Q2 2025 PepsiCo Inc Earnings Call - Q&A

Good morning and welcome to pepsico's 2025 second quarter earnings question and answer session. Your lines have been placed on this and only until it is your turn. To ask a question, today's call is being recorded and will be archived at www.pepsico.com.

It is now my pleasure to introduce Mr. Robbie pamani senior vice president of investor relations, Mr. Pamani you may begin.

Thank you, Kevin, 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, 2025 guidance, and Outlook.

Forward-looking statements inherently, involve risks, and uncertainties and only reflect our view as of today. July 17th 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 second quarter 2025 earnings release and second 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: Joining me today are pepsico's, chairman and CEO, Ramon, laguarta, and pepsico's Executive Vice President and CFO. Jamie cfield we ask that you please limit yourself to 1 question and with that, I will turn it over to the operator for the first question.

Speaker Change: Thank you, ladies and gentlemen, in order to ask a question. Please press star 1, 1 on your telephone. If your question has been answered, you wish to remove yourself from the queue? Please press star 1 1 again. 1 moment for our first question.

Our first question comes from Bonnie Herzog with Gulp and sax for line is open.

Speaker Change: All right, thank you. Good morning, everyone.

I guess I was hoping for some more color on your accelerated productivity, initiatives and your efforts, you know, to ultimately rightsize your asset footprint. My sense is your business, you know, is built for faster growth and, you know, as we're seeing growth moderate, I guess you're understanding the need to shrink your asset base and I, you know, an attempt to mitigate, you know, the impact that you might be seeing from some leverage moving forward. So first, could you quantify the productivity savings? You're hoping to generate this year and how much above the typical 1 billion dollar run rate, it will be and then second could you frame for us? How you're balancing your reduced asset footprint with ultimately ensuring your business will still be built for growth over the medium long term and I guess that along those lines. How should we think about your long-term algorithm?

Speaker Change: So and realistic category growth, thanks.

Speaker Change: Good. Bonnie, a lot of questions there. Um, listen, let let me talk, uh, first about how we're thinking about productivity, uh, in a multi-year, uh, Horizon. And then maybe Jamie can can give you a bit more, uh, sense of the, uh, of the numbers. Now, we're thinking about productivity you asked about Fredo, but think about pbna as well or international business. Every every 1 of those business have been, uh, optimized in their, uh, cost structure for multi years. Now, we've been investing in technology, we've been investing, in AI, we've been investing in in, in data those business. Now have opportunities to improve even more of their productivity in in, in as a standalone business when it comes to the North America. Um, uh Market, we have 1 new layer of opportunity that is going to give us a lot of uh um opportunities to improve our cost structure of the next 3 or 4 years, which is the North American integration. We have

Speaker Change: 2 large businesses, almost 30 billion dollar. Each that have been operating almost um, you know, a full value chain, uh, um, side by side. Now, with the Investments we've made in technology with the new up, uh, uh, you know, uh, data that we have and systems, we can start looking at those businesses in a more integrated way to perform some of the value chain, uh, tasks, in an integrated way with

That we create both, uh, efficiency and cost reduction, but also growth opportunities for the business in a combined way. Think about rural areas in the country think about um how we service small small stores or away from home restaurants. Think about some of those opportunities how we lower the cost to serve. At the same time, we can increase frequency. We can increase the time to sell, so those are Standalone opportunities.

Testing for now multiple years in global capability centers, around the world to serve as our businesses as 1, Pepsi, with 1 set of processes, with 1 set of information that is life. And that will also create a lot of, a lot of value for our businesses going forward. So think about productivity, not as a 1 year event, but a multi-year, uh, opportunity for us to reduce our cost investing growth and and obviously, uh, the food business in North America that you will referring to is 1 of the, uh, obviously business or worth looking at at, uh, at improved cost structure, uh, in in the coming, in the coming months and the coming years now, Jamie, where you want to talk a bit more about the details of, of

Of the costs. Yeah. Hi Bonnie. So yeah. In the second half. We're expecting to deliver about 70% more productivity than we delivered in the first half. Now that's across

Jamie Cfield: The entire Enterprise, but given the size of Fredo on the portfolio and the particular need the right size, the assets, and some of the other fixed costs. You know, excuse more to, uh, Fredo delivering that stepped up, uh, productivity. Uh, what we're going after. Um, I think we've mentioned in the past. We've, uh, closed 2 plantz. You know, we do have excess manufacturing capacity given the buying and performance over the past couple of years. Uh, we want to be careful. Not to what your point, uh, take out.

