Q1 2025 PepsiCo Inc Earnings Call - Q&A

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Unknown Executive: Good morning and welcome to PepsiCo's 2025 First Quarter Earnings Question and Answer session. Your lines have been placed on listen only until it's your turn to ask a question. Today's call is being recorded and will be archived at www.pepsico.com.

Speaker Change: Good morning, and welcome to Pepsico's 2025 first quarter earnings question and answer session. Your lines have been placed on listen only until it is your turn to ask the 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. Robert Mundy Senior Vice President of Investor Relations. Mr. Martin You may begin.

Ravi Pamnani: It is now my pleasure to introduce Mr. Ravi Pamnani, Senior Vice President of Investor Relations. Mr. Pamnani may begin.

Unknown Executive: Thank you, Kevin.

Speaker Change: Thank you Kevin 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.

Unknown Executive: 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.

Unknown Executive: 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, updated 2025 guidance, and outreach. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, April 24, 2025, and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to our First Quarter 2025 earnings release and First Quarter 2025 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.

Speaker Change: Before we begin please take note of our cautionary statement.

Speaker Change: We may make forward looking statements on today's call, including about our business plans updated 2025 guidance and outlook.

Speaker Change: Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today April 24, 2025, and we are under no obligation to update when discussing our results we refer to non-GAAP measures, which exclude certain items from reported results.

Speaker Change: Please refer to our first quarter 2025 earnings release, and first quarter 2025 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.

Speaker Change: For from forward looking statements Joy.

Unknown Executive: Joining me today are PepsiCo's Chairman and CEO, Ramon Laguarta, and PepsiCo's Executive Vice President and CFO, Jamie Caulfield. We ask that you please limit yourself to one question. And with that, I will turn it back 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. We'll pause for a moment while we compile our Q&A.

Speaker Change: Joining me today are pepsico's, chairman and CEO Ramon Love worked up and Pepsico Executive Vice President and CFO, Jamie Caulfield we.

Speaker Change: We ask that you please limit yourself to one question and.

Speaker Change: And with that I will turn it back over to the operator for the first question.

Speaker Change: 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 a moment, while we compile the Q&A roster.

Speaker Change: Okay.

Bonnie Herzog: Our first question comes from Bonnie Herzog with Goldman Sachs, your line is open. Hi, good morning. I have a question on Fredo. You know, last quarter, you emphasized your step up investments with a particular focus on improved price pack architecture, and then also, you know, an emphasis on the sizable away from home opportunity. So Ramon, I'd be curious to hear how some of those investments are paying off.

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

Bonnie Herzog: Hi, good morning.

Speaker Change: Yeah.

Speaker Change: I have a question on freight out last quarter, you emphasized your step up investment with a particular focus on improved price pack architecture and then also.

Bonnie Herzog: Emphasis on the sizeable away from home opportunity. So Ramon I'd be curious to hear how some of those investments are paying off and then your.

Bonnie Herzog: And then if you're, you know, making any changes to your strategy, especially given the the Do you now see a need to increase your investments to ultimately return Frito back to growth? Thank you.

Bonnie Herzog: Making any changes to your strategy, especially given the pressured consumer environment for instance.

Speaker Change: You now see a need to increase your investments to ultimately return frito back to growth. Thank you.

Ramon Laguarta: Thank you, Bonnie. So, I think it's, we're executing the playbook that we talked. late last year, early this year, and the playbook has multiple legs. One is, as you said, granular good return on invested value investments. The second is portfolio transformation. And the third is operational excellence in a broader way, execution and cost. So we're executing the three pillars with a sense of urgency at Frito. And we're starting to see the returns on some of the value and new price points investments that we're making. It's still early in the rollout of the strategy. But if you think about our dual size strategy in single serve, so below $2, above $2, where we have executed that strategy, we're seeing a meaningful improvement in units, especially when we attach the kind of the below $2 to meal deals.

Bonnie Herzog: Thank you Bonnie.

Speaker Change: I think it's.

Bonnie Herzog: We're executing the playbook that we talked.

Bonnie Herzog: Late last year early this year and that playbook has multiple legs. One is as you said.

Bonnie Herzog: Granular good return on invested value investments.

Bonnie Herzog: This portfolio transformation and the third is operational excellence in a broader way execution on cost. So we're executing the three pillars.

Bonnie Herzog: With a sense of urgency at Frito.

Bonnie Herzog: And.

Bonnie Herzog: We're starting to see the returns on some of the value.

Bonnie Herzog: Price points investments that we're making.

Bonnie Herzog: Early in the rollout of the.

Bonnie Herzog: The strategy, but if you think about our dual size strategy in single serve so below $2 above $2.

Bonnie Herzog: Where we have executed that strategy, we're seeing a meaningful improvement in units, especially when we attach.

Bonnie Herzog: That's kind of the below $2 two meal deals and that is especially in convenience stores. We're also seeing the.

Ramon Laguarta: And that is especially in convenience stores. We're also seeing the, when you take multi-packs, a multi-pack is a big, has been a big growth segment of the business for the last few years. We're seeing the 10 count assortment. We've increased that assortment as an entry, a much lower price point for consumers. That's also delivering good returns.

Bonnie Herzog: When you take multi bags and multi pack has a big has been a big growth segment of the business for the last few years, we're seeing that.

Bonnie Herzog: <unk> count.

Bonnie Herzog: <unk>.

Bonnie Herzog: Assortment, we've increased that assortment is on entry and much lower price point for consumers. That's also delivering good returns.

Ramon Laguarta: So we're optimistic that as we execute the playbook, the full playbook, including take home eventually later in the year, that that's gonna keep consumers in the category, and it's gonna increase the frequency of consumption of those consumers, which at the end is what we're trying to do with new price back.

Bonnie Herzog: We're optimistic that as we execute.

Bonnie Herzog: The.

Bonnie Herzog: The playbook, the full playbook, including take home eventually later in the year that that's going to keep consumers in the category.

Bonnie Herzog: We're going to increase their frequency of consumption of those consumers, which at the end is where we're trying to do with new price back at the same time, we're working hard at portfolio transformation and that is a key pillar offering consumers more options where consumers when they go and basically here is more permissibility of more functionality.

Ramon Laguarta: At the same time, we're working hard at portfolio transformation, and that is a key pillar. You know, offering consumers more options where consumers wanna go. And basically, here is more permissibility, more functionality in our snacks. And we're also working on improving the operational excellence of Frito, both in terms of right sizing the cost and improving the field rates and improving the ground order execution in go-to-market. Frito went through an SAP implementation. It just finished. And, you know, like any big system implementation, there has been some learnings for the organization. I think in the coming months, that will be behind us, and it will clearly have an impact on improved service levels and better visibility to execution.

Bonnie Herzog: Sure.

Bonnie Herzog: In our in our snacks and we're also working on improving the operational excellence our frito both in terms of right sizing the cost.

Bonnie Herzog: And improving fill rates on improving the granular execution in go to market.

Bonnie Herzog: Frito went through an SAP implementation that just finished and.

Bonnie Herzog: Any big system implementation, there has been some <unk>.

Bonnie Herzog: <unk> for the organization I think in the coming months that that will be behind us and it will clearly have an impact on <unk>.

Bonnie Herzog: <unk> service levels and better visibility to execution. So that is the full playbook and we are we will keep investing and we will keep making sure that that business.

Unknown Executive: So that is the full playbook, and we are, you know, we will keep investing, and we'll keep making sure that that business, you know, continues to grow for the long term, and that's the perspective that we're putting on the business. Thank you. One moment for our next question. Our next question comes from Steve Powers of Deutsche Bank. Your line is open. Great, good morning.

Bonnie Herzog: Continues to grow for the long term and that's the that's.

Bonnie Herzog: That is the perspective of we're putting on the business all the time.

Bonnie Herzog: Thank you one moment for our next question.

Speaker Change: Our next question comes from Steve Powers with Deutsche Bank. Your line is open.

Steve Powers: Great Good morning.

Steve Powers: I was hoping that you could maybe just decompose in a bit more detail, just the drivers of the reduced full year earnings outlook. You know, with organic growth, not really changing in the aggregate, you know, the implication is that, you know, the vast majority of that, if not all of that is related to tariffs. If that's right, just kind of the pockets of tariff friction that you're encountering and plans long term to offset it, assuming they stick around.

