms that are growing and thats. What overall you put it all together we feel good about about the second half.

Speaker Change #125: Over the year and the momentum that we will start 2005 with that.

Unknown Executive: Thank you.

Operator: One moment for our next question. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open. All right, thank you. Good morning, everyone.

Bonnie Herzog: One moment for our next question. Our next question comes from Bonnie Herzog with Goldman Sachs. Thank you. Good morning, everyone. I actually had a question on PBNA Ramon.

Speaker Change #126: Thank you one moment for our next question.

Speaker Change #126: Okay.

Speaker Change #127: Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open.

Bonnie Lee Herzog: Alright, Thank you and good morning, everyone asks you had a question on <unk> line of laser touch on it but I'd be.

Bonnie Herzog: I know you just touched on a bit, but I'd be curious to hear if you're satisfied with some of the progress you might be making to reinvigorate the business and maybe what green shoots you are seeing within PBNA. And then I guess I'm hoping for some color on the initiatives you highlighted in terms of the different commercial investments. Should we assume this will also mean a potential step up in promos for PBNA, and do you maybe see a need for some brand repositioning? Are there structural opportunities, you know, essentially what will be the drivers, you know, to reaccelerate growth at PBNA.

Speaker Change #127: Sure.

Speaker Change #129: Thank you.

Speaker Change #130: With some of the progress you might be making to reinvigorate the business.

Speaker Change #131: And maybe what green shoot you are seeing.

Speaker Change #132: Within <unk>, and then I guess, what I'm, hoping for some color on the most of you highlighted in terms of the disappointing commercial investments should be assume this will also mean a potential step up in promo for <unk> and do you maybe see a need for some brand repositioning are there structural opportunities essentially what.

We will be the drivers.

To reaccelerate growth at <unk>.

Ramon Laguarta: Thanks. Yeah, it's good. Bonnie, I'll give you a couple of data points that I think are relevant. Gatorade, for example, has been gaining share, you know, this year, year to date, meaningful. It's accelerating. That's a core part of our portfolio and a very profitable part of portfolio. So that that's one data point within investing in Gatorade, not so much on, as you were saying, promos and discount, but more on innovation, execution and branding and that's paying back the same with Propel. So all that functional hydration space, I think we're it's a focus for us always been a focus, but now I think that part of the portfolio is working well.

Speaker Change #133: Yeah. Thanks, Good morning, I'll give you a couple of data points that I think are relevant.

Ramon Luis Laguarta: Bonnie, I'll give you a couple of data points that I think are relevant. Gatorade, for example, has been gaining, and this year, it meaningfully is accelerating. That's a core part of our portfolio and a very profitable part of our portfolio. So that's one data point we've been investing in Gatorade, not so much on, as you were saying, promos and discounts, but more on innovation, execution, and branding, and that's paying back. The same is true with Propel.

Speaker Change #134: Gatorade for example has been gaining share.

Speaker Change #134: This year year to date meaningfully is accelerating that's a core part of our portfolio and a very profitable part of our portfolio. So thats one data point, we've been investing in Gatorade not so much on.

As you were saying promos and discounts, but more on innovation execution and branding and that's paying back the same with propel so all of that functional hydration space I think it's a focus for US has always been a focus but now I think that part of the portfolio is working well I think some of the G to DSD.

Ramon Laguarta: I think some of the G2DSD challenges that we had last year are behind us. I don't think we're all the way to perfection there, but much better service levels in this early part of the summer, which obviously weren't when the category peaks and where we have to be ready for perfection. So that part is clear. If you think about the other brand we've been talking for some time, month and new, a month and new is on growth. Now it's back to growth. I think we made the strategic decision to have multiple flavors driving the brand and made by a structural part of the portfolio versus the LTO that's driving consumers into the brand, incremental consumers, and again better levels of execution.

The challenges that we had last year are behind US I don't think we're all the way to perfection, there, but much better service levels in.

Speaker Change #134: <unk> in these early part of this summer, which obviously, where that's when the category.

Speaker Change #134: <unk> and where we have to be ready for perfection. So that part is clear when you think about the other brand we've been talking for some time mountain Dew.

Speaker Change #134: News on growth now is back to growth I think we made the strategic decision to have multiple flavors driving the brand that made by strict.

Structural.

Speaker Change #134: Part of the portfolio versus yes, and MTO, thus driving consumers into the brand.

Speaker Change #134: Incremental consumers and again better levels of execution. So there are some examples all the zero part of the portfolio is booming.

Ramon Laguarta: So there's some examples. All the zero part of the portfolio is booming, right? If you think about consumer trends, clearly we know where they're going. We know that internationally, and we know that's going to eventually happen here in the US. But so zero, not only on coal ads, not only on soft drinks, but also on Gatorade, on teas, on coffees, that we're seeing that consumers are are are going. And then the last part is our food service business is becoming stronger and we're being better at the where the profitability is, which is on the fragmented restaurant, local restaurant and, you know, we're consumers, you know, have a lot of interaction every day.

Speaker Change #134: If you think about consumer trends.

Speaker Change #134: Clearly, we know where they're going we know that internationally and we know that's going to eventually happen here in the U S. So zero not only oncology not only on soft drinks, but also on Gatorade.

On Ts on coffees.

Speaker Change #134: We're seeing that consumers are.

Are going and then the last part is our foodservice business is becoming stronger and were being better at.

Where the profitability is which is.

Speaker Change #134: Fragmented restaurant local restaurant and our consumers.

Speaker Change #134: Have a lot of interaction every day and Thats part of the portfolio. We've been investing we're getting additional distribution. We know we know we are becoming a better a better execution company in that in that particular channel and we are feeling good about about that.

Unknown Executive: And that part of the portfolio we've been investing, we're getting additional distribution. We know we know we're becoming a better execution company in that particular channel, and we're feeling good about about. Thank you.

Lauren Lieberman: One moment for our next question. Our next question comes from Lauren Lieberman with Barclays. Your line is open. Great. Thanks so much. I want to go back to Frito, if I may, because you commented on some consumers and being more value to stay with our brands. But one thing we've been doing a lot in trying to parse through the data that's available to us. And it looks like it's the category, the salty snack category as a whole is really pressured. It's not just your brands. I know, given your share, there's sort of one in the same, but it looks like there's a broader category issue.

Thank you one moment for our next question.

Speaker Change #134: Okay.

Operator: One moment for our next question. Our next question comes from Lauren Lieberman with Barclays. Your line is open. Great, thanks so much.

Our next question comes from Lauren Lieberman with Barclays. Your line is open.

Great. Thanks, so much.

Lauren Rae Lieberman: Ramon, I wanted to go back to Frito, if I may, because you commented on some consumers and, you know, being more value to stay with our brands. But one thing we've been doing a lot is trying to parse through the data that's available to us, and it looks like the category, the salty snack category as a whole, is really pressured. It's not just your brands.

Lauren Rae Lieberman: And then I wanted to circle back to Frito, if I may.

Speaker Change #135: Because you commented on.

Consumers and.

Speaker Change #136: Being more value to stay with our brands, but one thing we've been doing a lot in trying to parse through the data that's available to us and it looks like the category. The salty snack category as a whole is really pressured it's not just your brands I know given your share there sort of one and the same but it looks like there is a broader category issue.

Ramon Luis Laguarta: I know, given your share, they're sort of one in the same, but it looks like there's a broader category issue. Again, some of the data we've looked at, it feels like the category is not proving terribly responsive to promotion. So I just was hoping you could comment on that, if that is or isn't consistent with what you're seeing and how what you're gonna be doing will be different. Because again, what we've seen so far, it doesn't look like there's a lot of response, and it feels like the category is proving more discretionary. So I would just love your thoughts on that. Thanks.

Ramon Laguarta: Again, some of the data we've looked at, it feels like the category is not proving terribly responsive to promotion. So we just was hoping you could comment on that. If that is or isn't consistent with what you're seeing and how what you're going to be doing will be different. Because again, what we've seen so far, it doesn't look like there's a lot of response, and it feels like the category is proving more discretionary. So just love your thoughts on that. Thanks. Yeah.

Speaker Change #136: Some again some of the data we've looked at it feels like the category is not proving terribly responsive to promotion.

Speaker Change #137: So I just was hoping you could comment on that if that is or isn't consistent with what youre seeing and how youre going to be doing will be different because again, what we've seen so far it doesn't look like there's a lot of response.

Speaker Change #137: Feels like the category is proving more discretionary.

Speaker Change #137: So just love your thoughts on that thanks.

Ramon Laguarta: I think I, we feel that the issue is an issue of value. It's not an issue of anything else. And we have a lot of data. Obviously, now, how do you address that value gap versus what consumers want to do? I think it's the, you know, it is where they know how we'll come and the sweet spot. For us is not to promote, but is to promote to who needs it in the products that need it versus a blanket approach to promotion. So that's where we're investing a lot of time. I think we're much more capable from the insights and diagnostic point of view and also from our ability to execute more granularly all these interventions, be digital, be it with particular channels or customers. To give you an example.