Jamie Cfield: So much that we don't have room to grow. So we're being very intentional about this uh within our other manufacturing plants, we've uh shuttered some lines. But we can bring those back into Service uh when volume returns and then we're right sizing uh, the, the the workforce and and, uh, you know, over time you can, you can Flex, uh, uh, the the workforce up and down, depending on the volume growth, but, uh, you know, be beyond the fixed cost. Uh,

Jamie Cfield: Uh, addressing the, the fixed cost de-lever. We've got a lot of other initiatives in, in play, we're, we're, we've got the procurement savings. There's a lot of that is enabled by the Investments. We've made in the Erp system. Uh, we've got, uh, changes to our operating model where we're getting better leverage out of our management layer. Uh, we're uh, going after everything, uh, you know, travel and expense, uh, uh, we're looking at, uh, you know, third-party contracts. So we're we're, we're pushing on every cost lever, that is available and, and that's what's going to drive the incremental productivity in the second half.

Speaker Change: Thank you. 1 moment for our next question.

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

Steve Powers: Great. Um, could you hear me?

Speaker Change: Yeah, hi Steve. Okay, great. Hey Ramen. Um, so if we stay on North America, but maybe pivot to the Top Line, um, both pfna and pbna your prepared, remarks run through a number of initiatives, um, that you have underway to, um, leverage the capabilities that you just talked about in response to Bonnie's question, um, to drive improved momentum. And I guess my question is if if if, if there's a way to distill those those initiatives down to maybe the top 1 2 or 3 things that you would you would say are the most critical. The most important to get right? Uh as we run through uh the back half of here to drive Improvement and then I guess relatedly. Um, what does success look like? As we think about exiting the year, uh, in both those divisions, um, you know, where do you want to be? Where is your, where does your outlook kind of assume that you will be, um, in terms of the Run rate, uh, X in the year? Thank you.

Speaker Change: Yeah. Steve hi. Uh, this I'll give you, um, a bit of a, um, a sense of what we're trying to do. Uh, in in the 2 businesses. We're we're obviously in in the food business. Our number 1 priority has been trying to, uh, uh, stabilize the category as leaders in the category. We're always looking at the health of the category. We're trying to make granular investments in value. Make sure that consumers stay within our brand.

Speaker Change: Which has been done now over the summer, and we're getting very, very good. Positive, uh, results still work to do in potato chips. And we're we're very, uh, encouraged by the latest, uh, you know, last 2 periods performance in a flavor, tortilla chips with Tostitos on the right. So, first priority, make sure the category is stabilized second improved performance, in each 1 of those sub segments success in some, uh, more success come in. As you saw in the prepared remarks, we are relaunching Lays is our biggest brand. We're, we're trying to elevate the real food. Um, perception of place. If you think about the simplest and more natural snack is a potato chip, is a potato, its oil and is a little bit of salt the most simpler no artificials as we as we go into into the end of the year and also we're relaunching Tostitos because we think we can also Elevate the food, credentials of the brands, and that's what we're going to be doing in Q4 and q1. So,

Speaker Change: That's that's Foods Now, 1 element that maybe is not captured in sirana so much but it's been the focus of the business for many, many quarters. Now, a year is, is our away from home business. We've been putting a lot of emphasis on our way from home. That's giving us a lot of incremental locations to the category and we're our products and our focus is is giving us very good, very good returns both in foods and in beverages when it comes to beverages the uh the focus has been in improving colors and colors.