Steve Powers: I was hoping that you could maybe just decompose it and a bit more detail just the drivers of the reduced.

Steve Powers: Full year earnings outlook.

Steve Powers: Without with the organic growth not really changing in the aggregate the implication is that the.

Steve Powers: The vast majority of that if not all of that is related to tariffs. If that's right just kind of the pockets of tariff friction that you're encountering in plans.

Steve Powers: Plans long term to offset it assuming they stick around.

Steve Powers: But then also, if there's other things in there, if there are incremental investments, just sort of the relative bridge between prior full year outlook and today. Thank you.

Steve Powers: But then also if there's other things in there if there are incremental investments just sort of the relative bridge between prior full year outlook.

Steve Powers: Thank you.

Jamie Caulfield: Hey Steve, it's Jamie. The rationale behind the guidance adjustment that we announced today is really driven by three things and in a number of ways are a little bit Related to one another. The first is tariffs, so that is new news since we gave our initial guidance at the beginning of the year. So we've factored in what we know about tariffs today, and we factored in mitigation plans, which we continue to work. Some of those we'll be able to execute more quickly. Some of those will take more time to execute. The second is just the heightened macro and consumer uncertainty.

Steve Powers: Hey, Steve it's Jamie.

Steve Powers: Rationale behind the guidance adjustment that we announced stage is really driven by three things and in a number of ways are a little bit.

Steve Powers: <unk> to one another the first is tariffs so that that is new news since we gave our initial guidance at the beginning of the year. So we've factored in what we know about tariffs today and we've factored in mitigation plans, which we continue to work some of those will be able to execute more quickly some of those will take more time.

Steve Powers: To execute.

Steve Powers: The second is just the heightened macro and consumer uncertainty I'm sure you saw the consumer.

Jamie Caulfield: I'm sure you saw the Consumer Confidence Index. That's really nosedive. So, you know, relative to where we were three months ago, probably aren't feeling as good about the consumer now as we were a few months ago. And then third, and this is also related to the consumer picture, is Frito's subdued performance. And we've got clear plans to continue to turn the business around, but that'll take a little while too. Now, on the top line guidance, you saw Q1 versus our low single-digit guide for the We put up 1% as we called out in the prepared remarks, because our international quarter is only two months for the first quarter.

Steve Powers: Confidence index, that's really nosedive, so relative to where we were three months ago.

Steve Powers: Probably arent feeling as good about the consumer now as we were a few months ago and then third and this is also related to the consumer picture is.

Speaker Change: Brito subdued performance and we've got clear plans to continue to turn the business around.

Speaker Change: That'll take a little while to know on the top line guidance.

Speaker Change: You saw Q1 versus our low single digit guide for the year, we put up 1% as we called out in the prepared remarks, because our international quarter is only two months for the first quarter.

Unknown Executive: If we included the third month in the first quarter, we would have grown too. So we're solidly in a... in the band of top-line guides that we gave. back at the beginning. Thank you.

Speaker Change: If we included the third month in the first quarter.

Speaker Change: Have grown too so we're solidly in.

Speaker Change: In the band of topline guidance that we gave up.

Speaker Change: At the beginning of the year.

Unknown Executive: One moment for our next question.

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

Speaker Change: It has great momentum and.

Filippo Falorni: Our next question comes from Filippo Falorni with Citi, your line is open. Hey, good morning, everyone. I was wondering if you could talk a bit about the expectations for the international business going forward, clearly solid 5% growth in the quarter, you mentioned also including the March, total company would have been 2% organic. So you're expecting acceleration from here, any color you could provide would be great. Thank you.

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

Sean: Hey, good morning, everyone.

Sean: I was wondering if you could talk a bit about the expectation for the international business going forward clearly solid 5% growth in.

Sean: In the quarter, you mentioned also including.

Sean: Including the March total company would have been 2% organic so you're expecting an acceleration from here or any color you could provide would be great. Thank you.

Ramon Laguarta: Yes, good morning, Filippo. Listen, the international business continues to be the largest growth engine for the company and we continue to invest in that business. As you well said, it started the year at a good pace. If you take March, you know, even even faster. We see the international business continuing those trends during the bounce of the year. There are markets that we're seeing a bit of a slowdown in the consumer, namely China. China is a market where we've seen the consumer hurting a little bit. We're seeing Mexico. in a way impacted by what happens in the U.S.

Speaker Change: Yes, good morning Felipe.

Speaker Change: The international business continues to be.

Speaker Change: Yes.

Speaker Change: The largest growth engine for the company and we continue to invest in that business. As you well said you started the year at a good pace. If you take March even even faster.

Speaker Change: We see the international business continuing those trends during the during the balance of the year. There are markets that we're seeing a bit of a slowdown in the consumer namely <unk>.

Speaker Change: China, China is a market, where we've seen the consumer hurting a little bit we're seeing Mexico.

Speaker Change: In a way impacted by what happens in the U S and I think those two markets will continue to be connected in consumer sentiment and.

Ramon Laguarta: And I think those two markets will continue to be connected in consumer sentiment and probably consumer disposable income as well. We're seeing Europe navigating quite well. The first signs that we have in Europe are positive. We're seeing India in a good place. We're seeing Brazil in a good place. So overall, the portfolio of markets where we have the highest percentage of business are in a positive place, and we see the international business continuing to contribute to our growth at a, you know, that mid-single digit. Some markets, obviously, high single digits in the balance. Thank you.

Speaker Change: Probably consumer disposable income as well.

Speaker Change: We're seeing Europe navigating quite well.

Speaker Change: The first signs that we have in Europe are positive.

Speaker Change: We're seeing India.

Speaker Change: We're seeing Brazil in a good place. So overall the portfolio of markets, where we have the highest percentage of business are positive and we see the international business continuing to contribute to our growth.

Speaker Change: At a.

Speaker Change: At mid single digit some markets, obviously high single digits.

Speaker Change: And the balance of the year.

Unknown Executive: One moment for our next question.

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

Dara Mohsenian: Our next question comes from Dara Mohsenian with Morgan Stanley. Your line is open. Hey, good morning. So just wanted to follow up on Bonnie's question. You know, the magnitude and durability of the volume weakest in Frito in North America continues to disappoint. So it was helpful to hear about all the fixes you're putting in place here today, as well as at Cagney.

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

Dara: Hey, good morning.

Dara: So.

Dara: Just wanted to follow up on Bonnie's question.

<unk> and durability of the volume weakness in Credo in North America continues to.

Speaker Change: Disappoint. So it was helpful to hear about all the fixes youre, putting in place here today as well as the Cagny.

Dara Mohsenian: Just wanted to get your perspective on if at some point you think we might need a more substantial level of reinvestment behind FLNA to turn around trends in that business, some type of more dramatic step up in investment, and maybe you can split that into just potentially the need to reinvest more on pricing in this consumer environment, or, you know, investing more behind the business, whether it's frontline spend or marketing, and just how you think about that balance in this consumer environment, and if you might need more aggressive plans at some point to turn around trends there.

Speaker Change: Just wanted to get your perspective on if at some point you think we might need a more substantial level of reinvestment behind <unk> in a turnaround trends in that business. Some type of more dramatic step up in investment and maybe you can split that into just potentially the need to reinvest more on pricing.

Speaker Change: This consumer environment.

Speaker Change: Or.

Speaker Change: Vesting more behind the business, whether it's frontline spend on marketing and just how you think about that balance in this consumer environment and if you might need more aggressive class at some points to turnarounds transfer okay.

Unknown Executive: Thanks.

Jamie Caulfield: Hey, Derek, Jamie. Yeah, look, the way we're managing through this is we want to make sure we protect the long term health of the franchise. We've talked about providing value to the consumer. So we're doing that, but we're not going to do it in a way that, you know, we damage the long term health and profitability. of the business. We are driving greater levels of productivity that provide the investment that we're making in the business. And that's, you know, not only in revenue management tactics, but it's also in stepping up our execution capability. and the other part one.

Speaker Change: Hey, Derrick Jamie look the way we are managing through this as we want to make sure. We protect the long term health of the franchise we have.