Speaker Change #138: I think.

Ramon Luis Laguarta: Yeah. I, we feel that the issue is an issue of value and is not an issue of... anything else. We have a lot of data, obviously. Now, how do you address that value gap versus what consumers want to do? I think it's the...

Speaker Change #139: We feel that.

Speaker Change #140: The issue is an issue of value is not an issue of.

Speaker Change #140: Anything else in.

Speaker Change #140: We have a lot of data obviously now how do you address that value gap versus where consumers want to do I think it's the.

Ramon Luis Laguarta: It's the..., is where the know-how will come from, and the sweet spot for us is not to promote but to promote to those who need it in their products that need it versus a blanket approach to promotion. So that's where we're investing a lot of time. I think we're much more capable from the insights and diagnostic point of view and also from our ability to execute all these interventions more granularly, be it digital, be it with particular channels or customers.

Speaker Change #140: Is where they know how it will come in the sweet spot for US is not to promote but is to promote to who needs. It in their products that need it versus a blanket approach to promotion.

Ramon Laguarta: We feel that the unsalted part of our portfolio, right? If you think about potato chips or tortilla chips, that needs some value reset and value intervention for some consumers. When we think about flavor potato chips or other parts of our portfolio, no, I mean, consumers are staying in the category, are staying in our brands and they're buying with high frequency as in the past. There are other parts of the portfolio that are growing very fast, especially the permissible part of what we call Permissible Portfolio Positive Choices. This is a, you think about brands like sun chips, pop corners, smart food, all the simply range of the eating path.

Speaker Change #140: We feel that the.

Speaker Change #140: Unsalted part of our portfolio right. If you think about potato chips are our tortilla chips that needs some value reset and value intervention for some consumers. When we think about flavor potato chips or other parts of our portfolio no I mean consumers are staying in.

Ramon Luis Laguarta: Consumers are staying in the category, staying in our brands, and they're buying with pretty high frequency as in the past. There are other parts of the portfolio that are growing, growing very fast, especially the permissible part of what we call the permissible portfolio, positive choices. This is a, you think about brands like SunChips, Popcorners, Smart Food, or the Simply range of the Eat'n Path. Those brands are growing, and it is not about value.

Speaker Change #140: The category are staying in our brands and thereby with pretty high frequency as in the past there are other parts of the portfolio that are growing and growing very fast, especially the permissible part of what we call permissible portfolio positive choices.

Speaker Change #140: As a.

Speaker Change #140: When you think about brands like Sun chips, both corners.

Smart food or the simply range of the eat in Bath those brands are growing.

Ramon Laguarta: Those brands are growing, and there is not about value there. I think it's more about, and the way we're going to approach it is more marketing, investment, awareness, execution, availability. There's different tools that we'll be using to drive the category growth. To your point on, is it the category, is it PepsiCo brands? I think, given our massive participation in the category through many multiple brands, I think it's our responsibility to manage this category for the long term, providing value to consumers in different ways and continue to have the savory snacks category growing above food, structurally, as we have that in the past.

Speaker Change #140: And there is not about value there I think it's more about and the way we're going to approach. It is more marketing investment awareness execution availability. So there is different.

Ramon Luis Laguarta: There, I think, is more about, and the way we're gonna approach it, is more marketing, investment, awareness, execution, availability. So there are different tools that we'll be using to drive category growth. To your point, is it the category, or PepsiCo brands?

Speaker Change #140: Theres different tools that will be using.

Speaker Change #140: To drive the category growth.

Speaker Change #140: To your point on is it the categories at Pepsico brands I think given given our massive.

Ramon Luis Laguarta: I think given our massive participation in the category through many multiple brands, I think it's our responsibility to manage this category for the long term, providing value to consumers in different ways, and continue to have the savory snacks category growing structurally as we have done in the past. Now, there is nothing in terms of consumer long-term trends that tells us that that's not possible. I think it's small adjustments in value and in execution and in investment in new innovation areas that will drive it, and we feel very strong about our ability to do that, not in the long term but actually in the short term, in Q3 and Q4. And that's why our guidance reflects a little bit that inflection, because we're already testing and executing some of these levers, and we see the returns it has in volume and that. Thank you.

Speaker Change #140: Participation in the category through many multiple brands.

Speaker Change #140: It's our responsibility to manage these category for the long term providing value to consumers in different ways and continue to have.

Speaker Change #140: The savory snacks category growing about food structurally as we have done in the past now there is nothing in terms of consumer.

Ramon Laguarta: Now, there is nothing in terms of consumer long-term trends that tells us that that's not possible. I think it's a small adjustments in value and in execution and in investment in new innovation areas that will drive it. We feel very strong about our ability to do that, not in the long term, but actually in the short term, in Q3 and Q4. That's why our guidance reflects a little bit that inflection because we're already testing and executing some of these levers, and we see the returns it has in volume and effort. Ravi.

Speaker Change #140: Long term trends that tells us thats not possible I think as a small adjustments in value and in execution and investment in new innovation areas that will drive it and we feel very strong about our ability to do that not in the long term, but actually in the short term in Q3, and Q4 and Thats why our guidance reflects.

Speaker Change #140: A little bit that inflection because we're already testing on executing some of these levers and we see the returns he has in volume and net revenue.

Brian Spillane: Thank you, one more for our next question. Our next question comes from Brian Spillane with B of A; your line is open. Hey, thanks, operator. Good morning, good morning, Jamie. Just wanted to circle back on Frito, and I guess, you know, stepping back, you know, you're able to sort of reset the margins and fund it with just deep, you know, drilling deeper into some of the reservoirs of productivity, other places in the organization. So I guess just if you can comment on two things related to that. One, given that you're tapping more productivity this year, does it, how does that affect next year?

Speaker Change #141: Thank you one moment for our next question.

Speaker Change #141: Okay.

Operator: One moment for our next question. Our next question comes from Bryan Spillane with B of A. Your line is open. Hey, thanks, operator. Good morning, Ramon. Good morning, Jamie.

Speaker Change #142: Our next question comes from Bryan Spillane with Bofa. Your line is open.

Bryan Douglass Spillane: Hey, Thanks, operator, good morning, Ramon good morning, Jamie.

Bryan Douglass Spillane: Just wanted to circle back on Frito, and I guess stepping back.

Speaker Change #143: You were able to sort of reset the margins.

Funded with just DP.

Speaker Change #144: Drilling deeper into some of the reservoirs of a productivity other places in the organization. So I guess, just if you can comment on two things related to that one.

Speaker Change #144: Given that Youre tapping more productivity. This year does it how does that affect next year does that affect maybe not having as much productivity to flow through or is that reservoir very deep.

Brian Spillane: Does that affect maybe not having as much productivity to flow through, or is that reservoir very deep?

Ramon Luis Laguarta: And then the second is, as we're thinking about Frito margins stepping back, you know, in the back half of the year, should we be thinking about that now as the new base to maybe grow off of gradually, or is that a major step down, and then you'd expect for us to have another, you know, maybe step change up in the future? Yeah.

Brian Spillane: And then the second is, as we're thinking about Frito margins stepping back, you know, in the back half of the year, should we be thinking about that now as the new base to maybe grow off of gradually, or is that a major step down and then you'd expect Frito to have another, you know, maybe step change up in the future. Yeah.

And then the second is as we're thinking about frito margins stepping back.

Speaker Change #144: In the back half of the year.

Speaker Change #144: Should we be thinking about that now as the new base to maybe grow off of gradually or is that a major step down and then you would expect frito had another maybe step change up in the future.

Ramon Luis Laguarta: So, Bryan, let me tell you, and I think we've talked about this in the past, we're managing total PepsiCo operating margin. And as you've seen, we keep improving the margin. This quarter was, you know, almost 100 bps of operating margin improvement. And it's been consistent for the last few years. We feel good about our productivity pipeline. It's not tactical, it's super strategic, and it's

Ramon Laguarta: So, Brian, let me tell you, I think we've talked about this in the past. We're managing total PepsiCo operator margin. And, as you've seen, we keep improving the margin. And then this quarter was, you know, almost 100 bps of operating margin improvement. And it's been consistent for the last few years. We feel good about our productivity pipeline.

Brian: Yes, So Brian let me tell you I think we've talked about this in the past we're.

We're managing total Pepsico operating margin and <unk>.

Brian: <unk> seen we keep improving the margin this quarter was almost 100 bps of operating margin improvement.

Brian: It's been consistent for the last few years, we feel good about our productivity pipeline is not tactical it's super strategic multi year and is based on automation is based on digitalization and simplification of the company is standardization of different service models to the business. So there is there is a whole.

Ramon Laguarta: It's not tactical; it's super strategic, and it's multi-year, and it's based on automation, it's based on digitization, simplification of the company, standardization, different service models to the business. So there is a whole portfolio of productivity ideas that are multi-year in nature, and we don't think that we will slow down our productivity in the coming years. Now, as you think about our overall margin, international has, you know, continued to grow its margin. PBNA has been very vocal from our side that we want to have that business going, moving into meetings. And we're delivered on that. And we've always said that the big value of freedom for ads is not so much whether it's a 26 or 26 and a half or 27 and a half.

Ramon Luis Laguarta: And it's based on automation, it's based on digitalization, simplification of the company, standardization, and different service models for the business. So, there is a whole portfolio of productivity ideas that are multi-year in nature, and we don't think that we will slow down our productivity in the coming years. Now, as you think about our overall margin, international has continued to grow its margin. PB&A has been very vocal on our side that we want to have that business moving into the mid-teens, and we're delivering on that. And we've always said that the big value of freedom for us is not so much whether it's a 26 or 26 and a half or 27 and a half. That is, I would say, very relevant.

Brian: Portfolio of productivity ideas that are multiyear in nature and.

Brian: We don't think that we.

Brian: We will slow down our productivity in the coming years now as you think about our overall margin.

Brian: International has continued to grow its margin.

<unk> has been very vocal from our side that we want to have that business going moving into mid teens and were delivered on that and we've always said that the big value of Frito for us is not so much whether is it 26 or 26 and a half of 27 five that is very relevant I would.

Ramon Laguarta: That is very relevant, I would say. It's always tremendously acquitted for ads long-term. And the biggest value creation for freedom is to make sure that it grows at a four or five percent level. And that is going to be our continuous to be our strategic focus. How do we get freedom to continue to grow above the category, make the category very healthy in terms of growth, keep bringing consumers, occasions, and new opportunities for channel expansion to freedom. And that will continue to be our focus. We'll keep investing until we get it right. We feel good about getting it right rather soon.

Ramon Luis Laguarta: It's always tremendously accretive for us in the long term, and the biggest value creation for freedom is to make sure that it grows at four or 5% levels. And that is going to be our, and continues to be our strategic focus. How do we get the freedom to continue to grow above the category, make the category very healthy in terms of growth, keep bringing consumers, locations, and channels new opportunities for channel expansion to Frito? And that will continue to be our focus. We'll keep investing until we get it right. We feel good about getting it right rather soon.

Brian: Say, it's always tremendously accretive for us long term and the biggest value creation for Frito is to make sure that he grows at a four or 5% levels and that is going to be our continues to be our strategic focus how do we get frito to continue to grow above the category make the category very healthy in terms of growth.

Brian: Keep bringing consumers locations on channel and the opportunities for channel expansion to freedom and that will continue to be our focus we will keep investing until we get it right.

Brian: We feel good about getting it right.

Ramon Luis Laguarta: And that's the way we'll keep managing the overall profitability of the company and Frito, PB&A, and international, in particular, with different SAP strategies. And obviously, that ties down to every market around the world when you talk about international, but we have a very good playbook for every country and every line of business in every country, expectations for profitability, and roadmaps to deliver that kind of. Thank you.

Brian: Rather soon and.

Ramon Laguarta: And, you know, that's the way we'll keep managing the overall profitability of the company.

Brian: That's the way, we'll keep managing the overall profitability of the company and Frito PVA on international in particular with different SAP strategies, and obviously that triggers down to every market around the world. When you talk about international but we have very good playbook for every country and every at every.

Ramon Laguarta: And freedom, PBNA, and international in particular, with different sub-stories, and obviously that triggers down to every market around the world when we talk about international. But we have a very good playbook for every country and every line of business in every country, expectations on profitability and roadmaps to deliver that kind of... and that kind of growth.

Brian: Line of business and every country expectations on profitability on Roadmaps to deliver that you have that kind of that kind of growth.

Unknown Executive: Thank you. One moment for our next question. Our next question comes from Kamil Gajrawala with Jeff Rees; your line is open. Hi, good morning, everybody. Do you believe that the prices at Frito are too high, given the increases over recent years? I think I kind of touched on the point earlier, but some parts of the portfolio need value adjustments; some parts of the portfolio don't. Some parts of the portfolio need to be for particular consumers. We need some new entry points and probably some new promotional, you know, kind of mechanics that don't spec for the consumer to invest so much cash in a purchase of salty.

Thank you one of them before our next question.

Operator: One moment for our next question. Our next question comes from Kaumil Gajrawala with Jeffrey. Your line is open. Hi, good morning, everybody. Do you believe that the prices at Frito are too high, given the increases over recent years? isn't coming out.

Speaker Change #146: Our next question comes from <unk> <unk> with Jefferies. Your line is open.

Speaker Change #147: Hi, good morning, everybody.

Speaker Change #148: Do you believe that the prices at Frito are too high given.

Speaker Change #149: Given the increases over recent years.

Speaker Change #150: It isn't.

Kaumil S. Gajrawala: I think I kind of touched on this point earlier, but... Some parts of the portfolio need value adjustments, and some parts of the portfolio don't. Some parts of the portfolio need to be, for particular consumers, we need some new entry price points and probably some new promotional, you know, kind of mechanics that don't expect the consumer to invest so much cash in a purchase of salt. So there's adjustments that we have to make. [inaudible] I think this is going to be about granularity; it's going to be about, you know, good execution of that granularity.

Speaker Change #151: I think I kind of touch on the point earlier, but.

Speaker Change #151: Some parts of the portfolio need value adjustments some parts of the portfolio darned.

Speaker Change #151: Some parts of the portfolio needs to be for particular consumers, we need some new.

Speaker Change #151: Entry price points, and probably some new promotional.

Speaker Change #151: Kind of mechanics that done.

Speaker Change #151: Spec for the consumer to invest so much cash in our purchase of <unk>. So there is adjustments that we have to make to.

Kamil Gajrawala: So there's adjustments that we have to make to, for certain consumers, some parts of the portfolio.

Speaker Change #151: For certain consumers some parts of the portfolio I don't think the overall portfolio is.

Ramon Laguarta: I don't think the overall portfolio needs a reset. I think this is going to be about granularity; it's going to be about good execution of that granularity, and that's what I think we're well prepared to do throughout the full value chain. So, yes, there is some value to be given back to consumers after three or four years of a lot of inflation. Our cost allows us to do that whatever we choose to do, and that will be one of the interventions that we'll be making in the second half, but not the only one. I mean, there's going to be investments in marketing, there's going to be investments in better execution that overall will derive the business; the business grow to where we think it will be structurally in the coming years.

Speaker Change #151: His needs.

Speaker Change #151: It needs a reset.

I think this is going to be about and granularity is going to be about.

Speaker Change #151: Good execution of that granularity and Thats whats I think we're well prepared to do throughout.

Ramon Luis Laguarta: And that's what I think we're well prepared to do throughout, you know, throughout the full value chain. So yes, there is some value to be given back to consumers after three or four years of a lot of inflation. Our cost allows us to do that, whatever we choose to do.

Speaker Change #151: The full value chain so.

Speaker Change #152: Yes, there is some.

Speaker Change #152: Value to be given back to consumers after three or four years of a lot of inflation.

Speaker Change #152: Our cost allows us to do that wherever we choose to do and that will be one of the interventions that we'll be making.

Speaker Change #152: In the second half, but not the only one.

Speaker Change #152: There's going to be investments in marketing, there's going to be investments in better execution that overall will drive the business the business growth to where we think it will be structurally in the coming years.

Peter Grom: Thank you. One moment for our next question. Our next question comes from Peter Graham with UBS. Your line is open. Thanks Operator. Good morning, everyone.

Speaker Change #153: Thank you one moment for our next question.

Yes.

Operator: One moment for our next question. The next question comes from Peter Grom with UBS. Your line is open. Thanks, operator. Good morning, everyone. So I was hoping to get some color on Latin America.

Speaker Change #154: Our next question comes from Peter Grom with UBS. Your line is open.

Peter K. Grom: Organic revenue was the weakest we've seen in some time here, and I think in the prepared remarks, you know, Brazil and Mexico seem solid. So just a curious kind of what drove the weakness in the quarter.

Peter K. Grom: Thanks, operator, good morning, everyone. So I was hoping to get some color on Latin America.

Peter Grom: So I was hoping to get some color on Latin America. Organic revenue was the weakest we've seen in some time here. And I think in the prepared remarks, Brazil and Mexico seen style. So just curious, kind of what drove the weakness in the quarter.

Organic revenue was the weakness we've seen in some time here and I think in the prepared remarks.

Peter K. Grom: <unk> in Mexico has seen solid so just curious kind of what drove the weakness in the quarter and then Ramon just as we look ahead. You mentioned you still expect strong growth from international in the back half of the year, how does Latin America into that equation would you anticipate improvement or should we expect more muted performance to continue thanks.

Ramon Laguarta: And then we're going to just, as we look ahead, you mentioned you still expect strong growth from international in the back after a year. How does Latin America fit into that equation? Would you anticipate improvement, or should we expect more muted performance to continue? Thanks.