Talked about providing value to the consumer so we're doing that but we're not going to do it in a way that we damage the long term health and profitability of the business. We are driving greater levels of productivity that provide the investments that we're making in the business and that's not only in.

Speaker Change: Revenue management tactics, but it's also in stepping up our execution capability.

Speaker Change: The other part one.

Jamie Caulfield: Productivity is we are looking at how do we, as you saw in the first quarter. Quite a bit of fixed cost de-leveraged, so we're going after costs with even more intention. Yeah, the I think that The three pillars that we talked there at they, they are equally important. So the value investment is relevant and it impacts our core brands. And I think putting more intelligence behind the investment, making sure that we get the best return, that for every occasion and for every channel, we have the right package versus, you know, destroying value by overinvesting in value.

Speaker Change: Productivity is we are looking at how do we.

Speaker Change: As you saw in the first quarter.

Speaker Change: Quite a bit of fixed cost deleverage. So so we're going after.

Speaker Change: After costs with even more intentionality.

Speaker Change: Yes.

<unk>.

Speaker Change: That did.

The three pillars that we talked there at.

Speaker Change: They they are equally important.

Speaker Change: The value of investment is as relevant and it impacts our core brands.

Speaker Change: Putting more intelligence behind the investment in making sure that we get the best return that for every location.

Speaker Change: For every channel, we have the right package versus destroying value by over investing in value I think that is that is.

Jamie Caulfield: I think that is an intelligent reinvestment of value is an important one. Now, it is as important for us to make sure that we participate in all the subsegments of the market where the consumers are going. And the consumers love existing spaces, but they're also driving consumption in other spaces where we need to participate very intentionally, and that's what we're doing. There are some moves we're making organically. We obviously have visibility to next year's innovation plan. They're very strong. And we're also making some acquisitions, as you saw, between Sabra and Sierra. We have now two platforms to drive additional participation in new segments.

Speaker Change: In intelligent reinvestment of value.

Speaker Change: Is unimportant one now it is a critical and important for us to make sure that we participate in all the sub segments of the market, where the consumers are going and the consumers loss existing spaces, but there also.

Speaker Change: Driving consumption in other spaces, where we need to participate very intentionally and that's what we're doing there are some moves we're making organically.

Speaker Change: Sure.

Speaker Change: Obviously have visibility to next years.

Speaker Change: Ovation plan Theyre very strong.

Speaker Change: We're also making some acquisitions as you saw between <unk>. We have now two platforms to drive additional participation in new segments and the third pillar is not something that is small.

Jamie Caulfield: And the third pillar is not something that is small. The operational excellence of the business is improving. We now have better data. We have better systems. We have talent stability. COVID was a disruption for the organization. We have better leaders in place. And, you know, we've gone through a system implementation that has been, you know, in a way a little bit complex, as you imagine a business of that size. That is also behind us. So you should think about a multiple vector. execution, that will drive the performance of the business value being important and good return on investment in value.

The operational excellence of the business.

Speaker Change: Is improving we now have better data, we have better systems.

Speaker Change: We have challenged stability coffee was a disruption for the organization, we have better leaders in place and we've gone through a system implementation that has been in a way a little bit.

Speaker Change: Complex as you imagine a business of that size that it's also behind us. So you should think about multiples.

Speaker Change: Multiple vector.

Speaker Change: Execution.

Speaker Change: That will drive the performance of the business value being important.

Speaker Change: Good return on investment and value. It's how we're how we're thinking about our investments in that part.

Unknown Executive: It's how we're how we're thinking about our investments in that part of the Thank you.

Speaker Change: Of the business.

Unknown Executive: One moment for our next question.

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

Andrea Teixeira: Our next question comes from Andrea Teixeira with J.P. Morgan, your line is open. Yeah, good morning. Thank you for taking the question. I wanted to go back, sorry, to free-to-North America. As you look at the price letters, are you seeing more declines in the higher price points or in bigger packs? So, in other words, on a comparable basis, and Ramon, you spoke over the past, I would say, few quarters even, about like moving, reaching your multi-pack, reaching 5 billion against like 1 billion business before. Is that the 4% decline that we saw, I think in the 10Q, correct me if I'm wrong, just on free-to-North America in declining volumes?

Speaker Change: Our next question comes from Andrea Teixeira with Jpmorgan. Your line is open.

Andrea Teixeira: Yes. Good morning, Thank you for taking the question.

Andrea Teixeira: I wanted to go back sorry to Frito North America as you look at the price ladders.

Andrea Teixeira: Are you seeing more declines in the higher price points or bigger packs. So in other words on a comparable basis and my mom you spoke over the past I would say few quarters, even about like moving.

Andrea Teixeira: Senior Multipack, reaching 5 billion against <unk> 1 billion business before.

Andrea Teixeira: Is that the 4% decline that we saw I think in the 10-Q correct me if I'm wrong, but just on Frito lay North America and declining volumes on.

Andrea Teixeira: On average, are you seeing a much deeper decline in those large packs where consumers may be thinking, may be feeling more pressure because of the cash outlay? And conversely, you're seeing less or smaller declines in the small packs? I mean, I'm trying to gauge where, you know, on a mixed-neutral basis, are you seeing those movements and how you're reacting to those? Or, in other words, are you tapped off that multi-pack at some point and both of them are declining at similar paces and how to protect that?

Andrea Teixeira: On average are you seeing much deeper.

Andrea Teixeira: Declining those large banks.

Andrea Teixeira: Where consumers may be thinking maybe see any more pressure because of the cash outlay.

Andrea Teixeira: And Fortunately, we are seeing less smaller smaller declines in small box I mean, im trying to gauge where on a mixed neutral basis are you seeing those movements and how are you reacting to those or in other words are you tapped off that multi pack at some point in both of them.

Andrea Teixeira: Declining at similar basis, and how to protect that.

Ramon Laguarta: Yeah, and there is it's a, you know, revenue management really is becoming more complex as consumers are feeling more challenged with their disposable income. And that obviously is different for different levels of income across across the American consumer. Now, what we're seeing is that Consumers are giving a lot of value to absolute dollars now, so clearly entry price points and absolute outlay of money per unit is a very important, relevant metric, and so we're putting more emphasis on those entry price points and making sure that we're not asking for large amount of money for participating in our brands, and that is something that that's why smaller single serve, smaller multi-packs, those are all tools for us to keep the consumers in the brand and make sure that the frequency is there as well.

Andrea Teixeira: Yes.

Andrea Teixeira: Revenue management is becoming more complex as consumers are feeling more challenge with their disposable income and that obviously is different for different levels of income across at the Crosby and the American consumer now what we're seeing is that.

Andrea Teixeira: Consumers are given a lot of value to absolute dollars now so clearly entry price point and absolute.

Andrea Teixeira: Outlay of money per unit is a very important and relevant metric and so we're putting more emphasis on those entry price points and making sure that we're not asking for a large amount of money for participating in our brands and that is something that we're very that's why smaller single share.

Andrea Teixeira: Sure.

Andrea Teixeira: Smaller multi packs those aro <unk>.

Andrea Teixeira: Tools for us to keep their consumers and their brand and.

Andrea Teixeira: And make sure that the frequency is there as well there are different behaviors beginning of the month versus end of the month. So maybe beginning of the month consumers Im looking for more.

Ramon Laguarta: There are different behaviors beginning of the month versus end of the month, so maybe beginning of the month consumers are looking for more kind of price per kilo, so more quantities at a good value, end of the month maybe absolute price per unit, and again very complex how that works per occasion and per cohort, but those are where I think the intelligence, the data, the tools that we have now in the hands of our people can help us get the best return on the investment. Now there is a channel that is convenience stores that is impacted, there's less traffic in the channel, and our participation in that channel is very relevant, both in beverages and snacks, so how do we help our partners in the convenience store business to have traffic but also have higher incidence is a very important part of our operating plan, and that's why I was referring to meal deals, I was referring to some specific offers that we're having in that channel, because that is an important part of our business and it's impacting our single server.

Andrea Teixeira: Kind of price per kilo.

Andrea Teixeira: More quantities at a good value end of the month of May be absolute price per unit and again very complex, how that worst bear location and per cohort. So that those are where I think the intelligence. The data the tools that we have now in the hands of our people.

Andrea Teixeira: Kind of help us get their best return on the investment now there is a.