Ramon Laguarta: No, I think that again, I would look at Latin and all the international business in like six months rather than three months and three months. There's a lot of moving pieces between first quarter, second quarter, or Chinese New Year. In particular, the Latin situation in our case is related to Mexico. And Mexico, because of the elections, there've been some changes in this possible income given to the families by the government that created some abnormalities in the way those funds were distributed. And that's impacted demand in Mexico in the last what we're seeing in the last three weeks in Mexico that as those funds have been and giving back to consumers again that the demand has come back to our category.

No I think the.

Speaker Change #155: Again, I would look at Latam.

Speaker Change #155: And all of the international business like.

Speaker Change #155: <unk>.

Speaker Change #156: Six months, rather than a three months or three months, there's a lot of moving pieces between first quarter second quarter Chinese new year.

In particular, the Latam situation in our case is.

Speaker Change #156: As related to Mexico, and Mexico because of the elections there have been some changes in this possible income given to their families by the government that created some some I would say some normality.

Speaker Change #156: Normally it is in the way in the way those funds were distributed and that's impacted demand in Mexico in the last what we've seen in the last three weeks in Mexico that as those funds have been.

Speaker Change #156: Given back to consumers again.

Speaker Change #156: The demand has come back to our to our category. So we don't we don't foresee any issue in Latam in Latam.

Ramon Laguarta: So, we don't foresee any issue in Latam. Again, value continues to be a factor as it's always been in LatAm.

Speaker Change #156: Again, I mean value continues to be a factor as it has always been in Latam.

Ramon Laguarta: We'll see plus and minuses between the different countries, but as a region, Latam continues to be a high performing region for us where we keep developing the categories and we keep expanding our margins and building scale businesses. Not only makes you come Brazil, but that across multiple markets.

Speaker Change #156: We'll see pluses and minuses between the different countries about as a region Latam continues to be a high performing region for us where we keep.

Speaker Change #156: Developing the categories and we keep expanding our margins and building scale businesses, not only in Mexico, and Brazil that across multiple markets.

Unknown Executive: Thank you.

Filippo Falorni: One moment for our next question. Our next question comes from Filippo Falorni with City Online. Is open. Hey, good morning, everyone. So, just staying on an international business from on you sound pretty confident on the growth in international. Maybe you can talk more about like what regions do you see the greatest growth potential in that business. And going back to the question on guidance on top of for the second half, is the improvement in organic sales mainly driven by an improvement in North America or an acceleration in international. If you can give, you should assume that most of the incremental acceleration of the business comes from mostly North America, right?

Speaker Change #157: Thank you one moment for our next question.

Speaker Change #158: Our next question comes from Philip <unk> with Citi. Your line is open.

Ramon Luis Laguarta: And then Ramon, just as we look ahead, you mentioned you still expect strong growth from international in the back half of the year. How does Latin America fit into that equation? Would you anticipate improvement, or should we expect more muted performance to continue? Thanks.

Speaker Change #159: Hey, good morning, everyone. So just staying on international on the international business from on you sounded pretty confident on the growth.

Speaker Change #160: International maybe you can talk more bond like what regions do you see.

Speaker Change #161: The greater growth potential in that business and going back to the question on guidance on top line for the second half is the improvement in organic sales, mainly driven by an improvement in North America or an acceleration in international if you can give some color that will be helpful.

Ramon Luis Laguarta: No, I think the, again, I would look at LATAM and all the international business in like, [inaudible] Unknown Executive, Filippo Falorni, Ravi Pamnani, Callum Elliott, James Caulfield, Brett Cooper, Unknown Executive, Filippo Falorni, Ravi Pamnani, Callum Elliott, James Caulfield, Robert Moskow, Thank you. One moment for our next question. Our next question comes from Filippo Falorni with Citi. Your line is open. Hey, good morning, everyone.

Filippo: Yes Filippo.

Filippo: You should assume that most of the incremental.

Speaker Change #162: The incremental acceleration of their business comes from mostly in North America.

Filippo Falorni: And the two factors I mentioned, Quaker, we'll get back to growth; the labs get better for North America. And then some of the interventions we're making, both in value and in additional A&M, should drive additional volume. Those are the three factors.

Speaker Change #163: And the two factors I mentioned Quaker.

Speaker Change #164: We'll get back to growth.

Speaker Change #164: The lapsing of better for North America, and then some of the <unk>.

Speaker Change #164: Our ventures, we're making both in value, adding additional A&M should drive additional volume. Those are those are the three factors internationally, we're assuming that the rate of growth for the first half will continue in the second half and again.

Ramon Laguarta: Internationally, we're assuming that the rate of growth for the first half will continue in the second half. And again, we're seeing parts of the portfolio accelerating, parts of the portfolio kind of stabilizing. Some of them being a little bit softer, but overall, the portfolio at this point is broad enough; we have enough scale across multiple markets that we're kind of hedged geographically. So that's what we're assuming, and what we're seeing, that the percaf's growth of the category will continue.

Speaker Change #164: We're we're seeing parts of the portfolio.

Speaker Change #164: Sure.

Speaker Change #164: Accelerating in parts of the portfolio kind of stabilizing and some of them be.

Speaker Change #164: A little bit softer, but overall the portfolio at this point is broad enough we have enough scale across multiple markets that we are.

Speaker Change #164: Kind of hedge geographically.

Speaker Change #164: So thats, what were assuming and where we're seeing that.

Speaker Change #164: <unk> growth of the category will continue we continue to invest meaningfully incremental funds to both execution and brand development and we don't see any reason why now of course, it could be big geopolitical reasons, why we change our mind and later in the year, but with information we have today about geopolitics.

Ramon Laguarta: We continue to invest meaningfully, incremental funds to both execution and brand development. And we don't see any reason why; of course, it could be big geopolitical reasons why we change our mind later in the year, but with the information we have today about geopolitics and the stability of countries. That's our best guest today.

Speaker Change #164: And its stability of countries, that's our best our best guess today.

Robert Ottenstein: Thank you. One moment for our next question. Our next question comes from Robert Marta with TD Cowan. Your line is open. Thanks. A couple of questions.

Speaker Change #165: Thank you one of them before the next question.

Our next question comes from Robert Moskow with PD Cowen Your line is open.

Robert Bain Moskow: Hi, Thanks, a couple questions. One is I was hoping you could give a little more color on the energy drinks category growth has slowed dramatically in the U S and just wanted to get your perspective.

Ramon Laguarta: One is, I was hoping you'd give a little more color on the energy drinks category; growth has slowed dramatically in the U.S. and just wanted to get your perspective. Do you think that consumers there are making a value decision as well? There's a lot of premium-price drinks there. Do you see any evidence of trading down to maybe higher caffeine carbonated drinks? Thanks.

Robert Bain Moskow: And ask like do you think that consumers there are making a value decision as well there's a lot of premium priced drinks. There do you see any evidence of trading down to maybe higher caffeine carbonated drinks.

Speaker Change #167: This is.

Ramon Laguarta: I think from the mention of the energy category continues to provide long-term good prospects for our industry. I think it's a consumer need that will continue to be there, and whether we are able to satisfy that through multiple options that will continue to grow. There's always small ups and downs of subcategories within LRB that you could argue. Is it because of channel dynamics? Is it because it's very hot and people are moving to other parts of the portfolio. Like we're seeing, for example, in our case, in the recent six weeks, a massive growth in our hydration portfolio because obviously it's been very hot in the US.

I think fundamentally the energy category continues to provide.

Speaker Change #168: Long term good prospects for for our industry I think it's a it's a consumer need that we will continue to.

Speaker Change #168: B, there and whether we are able to satisfy that through multiple options.

Speaker Change #168: That will continue to grow.

Speaker Change #168: There's always small.

Speaker Change #168: Ups and downs of subcategories within LRB that you could argue could argue.

Speaker Change #168: Is it because of channel dynamics as you because it is very hard and people are moving to other.

Speaker Change #168: Parts of the portfolio like we're seeing for example in our case in the recent six weeks and massive growth in our hydration portfolio, because obviously, it's been very hot in the U S.

Ramon Laguarta: So I guess there is some kind of validation between energy and hydration for some consumers, and they prefer to do that. So I would then over reading to the short term of the category. I would try to think about this as a consumer needs energy. If we're able to provide energy in a consumer-friendly way, including price, probably as you mentioned. But I would say functionality, clean labels, I mean like a lot of the things that I think the category has been working on; they should be a good runway for that segment of the category, and it's been value creating for a lot of us that participate in it, including the retailer, partners, and the brand owners.

Speaker Change #169: Yes, there is some.

Speaker Change #169: Kind of validation between energy and hydration for some consumers and they prefer to do that so I wouldn't over read into the short term of the category I would I would try to think about this as a new consumer needs energy, we're able to provide energy.

Speaker Change #169: In a consumer friendly way, including price, probably as you mentioned, but I would say functionality.

Speaker Change #169: Labels.

Speaker Change #169: Lot of the things that I think the category has been working on this should be a good runway for that segment of the category and it's been value, creating for a lot of eyes that participate in it.

Speaker Change #169: The retailer partners.

Speaker Change #169: And the brand owners.