Andrea Teixeira: 10 or would that is convenient stores that is impacted.

There's less traffic in the channel.

Andrea Teixeira: Our participation in that channel is very relevant both in beverages and snacks. So how do we.

Andrea Teixeira: Help our partners in the convenience store business to have traffic, but also have higher incidence is a very important part of our operating plan and Thats why I was referring to meal deals I was referring to some specific offers that were having in that channel because that is an important part of our <unk>.

Andrea Teixeira: And it's impacting our single share performance.

Andrea Teixeira: Yes.

Unknown Executive: Thank you.

Unknown Executive: One moment for our next question.

Andrea Teixeira: Thank you one moment for our next question.

Andrea Teixeira: Yeah.

Lauren Lieberman: Our next question comes from Lauren Lieberman with Barclays, your line is open. Great. Thanks. Good morning.

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

Lauren Lieberman: Great. Thanks, good morning.

Ramon Laguarta: I was hoping you could talk a little bit around how the business can deal with some of the new legislation around ingredients and colors and sort of, I know you've got lots of technology and lots of technology in different markets around the world, but if the outlook currently built in some of the incremental costs you'll need to be absorbing to manage through this, and also just any perspective on SNAP. I know there's just a lot out there, but anything you can offer on sensitivity to business or exposure to business with regard to SNAP. Thanks. That's great.

Lauren Lieberman: I was hoping you could talk a little bit around how the business can can deal with some of the new legislation around.

Lauren Lieberman: Ingredient and colors.

Speaker Change: Sorry, guys I know, you've got lots of technology and lots of technology in different markets around the world, but if the outlook currently built in some of the incremental costs you will need to be.

Speaker Change: To be absorbing to manage through this and also just any perspective on snap I know theres, just a lot out there but.

Speaker Change: You can offer on sensitivity that business or exposure to that business.

Speaker Change: As regard to snap thanks.

Ramon Laguarta: Two good questions. Very, very relevant. The... You know, we've been leading the transformation of the industry now for a long time on sodium reduction, sugar reduction and better fats. And, you know, we already have a portfolio when we talk about the U.S. and the food business, 60 plus percent of our business today doesn't have any artificial color. So we're well undergoing that transition. And for example, brands like Lays will be out of artificial colors by the end of this year, the same with Tostitos, so some of our big brands. So we're well underway. Ideally, you know, we obviously we stand by the science and we, you know, where products are very safe.

Speaker Change: That's great two good questions I'm very very relevant.

Speaker Change: We've been leading the transformation of the industry now for a long time on sodium reduction sugar reduction and better fashion.

Speaker Change: We already have a portfolio when we talk about the U S.

Speaker Change: In the food business.

Speaker Change: 60 plus percent of our.

Speaker Change: Business today doesn't have any artificial colors. So we're well undergoing that transition and for example brands like lay's will be out of artificial colors by the end of this year the same with Dusty, though so some of our big brands.

Speaker Change: We're well underway ideally.

Speaker Change: Obviously, we stand by the science and we.

Speaker Change: Our products are.

Speaker Change: Very safe and does nothing to worry about this but we understand that there is going to be a probably a consumer demand for more natural ingredients and we're going to be accelerating that that transition.

Ramon Laguarta: Nothing to worry about this, but we understand that there's going to be probably a consumer demand for more natural ingredients, and we're going to be accelerating that transition. Ideally, we can do this in a very pragmatic, orchestrated way as an industry and not create unnecessary panic or chaos, but we'll lead that transition, and in the next couple of years, we'll have... We've migrated all the portfolio into natural colors, or at least provide the consumer with natural color options, and obviously every consumer will have the opportunity to choose what they prefer. So that's the journey we're undergoing.

Speaker Change: Ideally.

Speaker Change: We can do this in a very pragmatic orchestrated way as an industry and not create unnecessary panic or chaos.

Speaker Change: We'll will lead that that transition in India in the next.

A couple of years, we will have.

Speaker Change: Migrated all the portfolio into.

Speaker Change: Into natural colors or at least provide the consumer with natural color options.

Speaker Change: And obviously every consumer will have the opportunity to choose what they prefer so that's the journey, we're undergoing in terms of snap.

Ramon Laguarta: In terms of SNAP, again, there is a lot of conversation in different states, and we're seeing that some of our categories could be exposed to some restrictions. I think this will have a very limited impact in the business, as we are calculating today. And we'll need to see how the eventual legislation gets implemented. It's still a lot of unknowns on how this is going to be. Thank you.

Speaker Change: Again, there is a.

Speaker Change: There's a lot of conversation in different stage and we are seeing that some of our categories could be exposed to some jurisdictions. I think these will have a very limited impact in the business as we are calculating today and.

Speaker Change: We would need to see how the eventual legislation gets gets implemented it is still a lot of unknowns on how this is going to be happening.

Unknown Executive: One moment for our next question.

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

Bryan Spillane: Our next question comes from Bryan Spillane with B of A. Your line is open. Hey, thanks, operator. Good morning, everyone. Um, so Ramon, maybe just to step back, you know, the last few years, you know, some of the messaging, I think, if I've heard it correctly from you has been As you're looking at the business over the next few years, right, more of the growth sourced from international and you've done a lot, right, the company's done a lot to build and begin to scale more international, more countries contributing growth. So I know some of this has maybe been forced by the external environment, but you know, when we look at the top line in a two, if we had three full months of international.

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

Bryan Spillane: Hey, Thanks, operator, good morning, everyone.

Speaker Change: So Ramon maybe just to step back the last few years some of the messaging I think if I heard it correctly from you has been.

Speaker Change: As youre looking at the business.

Speaker Change: Over the next few years right more of the growth sourced from international and you've done a lot right. The company has done a lot to build and begin to scale more international more countries contributing growth.

Speaker Change: So I know some of this is maybe been forced by the external environment, but when we look at the top line and a two if we had three full months of international.

Bryan Spillane: You know, it It just seems like, from a revenue perspective, your international contribution kind of puts you in a position to maintain the longer-term growth objectives, even with what would be, I guess, a natural slowing of Frito in North America. So one, is that kind of the right way to think about this? And then second, if that's true, are we scaled enough to be able to drive profit growth alongside revenue growth if it's a more international heavy revenue model, I guess, over the next few years? So I guess what I'm basically asking is, are we at a point now where international can really contribute more if Frito is going to kind of naturally slow to a more modest growth?

Speaker Change: Yeah.

Speaker Change: It.

Speaker Change: It just seems like from a from a revenue perspective.

Speaker Change: Your your international contribution kind of puts you in a position to maintain.

Speaker Change: The longer term growth objectives, even with.

Speaker Change: What would be I guess, a natural slowing of Frito in North America. So.

Speaker Change: One is that the right way to think about this and then second if that's true or we scaled enough to be able to drive profit growth alongside revenue growth. If it's a more international heavy revenue model I guess over the next few years. So I guess, what I'm basically asking is are we at a point now where <unk>.

Speaker Change: National can really.

Speaker Change: Contribute more if frito is going to kind of naturally slow to a more modest growth overtime.

Ramon Laguarta: I think two, I mean, it is a great question, Bryan, and it's... for a long conversation. I think international will continue to be a growth and profit key driver for the company for the long term. you can look at the population inside and outside of the company, outside of the U.S., and how developed our per caps are internationally versus in the U.S., you could see. right away that that is the growth. And fortunately, we're now at a stage in the growth development of the company where that business is accretive to the company. So, two elements, high growth, high right to succeed in those markets, in the majority of those markets, both in beverages and in snacks, and food, and accretive business.

Speaker Change: I think.

Brian Spillane: I mean this is a great question Brian.

Speaker Change:

Speaker Change: Probably for a long conversation.

Speaker Change: I think international will continue to be.

Speaker Change: A growth in profit key driver for the company for the long term.

Speaker Change: If you look at the population inside outside of the company outside of the U S and.

Speaker Change: And how we develop our per caps are internationally versus in the U S. You could see.

Speaker Change: Right away that that is the growth and Fortunately, we're now at a stage in the in the growth development of the company where that business is accretive to the company. So.