Andrew Texher: Thank you. One moment for our next question. Our next question comes from Andrew Texher with JP Morgan. Your line is open. Thank you. Good morning, everyone. Ramon Jamie.

Speaker Change #170: Thank you one moment for our next question.

Speaker Change #171: Our next question comes from Andrew <unk> with Jpmorgan. Your line is open.

Andrew <unk>: Thank you good morning, everyone Ramon Jamie My question is on the bridge to the mid single digit organic sales growth in the second half.

Andrew Texher: My question is on the bridge to the meat and go to just the organics. Is growth in the second half. Assuming international Ramon, you just mentioned growth the same kind of single digits into the second half and of course understanding the easy codes for quicker. It soon implies a good inflection into a free to and and PDA. How do you think like we should be thinking about the progress and perhaps you know related to that from much channel perspective the away from home. For you growing from what it seems to be like a distribution, what what is the like for like in sales basically by by channel if you would think about away from home and at home.

Speaker Change #172: Assuming international Remortgages Mason goes the same kind of mid single digits in the second half of question understanding the easy comps for Quaker is to me implies a growth inflection into frito and <unk>.

Cdna.

Speaker Change #173: How do you think like we should be thinking about the progress and perhaps related to that.

Speaker Change #173: Channel perspective, the away from home.

Speaker Change #174: For you.

Speaker Change #174: Growing from what it seems to be like a distribution.

Speaker Change #174: The like for like.

Speaker Change #174: And in May is going to buy by channel. If you think about away from home and at home.

Jamie Caulfield: And right, Jamie. Yeah.

Ramon Luis Laguarta: Yeah, Filippo, hi, the three factors I mentioned, Quaker, we'll get back to growth. The Labs Get Better for North America, and then some of the interventions we're making both in value and in additional A&M should drive additional volume. Those are the three factors.

James T. Caulfield: Andrei it's Jamie.

Jamie Caulfield: On the acceleration in the back half, as Ramon mentioned, that that's going to come mostly from North America for reasons we cited, and we're making the investment primarily focused North America. We've got the easier laughs and Quaker. So that gives us a lot of confidence on one channels.

Ramon: On the acceleration in the back half as Ramon mentioned, that's going to come mostly from North America for the reasons, we cited and we're making the investment primarily focused in North America, we've got the easier laps and Quaker So that gives us a lot of confidence on channels look away from home has.

Ramon Luis Laguarta: Internationally, we're assuming that the rate of growth for the first half will continue in the second half. And again, we're seeing parts of the portfolio... Accelerating parts of the portfolio, kind of stabilizing some of them, being a little bit softer.

Ramon Luis Laguarta: But overall, the portfolio at this point is broad enough. We have enough scale across multiple markets that, you know, we're kind of hedged geographically. So that's what we're assuming and what we're seeing that, you know, the per capita growth of the category will continue. We continue to invest meaningfully in both execution and brand development. And we, you know, we don't see any reason why not. Of course, there could be big geopolitical reasons why we change our mind later in the year.

Jamie Caulfield: Look away from home has been a focus area for us. We put investment behind that, and it's out growing the balance of our portfolio. So we'd expect that to continue.

Ramon: Been a focus area for us, we put investments behind that and it's outgrowing.

Ramon: The balance of our portfolio, so we'd expect that to continue.

Chris Carey: Thank you. One more for next question. Our next question comes from Chris Kerry with Wells Fargo Securities. The line is open. Hi, good morning, everyone. Ramon, I know you mentioned international to be looked at on six months, paid in. I was wondering, however, if you could comment on some specific region just in Europe. Why do your mind have trends been so resilient? I don't think it's just your portfolio. I think the region in general has been more resilient for longer than many expected. I think you were clear last quarter that there was some timing benefit.

Operator: But with the information we have today about geopolitics and the stability of countries, that's our best guess. Thank you. One moment for our next question. Our next question comes from Robert Moskow with TD Cowen. Your line is open.

Speaker Change #175: Thank you one moment our next question.

Robert Bain Moskow: Hi, thanks. A couple questions. One is, I was hoping you'd give a little more color on the energy drinks category. You know, growth has slowed dramatically in the U.S., and I just wanted to get your perspective and ask, like, do you think that consumers there are making a value decision as well? There are a lot of premium price drinks there. Do you see any evidence of trading down to, maybe, higher caffeine carbonated drinks? Thanks.

Speaker Change #176: Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open.

Speaker Change #177: Hi, good morning, everyone.

Speaker Change #178: Ramon I know you mentioned international if you look at on six months. Peter I was wondering however, if you could comment on some specific region just in Europe.

Speaker Change #179: Why to your mind have trends been so resilient I don't think its just your portfolio in the region in general has been more resilient for longer than many expected and then in Asia. I think you were clear last quarter that there was some timing benefit clearly we saw that normalize this quarter what's the.

Ramon Laguarta: Clearly, we saw that normalize this quarter. What's the right run rate for this division? And do you have any comments on the progress in China? Thank you.

Speaker Change #180: Right run rate for this division and do you have any comment on the progress in China. Thank you.

Ramon Laguarta: Yeah, so listen again we're looking at international as a portfolio of geographies and markets, and we see you know the portfolio kind of when it's not growing so much here. So at the end, historically, we've learned that portfolio is quite diversified and that gives us the opportunity to, you know, to talk about an international business as a total, obviously. We run the business locally now when you when you go down to different parts of the world Europe is very is resilient and is resilient in you know our business has been performing very well both on on top line and and and share and very importantly in margin improvement and and that has you know has been a focus of the of the management team for quite some time.

Ramon Luis Laguarta: And you know, I think fundamentally the energy category continues to provide long-term good prospects for our industry. I think it's a consumer need that will continue to... There are always small ups and downs of subcategories within LRB that you could argue about. Is it because of channel dynamics?

Speaker Change #181: Yeah, So listen again, we're looking at.

Ramon Luis Laguarta: Is it because it's very hot and people are moving to other, you know, parts of the portfolio? Like we're seeing, for example, in our case, in the last six weeks, a massive growth in our hydration portfolio because, obviously, it's been very hot in the U.S. So I guess there is some cannibalization between energy and hydration for some consumers, and they prefer to do that.

Ramon Luis Laguarta: So I wouldn't over-read into the short term of the category. I would try to think about this as a consumer needs energy, and if we're able to provide energy in a consumer-friendly way, including price, probably, as you mentioned, but I would say functionality, clean labels, I mean, like a lot of the things that I think the category has been working on, there should be a good runway for that segment of the category, and it's been value-creating for a lot of us Thank you.

Operator: One moment for our next question. Our next question comes from Andrea Teixeira with J.P. Morgan. Your line is open.

Speaker Change #181: International is a portfolio of geographies and markets.

Speaker Change #181: And.

Speaker Change #182: Yes, we see the portfolio kind of warning, it's not growing so much here. So at the end and historically, we've learned that the portfolio is quite diversified and that gives us the opportunity to <unk>.

Speaker Change #182: About an international business.

Speaker Change #182: As a total obviously, we run the business locally now when you when you go down to.

Speaker Change #182: Different parts of the world.

Speaker Change #182: Europe is is very is resilient and is resilient.

In.

Speaker Change #182: Our business has been performing very well both on top line and share and very importantly in margin improvement and that has.

Speaker Change #182: Has been a focus of the management team for quite some time, we're getting a lot of traction. That's also giving the business the opportunity to reinvest which also obviously drives the top line and I think Europe in Arcata has is in a in a very positive cycle, which which we expect to continue.

Ramon Laguarta: We're getting a lot of traction that's also giving the business the opportunity to invest, which also obviously drives the top line. And I think Europe, in our case, is in a very positive cycle, which we expect to continue in the coming years.

Ramon Laguarta: Now I talked about a lot of America, so I will not mention much. We continue to see a lot of growth in many parts of our Amisa region; in particular, India is a big growth space for us and is an investment area for sure. The opportunity is massive. You think, you know, you take a decade perspective, and we're putting infrastructure on the ground and we're putting a lot of, you know, investing in the brands, make sure that we. We build a scale to capture what is going to be a I think a high demand market for many, many years. Then, when it comes to Asia, we're seeing a, you know, a very cautious consumer in China. The consumer is, is clearly, you know, saving, saving more than spending, and that has an implication for many categories. Our category is a low.

Speaker Change #182: In the coming years now I talked about Latin America. So I will not mention much we continue to see a lot of growth in many parts of our EMEA.

Speaker Change #182: Region in particular, India is a big growth space for us and.

Speaker Change #182: Is an investment area for sure the opportunity is massive you think.

Speaker Change #182: You could take a decade.

Speaker Change #182: Perspective, and we're putting infrastructure on the ground and we're putting a lot of it.

We're investing in the brands to make sure that we build the scale to capture what is going to be I think a high demand and market for many many years.

Speaker Change #182: And then when it comes to Asia, we're seeing.

Speaker Change #182: A very cautious consumer in China, the consumer is.

Speaker Change #182: Clearly.

Speaker Change #182: <unk>.