Speaker Change: Two elements high growth high right to succeed in those markets and the majority of those markets, both in beverages, and snacks and foods and accretive business. So that part and we will continue to invest we're investing in capacity, we're investing in talent and we're investing in go to market, we're investing in portfolio.

Ramon Laguarta: So that part, and we'll continue to invest. We're investing in capacity, we're investing in talent, we're investing in go-to-market, we're investing in portfolio on the brands, and that will continue.

Speaker Change: On the brands and that will continue now.

Ramon Laguarta: Now, what I disagree with you is in the fact that the U.S. business cannot grow at a faster speed than it is growing today. I think I have, you know, I think the U.S. business, both beverages and foods, will continue to grow at a very good rate in the U.S. when you think about the overall opportunity both from the better execution to evolving the portfolio to moving into new channels like Away From Home. We have, you know, tremendous opportunities to take our brands into new spaces, leverage the capability of our business. And now that we have an operating model that will be more integrated in the U.S., that will give us more resources, will be less duplicated in some areas, and synergize in other areas where we can drive growth in new service models, direct-to-consumer, direct-to-B2B, whatever we choose to play.

Speaker Change: I agree with you. It's in the fact that the U S business cannot grow at a faster speed than it is growing today I think I have.

Speaker Change: I think the U S business, both beverages and food will continue to grow at a very good rate in the U S and when you think about the overall opportunity both from the.

Speaker Change: Better execution to evolving the portfolio to moving into new channels like away from home we have.

Speaker Change: Tremendous opportunities to take our brands into new spaces leverage the capability of our business and now that we have an operating model that will be more integrated in the U S that will give us more resources will be less duplicated in some areas and synergize in other areas, where we can drive growth in new service model.

Speaker Change: Direct to consumer direct to be to be whatever we choose to play so I think the U S.

Ramon Laguarta: So, I think the U.S. We see it as a growth driver. We see it as a source of funding for the rest of the world, but also a growth opportunity for the company way above where we are today. I think we're today in a parenthesis given by all the consumer dynamics and some other dynamics that are happening in the US, but that will go through. We'll have a more relevant portfolio. We'll be in the relevant channels. We'll have the right price points and the consumer will be in a better place eventually in the US. We see the two components of growth.

Speaker Change: We see it as a growth driver we see it as a.

Speaker Change: Source of funding for the rest of the world, but also a growth opportunity for the company way above where we are today I think we are today in a bright emphasis given by all the consumer dynamics and some other dynamics that are happening in the U S. But that will go through.

Speaker Change: It will have a more.

Speaker Change: Relevant portfolio will be in their relevant channels will have the right price points and the consumer will be in a better place eventually in the U S.

Speaker Change: We'd see the components.

Speaker Change: Of growth, obviously international we will.

Unknown Executive: Obviously, international, we will grab that opportunity with the right investments, the right talent, the right brand strategies and challenge strategies, but the US is a great opportunity for us and we think we have the right to win and we have the fundamentals of brands and market presence to capture that. Thank you. One moment for our next question.

Speaker Change: We will grab that opportunity with the right investments the right talent, the right brand strategies and challenged strategies, but the U S.

Speaker Change: It's a great opportunity for us and that we think we have the right to win and we have the.

Speaker Change: The fundamentals of brands and market presence to capture that opportunity as well.

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

Michael Lavery: Our next question comes from Michael Lavery with the Piper Sandler. Your line is open. Thank you. Good morning. I just wanted to unpack the guidance change a little bit further. You touched on the three pieces, the tariffs, the macro uncertainty, and the Frito North America weakness. But the second and third have a top-line component, and you've held the revenue outlook constant. Is it just because the impact is modest enough to be in the wiggle room of low single digits, or is it an offset from international? How do we think about the top-line piece that's wrapped into that?

Speaker Change: Our next question comes from Michael Lavery with Piper Sandler Your line is open.

Michael Lavery: Thank you and good morning.

Michael Lavery: Just wanted to unpack the guidance change a little bit further.

Michael Lavery: You touched on the three pieces the tariffs the macro uncertainty.

Michael Lavery: The Frito North America weakness, but.

Michael Lavery: The second and third are.

Michael Lavery: Topline component.

Michael Lavery: Hello.

Michael Lavery: Revenue outlook constant.

Michael Lavery: Just because of that.

Michael Lavery: Impact is modest enough to be in the wiggle room of low single digits or is it an offset from international I guess, how do we think about the topline piece that's wrapped into that.

Michael Lavery: Then just on the tariff piece, Is your outlook based on current estimates?

Michael Lavery: Then just on the tariff piece.

Michael Lavery: Is your.

Jamie Caulfield: And I guess just simply, would we be right to assume that if, for example, the 90 day pause gets extended, or if there's any changes there, it could certainly drive some upside if you get a little relief out of that? The momentum in international is one of the key underpinnings of the guidance that we reiterated on the top line. As I mentioned, you look at the first quarter, sort of normalize it for the accounting calendar thing, and we're right in the middle of that low single digit. On tariffs, we're not going to get too much into piecemeal analysis.

Michael Lavery: Outlook based on current estimates and I guess, just simply would we be right to assume that if for example, the <unk>.

Michael Lavery: Andy did pause gets extended or if theres any changes there it could certainly drive some upside.

Michael Lavery: You'll get a little relief out of that.

Michael Lavery: Okay. So I think there were.

Michael Lavery: Two questions in there.

Michael Lavery: The first Michael Yes.

Michael Lavery: Momentum in international is one of the key underpinnings of the guidance that we reiterated on the topline as I mentioned, you look at the first quarter sort of normalize it for the.

Michael Lavery: Accounting calendar thing and we're right in the middle of that low single digit.

Michael Lavery: Guidance.

Michael Lavery: On tariffs, we're not going to get.

Michael Lavery: Too much in the piecemeal analysis.

Unknown Executive: Have we based our guidance on what we observe today? We've run various scenarios of what could happen, and I think based on what we know today, that's what we factored into the guidance. Thank you. One moment for our next question.

Michael Lavery: We based our guidance on.

Michael Lavery: What we observe today, we've run various scenarios of what could happen and I think based on what we know today.

Michael Lavery: What we factored into the guidance.

Michael Lavery: Thank you one of them before our next question.

Kaumil Gajrawala: Our next question comes from Kaumil Gajrawala with Jeffries, your line is open. Hey guys, it's a it's bring your kid to work day at Jeffrey.

Speaker Change: Our next question comes from Camilo Gotcha wallet with Jefferies. Your line is open.

Speaker Change: Hey, guys just bring your Kinder workday at Jefferies. So if you don't mind, My daughter, Malaysia is going to ask the question.

Kaumil Gajrawala: So if you don't mind my daughter Milena is going to ask the question What do you think about the launch of GLP-1 oral medications coming to market next year? That was entirely her own. Yeah, it's good, it's good. And I think it's relevant. And it's, again, I would, I would, Kamil, and I don't know your daughter's name, but obviously, we've been transforming the portfolio, and we'll continue to give the consumer offerings that, you know, help them in any sort of dietary preferences that they have. So whether they're... GLP situation or they're not, we will be providing them.

Speaker Change: Yes.

Speaker Change: Why do you think about the launch of GLC, one oral medications coming to market next year.

Speaker Change: Yes.

Yeah.

Speaker Change: That was entirely around yes.

Speaker Change: Yes, that's good that's good and I think it's relevant.

Speaker Change: Again, I would I would.

Speaker Change: I don't know your daughter's name but.

Speaker Change: Obviously, we've been transforming the portfolio and we will continue to give the consumer offerings that.

Speaker Change: Help them in any sort of dietary preferences that they have to weather.

Speaker Change: Sure.

Speaker Change: In a DLP situation are there or not we will keep providing them what we're seeing with DLP consumers is.

Ramon Laguarta: What we're seeing with GLP consumers is, again, they are, you know, they're driving more consumption on protein, space, on fiber, on hydration. I think we're well-positioned for both fiber and hydration solutions, and we will increase the availability of products in those two areas. I think we're a bit less well-positioned in protein, and that we're innovating. Our teams are working on innovation against protein, both on the beverage and the food business, and you will see some late this year, early next year. And that's the space that I think we can capture more incremental value. Now, the other thing we're seeing in GLP consumers is that they're keeping our brands in their repertoire, probably in a smaller portion.