Speaker Change #182: Saving saving more than spending and that has an implication for many categories. Our categories is a low ticket item. So we continue to see good performance of our categories.

Ramon Laguarta: Ticket item so we continue to see good performance of our categories and we're gaining share is quite an advantage business what we have in China special in the food sites and we continue to invest in different regions of the country continue to get more penetration additional distribution that's has been a big driver so additional penetration additional consumers come into our brands come into the habit of snacking and that has been very positive. So in spite of a cautious consumer, we have levers to continue to grow the business; some of that is physical availability, some of that is a share of market, and better penetration of our brands.

Speaker Change #182: We're gaining share is quite an advantage business, where we have in China, especially on the food side and we continue to invest in different regions of the country. We continue to get more penetration additional distribution that has been a big driver. So additional penetration of additional consumers coming to our brands come into the habit of snacking.

Speaker Change #182: And that has been very positive. So in spite of a cautious consumer we have levers to continue to grow the business some of that physical availability. Some of that is share of market and better penetration of our brands I think we have advantaged products. There. We've been we have a very strong R&D center in.

Ramon Laguarta: I think we have advantage products there we've been we have a very strong and dissentering in China that develops is for East products and that is giving us an advantage versus versus other company so that's how we're how we're seeing the different parts of the world. And again we'll continue to invest. For us, this is a business that you think about. Our international business is almost $40 billion already, right? So it's been growing very fast over time. It's almost $40 billion; it's a credit to PepsiCo. It's higher margin than the average of PepsiCo. And it's clearly the largest growth opportunity for our company if you think about the next decade.

Speaker Change #182: In China that develops is for Easter product and that is that is giving us an advantage versus <unk> versus other companies. So.

Speaker Change #182: That's how we're seeing the different parts of the world.

Speaker Change #182: Again, we will continue to invest for US. This is a business that you think about our international business is almost $40 billion already right. So it's been growing very fast over time, it's almost $40 billion, it's accretive to Pepsico is higher margin than the average of Pepsico and its clearly the.

Speaker Change #182: The largest growth opportunity for our company. If you think about the next decade and that's why we're putting so much focus how much investment we believe that we.

Ramon Laguarta: And that's why we're putting so much focus, so much investment. We believe that we, you know, both on the beverage side and on the food side, we have many years of growth in that particular part of the business.

Speaker Change #182: Both on the beverage side and on the food side, we have a.

Many years of growth.

Speaker Change #182: In that in that particular part of the business.

Unknown Executive: Thank you. One moment for our next question.

Thank you one number for next question.

Robert Ottenstein: Our next question. And then comes from Robert Ottenstein with Evercore ISI, as long as open. Great. Thank you very much.

Speaker Change #183: Our next question comes from Robert Hopkins sticking with Evercore ISI. Your line is open.

Speaker Change #184: Great. Thank you very much.

Ramon Laguarta: I want to look at a more structural strategic type question. And that is to get your thoughts around the Carlsberg Britvic transaction. And maybe talk a little bit why perhaps it made more sense for Carlsberg to buy Britvic rather than you. You know, given the fact that you generally own your botlars in the US, why not Britvic? Does that have any implications in terms of how you're thinking about the US botlars? And does the fact that, you know, maybe combining beer and CSDs makes more sense outside of the US, obviously, for regulatory reasons, you know, how should we think about that component?

Speaker Change #185: Looking at more structural strategic type question.

Robert Hopkins: And that is to get your thoughts around the.

Speaker Change #187: Carlsberg Britvic transaction.

Speaker Change #188: And maybe talk a little bit why why perhaps it made more sense for carlsberg to buy britvic.

Speaker Change #189: Other than you.

Speaker Change #190: Given the fact that you generally owned bottlers in the U S.

Why not why not britvic.

Speaker Change #191: Does that have any implications in terms of how youre thinking about the U S bottlers.

Speaker Change #191: And does the fact that maybe combining beer and CSD. It makes more sense outside of the U S. Obviously for regulatory reasons.

Speaker Change #192: How should we think about that component. Thank you.

Ramon Laguarta: Thank you. Yeah, I wouldn't extrapolate too much. This is a decision by Carlsberg to make an investment in the UK business. It makes a lot of sense for Carlsberg for multiple reasons. And we partner with Carlsburg in other geographies. We are very happy with the partnership. We trust them as a partner to grow our business. And, you know, of course, we, you know, we support it as a transaction. So, yeah, I wouldn't over-extrapolate it. Let's make it a UK decision by Carlsberg. And we decided to endorse the transaction because we have a great relationship with Carlsburg and we trust them.

Speaker Change #193: Yes, I wouldn't I wouldn't extrapolate too much of this is.

Kozberg: A decision by Kozberg.

Speaker Change #194: To make an investment in the U K business. It makes a lot of sense for kozberg for multiple reasons, and where we partner with Carlsberg in other geographies. We are very happy with our partnership with <unk>.

Speaker Change #194: As a partner to grow our business and of course, we.

Speaker Change #194: We supported the transaction so I wouldn't over <unk>.

Let's make it a UK this issue, Mike Osborn and we decided to endorse a transaction because we have a great relationship with cosmetic and we trust them.

Carlos Laboy: Thank you. One moment for our next question. Our next question comes from Carlos Lebois with HSBC. Your line is open. Yes, good morning, everyone. Remon, I'm keeping with the last two comments you've made and the Brithik deal.

Speaker Change #195: Thank you one moment for our next question.

Speaker Change #194: Yes.

Our next question comes from Carlos Laboy with HSBC. Your line is open.

Andrea Faria Teixeira: Thank you. Good morning, everyone, Ramon, and Jamie. My question is on the bridge to the mid-single-digit organic sales growth in the second half. Assuming international, Ramon you just mentioned, goes the same kind of single digits into the second half, and of course, understanding the easy co-ops for Quaker, it still implies a good inflection into Afrito and PB&A. How do you think, like, we should be thinking about the progress and perhaps, you know, related to that from a channel perspective, being away from home for you, growing from what seems to be like a distribution, what what is the like for like? in sales basically by channel if you would think about away from home and, Hey Andrea, it's Jamie.

Carlos Alberto Laboy: Yes, good morning, everyone.

Speaker Change #197: In keeping with the last.

Two two comments, you've made and the Britvic deal can.

Ramon Laguarta: Can you discuss the international franchise doctor in the PepsiCo? In other words, how are you thinking in terms of clarity of what each side is supposed to do and allowed the cake, right? I'm trying to get a sense of how you're compelling independent bottlers in these great growth territories that you see. To step up investments for the purpose of accelerated system revenue growth and bottling returns. Yeah, Carlos, we're very pleased with the relationship we have with most of the bottlers on this strategic alignment. Actually, our international beverage business has been one of the growth engines of the company for the last few years.

Speaker Change #198: Can you discuss the international franchise Doctor in the Pepsico in other words, how are you thinking in terms of clarity.

Speaker Change #198: What each side is supposed to do.

Speaker Change #199: And allowed the key right.

Speaker Change #200: I'm trying to get a sense of how you are compelling independent bottlers and these great growth territories that you see.

Speaker Change #200: To step up investments for the purpose of accelerating system revenue growth in bottling returns.

James T. Caulfield: You know, on the acceleration in the back half, as Ramon mentioned, that that's going to come mostly from North America for reasons we cited, and we're making the investment primarily focused on North America. We've got the easier ladder, and Quaker. So that gives us a lot of confidence in channels. Look, away from home has been a focus area for us. We've put investment behind that, and it's outgrowing the balance of our portfolio. So we'd expect that to continue. Thank you.

Carlos Alberto Laboy: Yes Carlos.

Carlos Alberto Laboy: We're very pleased with the relationship we have with most of the bottlers on this strategic alignment activity our international beverage business has been one of the growth engines of the company.

Operator: One moment for our next question. Our next question comes from Chris Carey of Wells Fargo Securities. Your line is open.

For the last few years so.

Ramon Laguarta: So we keep innovating and building great products that have consumer appeal. And specifically, we've been very successful with our non-sugar business. Internationally, our non-sugar Pepsi has been a great driver of growth for many years. Gatorade is also another great platform that we are moving around. The last is growing 10%. Historically, and we will continue to invest.

Carlos Alberto Laboy: We keep innovating and building.

Carlos Alberto Laboy: Great products that.

Carlos Alberto Laboy: Yeah.

Carlos Alberto Laboy: Have consumer appeal and specifically, we've been very successful with our non sugar.

Carlos Alberto Laboy: Business internationally, our non sugar Pepsi has been a great driver of growth for many years. Gatorade is also another great platform that we are moving.

Carlos Alberto Laboy: Around.

So.

Carlos Alberto Laboy: The last.

Carlos Alberto Laboy: Growing 10%.

Carlos Alberto Laboy: Historically.

Carlos Alberto Laboy: And we'll continue to invest now are there other opportunities to.