Speaker Change: They are.

Speaker Change: Sure.

Speaker Change: Driving more consumption on protein space on fiber on hydration.

Speaker Change: I think we're well positioned for both fiber and hydration solutions and we will.

Speaker Change: Increase the availability of products.

Speaker Change: In those two areas I think we are a bit less well position in prostate and we're innovating.

Speaker Change: Our teams are working on innovation for against <unk>, both on the beverage and the food business and you will see some.

Speaker Change: Late this year early next year.

Speaker Change: And that the space that I think we can capture more incremental more incremental value now the other thing we're seeing in GOP consumers is that they are they keeping our branch in their repertoire.

Speaker Change: Probably in the smaller portion so they are going for and Thats. The way they are actually eating across most of their choices. They are eating less quantity so our offerings in.

Ramon Laguarta: So, they're going for, and that's the way they're actually eating across most of their choices, they're eating less quantity. So, our offerings in small portions. whether it's a multi-pack or some other options that we provide, keeps our brands in their repertoire and it's still relevant. So, again, portfolio transformation, portion control, and the right offerings for those consumers will make sure that, you know, our brands stay relevant to those consumers. And I don't know whether that the, you know, the current participation, I think it's about an eight, seven, eight percent. And there's obviously still a lot of, a lot of.

Speaker Change: While portions and.

Speaker Change: Whether it's a multi pack or some other options that we provide keeps our brands in their in their repertoire and it's still relevant so again portfolio transformation portion control and they're right there right the right offerings for those consumers, we'll we'll make sure that our.

Speaker Change: Our branch stay relative.

Speaker Change: Relevant to those consumers.

Speaker Change: Sure.

Speaker Change: Don't know whether that.

Speaker Change: The current participation I think it's about $8 to 78% and there is obviously still a lot of.

Speaker Change: A lot of.

Ramon Laguarta: a lot of trial and error from consumers in that space. I think it's gonna be relevant in the future and something that every food company is thinking about and we're obviously thinking about it. Thank you.

Speaker Change: And a lot of trial and error from consumers in that space, but I think it is going to be relevant in the future and something that every food company is thinking about and we're obviously thinking about it and reacted.

Unknown Executive: One moment for our next question.

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

Robert Ottenstein: Our next question comes from Robert Ottenstein with Evercore ISI, your line is open. Yeah, hi, this is Greg on for Robert. We have two questions on the PB&A business.

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

Speaker Change: Yes, Hi, this is Greg on for Robert.

Speaker Change: Two questions on the <unk> business I guess first if you could talk about kind of the rationale behind the acquisition of Poppy and what Youre planning to do with the brand and then second of all.

Ramon Laguarta: I guess first, if you could talk about kind of the rationale behind the acquisition of Poppy and what you're planning to, you know, do with the brand. And then second of all, if you could talk about the drivers for PB&A margins, kind of how you're thinking about that segment and the setup, and kind of any, any new thoughts on where you see the, you know, margin goal being over the medium term. Thank you. Yeah, listen, we're feeling we're feeling good about about our beverage business in North America. And we made choices a few years ago.

Speaker Change: If you could talk about the drivers for our PVA margins kind of how you are thinking about.

Speaker Change: About that segment in the setup and kind of any.

Speaker Change: Any new thoughts on where you see the margin goal of being over the medium term. Thank you.

Speaker Change: Yes.

Speaker Change: We're feeling we're feeling good about.

Speaker Change: About.

Speaker Change: Our beverage business in North America, and we made choices few.

Ramon Laguarta: We're executing those choices, and I think we're executing quite well. And I need to thank the team for their focus and their their their good execution of the playbook. Now, one of the key pillars was Improving the margin of the business and you can see these in a multi-year trend that we keep improving. Q1 was a good step in the right direction. I think there's opportunities still to become a better operating business and keep driving better excellence out of everything of our value chain from making, moving, and selling. So good, good progress there. We're also very...

Speaker Change: A few years ago, we're executing those choices and I think we're executing quite well and I need to hang the teams for their focus on there.

Speaker Change: They're a good execution of the playbook now.

Speaker Change: One of the key pillars was.

Speaker Change: Improving the margin of the business and you can see these in a multi year trend that we keep improving in Q1 was a good step in the right direction and there is there is opportunities still to become a better operating business and keep driving.

Speaker Change: Better excellence out of everything of our value chain from making moving and selling so good good progress there. We're also very.

Ramon Laguarta: very optimistic about our brands. And if you think about our soft drink business, CSD business, Pepsi is growing faster than in the last few years. Pepsi actually is starting to gain share of carbonated soft drinks. And it's been the focus on zero sugar, it's been the focus on Pepsi and food, and all the activation of the brand in that space that is giving us very good results. We're also happy with Gatorade. Gatorade is also a business that is starting to regain share in the sports drink category. If you add to that Propel and the functional hydration, that space where clearly we're leaders and we keep driving better performance.

Speaker Change: I'm very optimistic about our brands and.

Speaker Change: Do you think about our soft drink business.

Speaker Change: CSD business pepsi's grow in <unk>.

Speaker Change: <unk> faster than in the last few years <unk> actually starting to gain share of carbonated soft drinks and it's been the focus on zero sugar has been the focus was on.

Speaker Change: Pepsi and food and all the activation of the brand in that space that is giving US very good results. We're also happy with Gatorade reiterate is also a business that is starting to regain share in the sports drink category.

Speaker Change: If you add to that propel and functional hydration that space, where clearly we're leaders and we keep we keep driving better performance now our powders and tablets or enhance our business is also gaining share. So that is again a multi.

Ramon Laguarta: Now, our powders and tablets, our enhancer business is also gaining share. So that is, again, a multi-prone strategy that is starting to deliver for us. So we feel good about it. There are areas where we need to keep improving, right? So if you think about Mountain Dew, we've been working on it for a while.

Speaker Change: Multi prone strategy that is starting to deliver for that so we feel good about it there are areas, where we need to keep improving right. So if you think about months of new we've been working on it for a while there is a big relaunch of the brand in a few weeks we will see.

Ramon Laguarta: There's a big relaunch of the brand in a few weeks. We feel optimistic as well about Baja Blast being a good addition to the portfolio that will drive a structural demand for the brand. So we're feeling good about both the operating metrics improvement, we're feeling good about some of the brands, and we're feeling good about some of the inorganic moves that we're making. Again, this is all subject to regulatory approval.

Speaker Change: Feel optimistic as well about.

Speaker Change: <unk> been a good addition to the portfolio that will drive a structural structural.

Speaker Change: Demand for the brand so we're feeling good about both the operating.

Speaker Change: Metrics improvement, we're feeling good about some of the brands and we're feeling good about some of the.

Speaker Change: Inorganic.

Speaker Change: Moves that we're making again this is all subject to regulatory.

Unknown Executive: So when things are approved, then I think we can talk more about POPI and how we're planning to integrate that. Thank you. One moment for our next question.

Speaker Change: Approval somewhat when things are approved then I think we can talk more about <unk> and how we're planning to integrate that into the business.

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

Peter Grom: Our next question comes from Peter Grom with UBS, your line is open. Thanks, operator. Good morning, everyone. Ramon, I wanted to follow up on your commentary there around beverages and just the commentary around the portfolio. But can you maybe just give us an update on energy drinks? I think it's one of the few categories that has seen some sequential improvement year-to-date from a category perspective. Celsius has seen some improved performance as well. And then just when you think about your partnership with Celsius, they obviously have brought on a new brand in a lot of news.

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

Speaker Change: Yeah.

Peter Grom: Thanks, operator, good morning, everyone Ramon I wanted to follow up on your commentary there around beverages and just the commentary around the portfolio, but can you maybe just give us an update on <unk>.

Peter Grom: Energy drinks I think it's one of the few categories that has seen some sequential improvement year to date from a category perspective.

Peter Grom: <unk> seen some improved performance as well and then just when you think about your partnership with Celsius. They obviously, you've brought on a new brand and a lot of news. So can you just talk about your willingness to kind of bring that brand onto three year distribution network. Thanks.

Ramon Laguarta: So can you just talk about your willingness to kind of bring that brand on through your distribution network? Thanks.