Ramon Laguarta: Now, are there other opportunities to scale up some of our bottlers? Of course, there's always opportunities to improve the infrastructure, and we're working on that for the long term. But I think this is a part of our business that is going well. It's a part of our business that we are prepared to invest even more. The bottlers know we obviously are very aligned strategically in which markets and which platforms we're going to put our focus and our investments. And I think, as I said, it's part of our international story that I was referring to earlier.

To scale up some of our bottlers are the of course, there is always opportunities to improve the infrastructure.

And we're working on that for the long term, but I think this is a part of our business that is growing well is a part of our business that we are prepared to invest even more the bottlers now, we obviously are very aligned strategically and which markets and which platforms were going to put our our focus on our our investments.

Carlos Alberto Laboy: I think as I said as part of our international story that I was referring to earlier.

Ramon Laguarta: There's a food story, and there's a beverage story, and there's a combination of the two story in some markets. That we're playing long term. Hopefully, I'm answering your question. Do you have some other implications there?

Carlos Alberto Laboy: The food story and there is a beverage story and there is a combination of the two story in some markets that we're playing we're playing long term so.

Carlos Alberto Laboy: Hopefully I'm answering your question.

Speaker Change #201: You had some other some other kind of implications there.

Nick Modi: Thank you. One moment for our next question. Our next question comes from Nick Modi with RBC. Your line is open. Yeah, thank you. Good morning, everyone.

Thank you one moment for our next question.

Speaker Change #202: Our next question comes from Nik Modi with RBC. Your line is open.

Christopher Michael Carey: Hi, good morning, everyone. Ramon, I know you mentioned international to be looked at on a six month cadence. I was wondering, however, if you could comment on some specific regions just in Europe. Why, in your mind, have trends been so resilient? I don't think it's just your portfolio. I think the region, in general, has been more resilient for longer than many expected. And then in Asia, I think you were clear last quarter that there was some timing benefit. Clearly, we saw that normalized this quarter. What's the right run rate for this division?

Sunil Harshad Modi: Yes, Thank you and good morning, everyone. Ramon I was hoping you can just kind of.

Nick Modi: Ramon, I was hoping you can just kind of share some perspective around overall food volume, right? Because a lot of questions have been asked about, you know, where's the volume going? It's not just salty snacks that's been under pressure; you know, pretty much across the board in terms of volumes. And so I was just curious on your thoughts. I mean, I don't think it's GLP-1. I know that's what, you know, some might suggest, but I'd love your views on kind of where you think the volume's actually migrating.

Ramon: Sure some perspective around overall food volume right because a lot of questions have been asked about where's the volume going its not the salty snack.

Speaker Change #203: <unk> been under pressure pretty much across the board.

In terms of volumes and so I was just.

Speaker Change #204: Curious on your thoughts I mean, I don't think DLP, one and that's what.

Speaker Change #205: I might suggest.

I'd Love your views on kind of where you think the volumes actually migrating.

Ramon Laguarta: Yeah, listen, I think I don't know about, you know, all the categories. I know that for many categories, the multiple year inflation that we had to take because our input cost went up has created some perception and some reality in a lot of households that food is expensive and consumers are making money. They can make choices, and they can make choices to cook versus buy finished goods or finished products, or they can make a lot of decisions around how they spend their money and how do they feed themselves every day with the lowest budget. And I think that's the fundamental question to address for the food companies.

Ramon Luis Laguarta: And do you have any comments on the progress in China? Thank you. Yeah, so listen, again, we're looking at International is a portfolio of geographies and markets. And we see the portfolio kind of, when it's not growing so much here, it's growing. So in the end, historically, we've learned that the portfolio is quite diversified, and that gives us the opportunity to talk about an international business as a whole. Obviously, we run the business locally.

Speaker Change #205: Yes.

Speaker Change #206: Nick I don't know about.

Ramon Luis Laguarta: So additional penetration, additional consumers coming to our brands, and getting into the habit of snacking, and that has been very positive. So in spite of a cautious consumer, we have levers to continue to grow the business. Some of that is physical availability; some of that is share of the market and better penetration of our brands. I think we have advantage products there. We have a very strong R&D center in China that develops East4East products. And that is giving us an advantage versus other companies. So that's how we see different parts of the world.

Operator: And again, we'll continue to invest for us. This is a business that, if you think about our international business, it's almost $40 billion already, right? So it's been growing very fast over time. It's almost $40 billion is a credit to PepsiCo. Filippo Falorni, Callum Elliott, James Caulfield, Peter Grom, Robert Moskow, Gerald Pascarelli, in that particular part.

Speaker Change #206: All of the categories I know that for for many categories.

Speaker Change #206: The multiple year.

Speaker Change #206: Inflation that we had to take because our input cost went up.

Speaker Change #206: <unk> created some.

Perception and some reality in a lot of households that fluid is expensive and consumers are making choices and they can make choices to cook versus by finished goods or finished products are are they can you can they can make a lot of.

Speaker Change #206: Decisions around how they spend their money and how do they fit themselves every.

Speaker Change #206: Every day with the with the lowest budget and that in that.

Speaker Change #206: The fundamental question to address for the for the food companies now that our costs are kind of normalizing our input costs and we've all been going at productivity in our case. It has been a very very strategic focus for US now how do we deploy those.

Ramon Laguarta: Now that our costs are kind of normalizing, our input cost, and we've all been going at productivity. In our case, this has been a very, very strategic focus for us. Now how do we deploy those resources against what are the best levers to reignite growth? And again, it will not be a blanket approach. It will be a segmented approach. In our case, it will be very rational. It will be based on data. I think we have a lot of data, and we have great segmentation. And I think we can execute with, again, with precision so that we don't destroy value, but we create value for the category as we increase the net revenue of the category.

Resources against what are the best levers to reignite growth and again it will not be a.

Blanket approach it will be a segmented approach in our case it will be very rationale. It will based on data I think we have a lot of data and we have great segment Asia and I think we can execute with again with with.

With precision so that we don't destroy value by we create value for the category as we as we increase the net revenue off of the category. So that's how we're thinking about it I don't think <unk> at this point Nick.

Ramon Laguarta: So that's how we're thinking about it. I don't think you'll be at this point as material impact in our category for sure. And we have a lot of panels, and we have a lot of conversation with consumers. It's not impacting us. At this point, there is an economic value relationship for our categories, and we will address them in the second half of the year.

Speaker Change #206: Material impact in our in our in our category for sure and we have a lot of.

Speaker Change #206: Panels, and we have a lot of conversations with consumers is not impacting us at this point is an economic value.

The relationship for our for our categories and we will address them, India in the second half of the year.

Unknown Executive: Thank you. Our last question comes from one moment. Comes from Kevin Grundy with BNB Parabiss. Reline is open. Great.

Robert Edward Ottenstein: Thank you. One moment for our next question. Our next question comes from Robert Ottenstein with Evercore ISI. The line is open.

Speaker Change #207: Thank you our last question comes from one moment.

Speaker Change #208: Comes from Kevin Grundy with Bnb Paribas Your line is open.

Ramon Luis Laguarta: Great, thank you very much. I want to look at a more structural, strategic type question. And that is to get your thoughts around the Carlsberg-Britvick transaction and maybe talk a little bit about why perhaps it made more sense for Carlsberg to buy Britvick rather than you, given the fact that you generally own your bottlers in the U.S., why not Britvick? Does that have any implications in terms of how you're thinking about the U.S. bottlers?

Kevin Grundy: Thank you. Morning, everyone. Covered a lot of ground and not to be the dead horse, but just to drill down a couple areas from what we could on the demand weakness and snack. So you mentioned some parts of the portfolio, but not all consumers. I apologize if I missed this. What do you see beyond the low income consumer? It's a lot of focus on where's the consumer, and depends on which management call you're listening to or what industry, frankly. What do you think specifically with the middle and high end consumer is the weakness also being seen among that cohort as well.

Speaker Change #209: Great. Thanks, good morning, everyone.

Ramon Luis Laguarta: And does the fact that maybe combining beer and CSDs makes more sense outside of the U.S., obviously for regulatory reasons, how should we think about that component? Thank you. Yeah, I wouldn't, I wouldn't extrapolate too much.

Ramon Luis Laguarta: This is a decision by Carlsberg, which supported the transaction. So yeah, I wouldn't over extrapolate it. Let's make it a UK decision by Cosberg.

Speaker Change #210: Covered a lot of ground and not to beat a dead horse, but just to drill down a couple of areas remote if we could on the on the demand weakness and snack. So you mentioned some parts of the portfolio, but not all consumers I apologize if I missed this what are you seeing beyond the low income consumer so a lot of focus on where is the consumer and it depends on which management call.

Speaker Change #211: Listening to what industry frankly, what are you seeing specifically with the middle and high end consumer is the weakness also being seeing among that cohort as well and then I think an important question as well is there anything youre seeing in your market research I know youre staying close to the consumer it gives you any pause with the longer term.

Ramon Laguarta: And then I think an important question as well. Is there anything you're seeing in your market research? I know you're staying close to the consumer that gives you any pause with the longer term outlook for the freedom of business, which has been so strong for so long. Is there anything there that kind of gives you pause, or do you do this to be entirely transitory? So thanks for that. Yeah, thanks. Listen, I think the this needs for value or more value consciousness. I think it's impacting every household in the US. So it is different levels of income.

Speaker Change #212: <unk> outlook for the Frito business, which has been so strong for so long is there anything there that kind of gives you pause.

Speaker Change #213: Just to be entirely transitory so thanks for that yes.

Operator: And we decided to endorse the transaction because we have a great relationship with Cosberg. Thank you. One moment for our next question. Our next question comes from Carlos Laboy with HSBC. Your line is open. Yes, good morning, everyone. Ramon, in keeping with the last two comments you've made and the Bridgwick deal... Can you discuss the international franchise doctrine of PepsiCo? In other words, how are you thinking in terms of clarity of what each side is supposed to do and allow, Sheik, right? I'm trying to get a sense of how you're compelling independent bottlers in these great growth territories that you see to step up investments for the purpose of accelerating system revenue growth and bottling. Yeah, Carlos.

Carlos Alberto Laboy: Listen, we're very pleased with the relationship we have with most of the bottlers and the strategic alignment. Actually, our international beverage business has been one of the growth engines of the company for the last few years. So, you know, we keep innovating and building great products that have consumer appeal, and specifically, we've been very successful with our non-sugar business internationally. Our non-sugar Pepsi has been a great driver of growth for many years.

Kevin Michael Grundy: Yes, thanks, Kevin.

Carlos Alberto Laboy: Gatorade is also another great platform that we are moving around. So, you know, the last is growing 10% historically, and we will continue to invest. Now, are there other opportunities to scale up some of our bottlers? Of course, there's always opportunities to improve the infrastructure, and we're working on that for the long term.

Speaker Change #215: I think the.

Ramon Luis Laguarta: But I think this is a part of our business that is going well. It's a part of our business that we are prepared to invest even more. The bottlers know we are obviously very aligned statistically on which markets and which platforms we're going to put our focus and our investments.

Ramon Luis Laguarta: And I think, as I said, it's part of our international story that I was referring to earlier. There's a food story, and there's a beverage story, and there's a combination of the two stories in some markets that we're playing long term. Hopefully, I'm answering your question. I don't know, some other, some other. Thank you. One moment for our next question. Our next question comes from Nick Modi with RBC. Your line is open. Yeah, thank you. Good morning, everyone.

Speaker Change #216: This need for value or more.

Speaker Change #216: Value consciousness I think is.

Speaker Change #216: Is impacting every household in the U S. So it is it is.

Speaker Change #216: Different levels of income I think it's impacting everybody and we're seeing behaviors in.

Ramon Laguarta: I think it's impacting everybody. And we're seeing behaviors in different income levels. I would aggregate all that. The consumer is much more price conscious. It's looking for more value across. So maybe you see the higher income consumers that, you know, they're not going to expensive restaurants. They're adjusting their behavior to more affordable restaurants, or they stay at home. And then, you know, they create their own entertainment moments or fun moments at home. So you see different behaviors happening everywhere. I think the connecting the connecting line would be the consumer is more cautious. The consumer is more choiceful.

Speaker Change #216: And different income levels.

Operator: Ramon, I was hoping you could just kind of, share some perspective around overall food volume, right? Because, you know, a lot of questions have been asked about, you know, where's the volume going? It's not just salty snacks.

Sunil Harshad Modi: That's been under pressure, you know, pretty much across the board in terms of volumes. And so I was just curious about your thoughts. I mean, I don't think it's GLP-1.

Speaker Change #216: I would I would aggregate all that the consumer is much more price conscious is looking for more value or cross. So maybe you see the higher income consumers.

Ramon Luis Laguarta: I know that's what some might suggest, but I'd love your views on kind of where you think the volume's actually migrating. Yeah, listen, I, Nick, I don't know about that. All the categories; I know that for many categories. The multiple-year inflation that we had to take because our input cost went up has created some perception and some reality in a lot of households that food is expensive, and consumers are making choices, and they can make choices to cook versus buy finished goods or finished products, or they can make a lot of decisions around how they spend their money and how they feed themselves every day with the lowest budget, and I think that's the fundamental question to address for food companies.

Ramon Luis Laguarta: Now that our costs are kind of normalizing, our input costs, and we've all been going at productivity, in our case, this has been a very, very strategic focus for us, now how do we deploy those resources against what are the best levers to reignite growth, and again, it will not be a blanket approach; it will be a segmented approach, in our case, it will be very rational, it will be based on data That's how we're thinking about it; I don't think GLP at this point has a material impact on our category for sure, and we have a lot of panels, and we have a lot of conversations with consumers; it's not impacting us. At this point, it's an economic value relationship for our categories, and we will address them in the second half. Thank you. Our last question comes from one. This comes from Kevin Grundy with B&B Paribas. Your line is open. Great Thanks.

There are not going too expensive restaurants, they are adjusting their behavior to more affordable restaurant or they just stay at home and then.

Speaker Change #216: They create their own entertainment moments or fund moments at home. So do you see different behaviors happening everywhere.

Operator: Good morning, everyone. We covered a lot of ground, and not to beat a dead horse, but just to drill down on a couple areas, Ramon, if we could, on the demand weakness in SNAC. So, you mentioned some parts of the portfolio, but not all consumers. I apologize if I missed this.

Speaker Change #216: The connecting the connect in line it would be.

Kevin Michael Grundy: What are you seeing beyond the low-income consumer? There's a lot of focus on where the consumer is, and it depends on which management call you're listening to or what industry you're in, frankly. What are you seeing specifically with the middle and high-end consumer? Is the weakness also being seen among that cohort as well?

Speaker Change #216: The consumer is more cautious that consumers more choice full.

Ramon Luis Laguarta: So, thanks for that. Yeah, thanks, Kevin. Listen, I think the...

Ramon Luis Laguarta: This need for value or more value consciousness, I think, is impacting every household in the U.S. So it's at different levels of income. I think it's impacting everybody. And we're seeing behaviors at different income levels. I would aggregate all that.

Ramon Laguarta: But the consumer is willing to spend in areas where they see value. And we see it in our category, right? The more the parts of the category there was referring to. But also for other parts of the category, they're asking for more value. And they're willing to compromise in some of their decisions. So that's the problem to address. So I would stay there. And I think once we address that situation, we will be, you know, we'll be back in growth. And we feel pretty good about the tools and the resources we have, and the actions that we're taking.

Ramon Luis Laguarta: The consumer is much more price conscious, and is looking for more value. So maybe you see the higher-income consumers that they're not going to expensive restaurants; they're adjusting their behavior to more affordable restaurants, or they stay at home, and then they create their own entertainment moments or fun moments at home. So you see different behaviors happening everywhere. I think the connecting line would be that the consumer is more cautious, the consumer is more choiceful, but the consumer is willing to spend in areas where they see value. And we see it in our category, right? Page PAGE of NUMPAGES www.pepsi.com. So I would, I would stay there.

Speaker Change #216: But the consumer is willing to spend in areas, where they see value when we see it in our category right there more than that.

Speaker Change #216: Part of it the category there was referring to but also for other parts of the category there.

Speaker Change #216: They are asking for more value and they're willing to start to compromise in some of their decisions. So that's the problem to address.

Ramon Luis Laguarta: And I think once we address that situation, we'll be, you know, we'll be back to growth. And we feel pretty good about the tools and the resources we have, and the actions that we're taking. And we're quite encouraged by our recent performance.

Speaker Change #216: So.

Speaker Change #216: I would stay there.

Speaker Change #216: I think once we address that situation we will be.

Speaker Change #216: We will be back in growth and we feel pretty good about the tools and the resources, we have and the actions that we're taking and we're quite encouraged by recent performance of the business.

Ramon Laguarta: And we're quite encouraged by recent performance of the business.

Unknown Executive: Okay.

Ramon Luis Laguarta: Okay, so this is the last question. So thank you, everyone, for joining us today and your thoughtful questions, and also, obviously, for the confidence that you've placed in us with your investments. And we hope everybody has a great summer and that they buy a lot of PepsiCo products. Ladies and gentlemen, this concludes today's presentation. You may now disconnect. Have a wonderful day.

Unknown Executive: So I think we, this is the last, the last question. So thank you, everyone, for joining us today and your thoughtful questions. And also, obviously, for the confidence that you've placed in us with your investments. And we hope everybody has a great summer. And that you buy a lot of PepsiCo products. Thank you. Thank you, ladies and gentlemen.

Speaker Change #216: Okay. So I think we.

Speaker Change #217: This is the last the last question. So thank you everyone for joining us today on your thoughtful questions and also obviously for the confidence that you've placed in us with your investments and we hope everybody has a great summer and you buy a lot of Pepsico products. Thank you.

Speaker Change #218: Thank you ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Just conclude today's presentation. You may now disconnect and have a wonderful day.

Q2 2024 PepsiCo Inc Earnings Call - Q&A

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