Ramon Laguarta: Yeah, listen, we feel good about energy and we feel good about the strategy and the partnerships that we have in this space. We're having conversations with Celsius, obviously, after they acquired new brands and still, I would say, early discussions about how we can find ways to participate or not in this new acquisition. It's still too early to make any kind of public.

Peter Grom: Yes.

Peter Grom: We feel good about energy and we feel good about the.

Peter Grom: The strategy and the partnerships that we have in this space.

Peter Grom: We're having conversations with Celsius, obviously after they they acquire new brands in steel I would say early discussions about how.

Peter Grom: We can find ways to participate or not in this new acquisition.

It's still too early to make.

Peter Grom: Any kind of public comment on this.

Unknown Executive: Thank you.

Unknown Executive: One moment for our next question.

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

Chris Carey: Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open. Hi, good morning, everyone.

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

Chris Carey: Hi, good morning, everyone.

Chris Carey: I did want to follow up on, you know, a question around PB&A, specifically on the Pepsi brand. It gained market share in the quarter, as highlighted in the prepared remarks, which is certainly encouraging. Do you think that this is the start of something that can be a bit more durable? What are your expectations for the brand from here? And then if we take a step back, it's a little bit like Bryan's question, but more toward North America and specifically on beverages. You know, your peers have delivered pretty dynamic results in their North American beverage business in recent years.

Chris Carey: I did want to follow up on a question around <unk>, specifically on the Pepsi brand gained market share in the quarter.

As highlighted in our prepared remarks, which is certainly encouraging.

Speaker Change: That this is the start of something that can be a bit more durable what are your expectations for the brand from here and then if we take a step back it is a little bit like Brian's question, but more towards North America, and specifically on beverages.

Speaker Change: Peers have delivered pretty dynamic results in their north American beverage business in recent years.

Ramon Laguarta: Certainly you've been active in the environment as well, but has your thought process on this business changed over time? I will tell you my personal view is that it feels like there's a lot of focus on margins from the investment community and less so from growth. Certainly that wouldn't be your starting point with your pillars of profitable growth. But maybe just as you canvas this North America beverage environment over the past few years, has that evolved your thinking on what this business is capable of going through the medium term? Thanks.

Speaker Change: Certainly you've been active in the environment as well, but.

Speaker Change: Has your thought process on this business changed over time I will tell you my personal.

Speaker Change: View is that it feels like there's a lot of focus on margins from the investment community.

Speaker Change: So from growth certainly that wouldn't be your starting point with your pillars of.

Speaker Change: Profitable growth, but maybe just as you canvas this north American beverage environment over the past few years.

Speaker Change: Is that has that evolved your thinking on what this business is capable of.

Speaker Change: Going through the medium term thanks, so much.

Ramon Laguarta: It's a good, it's a very good question and I would refer back to my previous answer, we were feeling very good about the progress that we're making and these large businesses is about clear focus, clear trade offs, clear areas of where you wanna improve the business and over time you execute and we're feeling good about both the operational excellence. So the margin improvement is not only a margin improvement, it's an operational excellence. It's an operating improvement metrics across make, move and sell and that's where the business is focused. So it is a long-term improvement in capabilities and infrastructure in data and technology and all that is being rolled out to make the business more capable and more granular and more intelligent.

Speaker Change: Yes, it's a good is a very good question and as I would refer back to my previous answer.

Speaker Change: We're feeling.

Speaker Change: Very good about the progress that we're making in these large businesses is about clear focus clear tradeoffs clear areas off.

Speaker Change: Or do you want to improve the business and over time, you guys fix you execute and we're feeling good about both the operational excellence. So the margin improvement is not only a margin improvement is on operational excellence and operating.

Speaker Change: <unk> metrics across make move and sell and Thats, where the business is focus.

Speaker Change: Alright.

Speaker Change: It is it is it is a long term improvement in capabilities and infra.

Speaker Change: Infrastructure in data and technology and all of that is being rolled out to make the business more capable and more granular and more intelligent now on the brands as well we have obviously, we have been investing regularly.

Ramon Laguarta: Now on the brands as well, we have obviously, we have been investing regularly and consistently in our brands with focus on Pepsi and Gatorade and those two brands are starting to gain share. We feel good about the positioning, we'll feel good about the advertising, we'll feel good about the portfolio. If you think about Pepsi Zero, it's a great addition to the portfolio and it's performing very well. If you think about Gatorade. Rapid Hydration is a big consumer space that we're participating with Gator Light, Gator 8.0 as well has been a good addition to the portfolio, a very, very large scale part of the business now.

Speaker Change: And consistently in our brands with focus on Pepsi and Gatorade on those two brands are starting to gain share.

Speaker Change: We feel good about the positioning we will feel good about the advertising will feel good about the portfolio.

Speaker Change: About Pepsi zero.

Speaker Change: It's a great addition to their portfolio and its performing very well if you think about Gatorade.

Speaker Change: Rapid hydration is a big consumer space that were participating with get a light Gatorade zero as well has been a good addition to the portfolio very very large scale part of the business now and we're investing in <unk> and tablets, because we see the consumer moving there and we're now going to have new infrastructure in the us.

Ramon Laguarta: And we're investing in powders and tablets because we see the consumer moving there. We're now going to have new infrastructure, new assets that help us, you know, increase our offerings and probably add more functionality to that part of the portfolio. I think there are still opportunities on the brand. Some of them will be organic. Some of that would be inorganically or through partnerships, as you mentioned, with Celsius and on the energy space, with Starbucks on the coffee space. And we have also, I think, a pretty good development of the tea category ahead of us with our partnership with Unilever.

Speaker Change: Does that help us.

Speaker Change: Increase our offerings and probably be add more functionality to that part of the portfolio.

I think there are still opportunities on the brand some of that will be organic some of that would be inorganically or through partnerships as you mentioned with Celsius.

Speaker Change: In the energy space with.

Speaker Change: Starbucks on the coffee space and we have also I think a pretty good development of the tea category ahead of us with our partnership with Unilever. So.

Ramon Laguarta: So, again, through a partnership, organic or inorganic, I think the portfolio, we have very good, good strategic intentions of where we want to take the portfolio, where the consumer is going. And we feel good about the progress we're making. This is not going to be an overnight. We knew that this is going to be a year after year progress. But the way the business is performing, the way we're building the talent, the way we're building it step by step, the capabilities of the business make us feel very good about this. Thank you. One moment for our next question.

Speaker Change: Again through a partnership.

Speaker Change: Organic or inorganic got in the portfolio. We have very good good strategic intentions are willing to take the portfolio, where the consumer is going and we feel good about the progress. We're making this is not going to be an overnight. We knew that this is going to be a year after year progress, but the way the business is performing the way we are building the Italian.

Speaker Change: There will be a step by step.

Speaker Change: <unk> of the business to make us feel very good about this business long term.

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

Speaker Change: Yeah.

Kevin Grundy: Our next question comes from Kevin Grundy with BNP Paribas, your line is open. Great. Thanks. Morning, everyone.

Kevin Grundy: Our next question comes from Kevin Grundy with BNP Paribas. Your line is open.

Kevin Grundy: Great. Thanks, good morning, everyone.

Ramon Laguarta: Question for Ramon, just on the decision to recast your segment results, but really from a strategic perspective. So, you know, as you're aware, it's not uncommon for such moves to be a precursor to more impactful strategic considerations from companies board, particularly when a stock's been under pressure. So I wouldn't expect you to front run anything, of course, on a call like this today, but perhaps provide context, one, for the decision to recast your segment results, and then two, what you believe investors may underappreciate about the story of PepsiCo that perhaps becomes more evident with the company's new financial segment reporting.

Kevin Grundy: Question for Ramon just on the decision to recast your segment results, but really from a strategic perspective, so as youre aware. It is not uncommon for such moves to be a precursor to more impactful strategic considerations from company's board, particularly when the stock has been under pressure.

Kevin Grundy: I wouldn't expect you to front run anything of course.

Kevin Grundy: A call like this today, but perhaps provide context one for decision to recast our segment results and then to what you believe investors may underappreciated about the story of Pepsico that perhaps it becomes more evident with the company's new financial segment reporting so thank you for that.

Ramon Laguarta: So thank you for that. Yeah, Kevin. We have a new think about. Maximizing the growth of the company in the future, we think there is an opportunity to both provide more focus in some parts of the business, either beverages or foods, or operating model COBO or FOBO in our international business. So that has been the majority of the recast. And so it provides a, you know, separation of the FOBO business international versus the operating units where we control from the manufacturing all the way to the selling. And so this is a very simple way for our international business, which is very scaled today to have a bit more focus on the value we provide to our partners in the FOBO business and the operating infrastructure around our company-owned businesses and how we apply technology and how we provide services to our operating units.

Speaker Change: No Kevin.

Kevin Grundy: I think we have a new.

Kevin Grundy: How should we think about.

Kevin Grundy: Maximizing the growth of the company in the future.

Kevin Grundy: We think there is an opportunity to.

Kevin Grundy: Both provide more photos in some parts of the business either.

Kevin Grundy: Beverages foods, our operating model Cabo or <unk> in our international business. So that has been the majority of the recast.

Kevin Grundy: It provides a.

Kevin Grundy:

Kevin Grundy: Separation of the formal business international versus the operating units.

Kevin Grundy: We control from the manufacturing all the way to the selling and so this is a very simple way for our international business, which has various scale today to have a bit more focus on the value we provide to our partners in the pharma business and the operating infrastructure around our.

Kevin Grundy: Company owned businesses and how we apply technology and how we provide services to our operating units. So it's more on the.

Ramon Laguarta: So it's more on the, let's make sure that we're well positioned for the long-term growth of our international business and nothing else. Now on the North America business, Quaker has been part of the food business now for a couple of years. So we're just recognizing something that is the way we're thinking about the business and running the business. and then the beverage business continues to be separate. Now, what we're adding in North America, it's a North America integration opportunity, both from running the business more efficiently in the short term, but most importantly, about how we can grow the business in a different way in the future, especially as we look at common infrastructure for some of our supply chain, or some of our go-to-market models for particular channels where I think the scale could give more value than the separation, and that's how you should be thinking about why we've made some of these changes.

Kevin Grundy: Let's make sure that we are well.

Kevin Grundy: Position for the long term growth of our international business and nothing else now on the on the North America business Quaker has been.

Kevin Grundy: Part of the food business now for a couple of years. So we're just recognizing something that is the way we're thinking about the visa in running the business and then the beverage business continues to be set right now what we are adding in North America, It's a north America integration opportunity both from running the business more.

Kevin Grundy: Efficiently in the short term, but most importantly about how we can grow the business in a different way in the future, especially as we look at common infrastructure for some of our supply chain or some of our go to market models for particular channels, where we can I think the scale could give more value than the separation.

Kevin Grundy: That's how you should be thinking about.

Kevin Grundy: Why why we've made some of these changes the north American one is not on the reporting is more on the operating the international one is they are reporting and the operating mode.

Unknown Executive: The North American one is not on the reporting, it's more on the operating. The international one is the reporting and the operating. Thank you.

Robert Moskow: One moment for our next question.

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

Ramon Laguarta: Our next question comes from Robert Moskow with TD Cowell and your line is open. Thanks. Kaumil's daughter took my first question, but fortunately, I have a backup here. So last year, you characterized potato chips and other kind of unflavored chip products as being more commoditized. And that was where you wanted to be more forward on your promotional activity. And there's not much talk about that this year.

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

Speaker Change: Thanks Komal.

Speaker Change: Almost daughter took my first question, but unfortunately I have a backup here.

Speaker Change: So last year you.

Speaker Change: Characterize potato chips and other kind of Unfavored chip products as being more commoditized and that was where you want it to be more.

Speaker Change: Forward on your promotional activity.

Speaker Change: And it's not much talk about that this year. So remote I wanted to know do you feel like.

Ramon Laguarta: So Ramon, I wanted to know, do you feel like, in terms of your value actions, you need to be more active on that part of the portfolio? Or do you feel like you've got it where you need to? I think the, the, um... The strategic intent remains the same. In areas where we have less consumer differentiation, we need to probably be a bit more intentional in our revenue management initiatives. In areas where we are more differentiated, we can probably... be more intentional, but in the other direction, in terms of capturing more value from consumers where our products provide more uniqueness and they obviously consider...

Speaker Change: In terms of your value actions you need to be more act.

Speaker Change: Active on that part of the portfolio or do you feel like you've got it where you need to be.

Speaker Change: I think the idea.

Speaker Change: <unk>.

Speaker Change: I mean, India strategic intent remains the same and in areas, where we have less consumer differentiation, we need to probably be a bit more intentional in our revenue management initiatives in areas, where we're more differentiated we can probably.

Speaker Change: He also more intentional about in the other direction right in terms of capturing more value from consumers, where our products provide more uniqueness.

Obviously consider consumer.

Ramon Laguarta: will give us more recognition for that value. So nothing has changed. We're not talking the details because obviously we're not going so much into that space. But in the work the teams are doing, we understand where we provide value, and value is in the product, it's in the brand, it's in the experience, it's in multiple elements of value. And then obviously where we have less differentiation or we provide less value, we can afford less gap versus competitors in terms of pricing. I mean the principle, the strategic principles of our pricing versus our value remain the same.

Speaker Change: Consumers will give us more recognition for that value. So nothing has changed we're not shocking the details because obviously were not going so much into that space, but in the work. The teams are doing we have.

Speaker Change: We understand where we provide value and value in the product and the brand is in its in the experiences in multiple elements of value and then obviously, where we have less differentiation.

Speaker Change: Provide less value we need to have we can afford less gap versus competitors in terms of pricing I mean, the principal strategic principles of our pricing versus our value remained the same.

Ramon Laguarta: Actually, I think we've gotten better at understanding really our value and the drivers of value and how then our pricing needs to reflect those elements in particular locations or particular brands.

Speaker Change: Actually I think we've gotten better at understanding and really our value and the drivers of value and how then our pricing needs to reflect those those elements in particular locations are particular brands. So I think the organization is become more.

Unknown Executive: I think the organization has become more nuanced, more granular, more intelligent in what is a critical element of our profitability and our growth. Thank you. One moment for our next question.

Speaker Change: <unk> more granular or more intelligent in.

What is a critical element of our profitability and our growth.

Speaker Change: Yes.

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

Charlie Higgs: Our last question comes from Charlie Higgs with Redburn Atlantic. Your line is open. Hi Ramon, Jamie, hope you're both well. I just wanted to dig into the organic sales growth guidance please. I think you're now including high inflation economies in that. Can I just confirm and what you're building in for the rest of the year as a contribution from these high inflation economies? Thank you. So, yeah, I'll confirm that we do include it, and frankly, that was to put us on a comparable basis with many of our close-in peers. It's not going to be a significant part of...

Speaker Change: Our last question comes from Charlie Higgs with Redburn Atlantic Your line is open.

Speaker Change: Alright remained Jamie well.

Speaker Change: I just wanted to dig into the organic sales growth guidance. Please because I think youll now, including high inflation economies and that can I just confirm.

Speaker Change: What you're building in for the rest of the year as a contribution from these.

Speaker Change: Inflation economies. Thank you.

Speaker Change: So I will confirm that we do include it and frankly that was.

Speaker Change: Put us on a comparable basis with many of our close in peers, it's not going to be a significant part of <unk>.

Jamie Caulfield: of the Revenue Generation. for the year and it wasn't a significant contributor in the first quarter. Benefit or nothing.

Speaker Change: Of the revenue generation.

Speaker Change: For the year and it wasn't.

Speaker Change: <unk> contributor in the first quarter, yes, Charlie it's Ravi it's immaterial and there is no impact on earnings either just to make sure we clarify that.

Speaker Change: Benefit on it.

Speaker Change: Alright.

Speaker Change: Okay.

Unknown Executive: Great.

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

Speaker Change: Great. Okay. I think this is the last question and then close the call by now. Thank you very much for your participation and obviously, thank you very much especially for the trust you have in ourselves and the Pepsico for your investments. Thank you.

Unknown Executive: And we close the call right now. Thank you very much for your participation. And obviously, thank you very much, especially for the trust you have in ourselves and PepsiCo for your Ladies and gentlemen, this concludes today's presentation.

Speaker Change: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Unknown Executive: You may now disconnect and have a wonderful day.

Speaker Change: Okay.

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