Speaker Change: Is a, is a good success for us. We've been focusing on the no sugar call us. We've been focusing on Foods, uh, food and, and Pepsi, and we've been focusing on the dates Challenge and those 3 uh elements have driven. Uh you know, share positive, share performance for for Pepsi which is something we feel very good about not only in the US but globally. Now, the other the other big Focus for us has been Sports, make sure that Gator recover share in sports and that's, you know, first half of the year we, we're getting share and then adding some new platforms to the functional hydration with Propel being a great success. If you think about the last few years and how that brand continues to uh, to develop. Now what would be success for us success would be sequential Improvement of our Top Line, sequential Improvement of our share of market performance with the goal to be back at the low end of our algorithm in Top Line of the next few quarters that would be success. That's what we're really having a sense of

Speaker Change: Urgency, uh, as an organization and all the businesses are improving. All the operational metrics are very focused on, on, on delivering that over the next few quarters. That's our goal. And um, and we will we will try to be there over the next few quarters.

Speaker Change: Thank you. 1 moment for our next question.

Our next question comes from Philipa Forney with City, your line is open.

Hi, good morning everyone. Um, Ramen, I wanted to go back to 1 of your comment on that away from home. Uh, which is Bryce. Paul, definitely the result. Can you give us a sense of how big is away from home? Both for the beverage side and the food side, and you called out in the pbna, it was up high single digits in the quarter. Should we expect that to continue in the balance of the year? And, and maybe also a little bit longer term? What's the opportunity? Uh, longer term for your away from home business? Thank you.

Speaker Change: Yeah, I away from home for as is a way obviously, as consumers, move their consumption patterns to more calories away from home. It is a, a, a obviously, an opportunity for us to create more occasions, uh, accelerate growth in our categories, growth in our brand. So, it's been a focus for us for quite some time. It's been more of a physical availability effort. Now, we're adding layers of innovation, some other some other, um, solutions that in terms of mini meals and some, uh, ready to eat solutions that, we'll, we'll talk to you in the future but that will be Beyond physical availability. That's what we're trying to do. Now, it is very sizable, it is more, it is a bigger part of the business in beverages than it is in foods and um and it is margin a creative.

Speaker Change: Both businesses. We you know, it's a higher margin business, uh, for both Beverages and snacks in uh, in uh, you know, in away from home that it is in in retail. So growth opportunity, very incremental uh a focus area and and margin accretive. Um so you know you will see us talking about it, more in the future, you will see as the putting more resources against that channel. And uh, and also as I said, having more Innovation, uh, beyond what is the phys? Physical availability of our of our products in those channels?

Thank you. 1 moment for our next question.

Our next question comes from darra. Mining with Morgan Stanley, your line is open.

Speaker Change: Hey, good morning, guys.

So um Jamie I just wanted to maybe extend Bonnie's productivity question a bit to to fully your earnings. Can you just help us understand your visibility in the assumptions behind the acceleration in the back half of the Year relative to the first half. It's a pretty large magnitude. Obviously currency is a big swing factor that helps but I imagine a lot of that is eaten up by tariffs so just trying to understand your level of confidence there. What the key drivers are is it mainly productivity or are there other factors there and then also just longer term remote or Jamie as you think about investing behind the business, I'm not hearing a ton about reinvestment on this call. So just can you talk about the decision to sort of drop that to the bottom line versus reinvest behind the business? Obviously some nice growth internationally opportunity to continue to invest their you look at a drive better Trends in North America, still below long-term goals from the top.

Speaker Change: Flying standpoint. So just curious, uh, how reinvesting behind the business fits into your plans and the ability to accelerate organic sales growth as we look out Beyond this year. So Daryl, I'll start on the confidence level with productivity. I I put that at high when you look at the phasing of this is we've got into 2025. I would say became increasingly clear that the external environment was

Going to be pretty challenging. So, you know, end of q1 into the beginning of Q2 we doubled down on identifying incremental, initiatives to drive.

The.

Speaker Change: Ramp up and productivity which will start to acrew. You know that incremental productivity really occurs in in the second half of the year. So we've got all the actions I identified, some we've already uh, executed on so uh, very high degree of confidence there on tariffs, we factored that obviously, you know, it's a, it's a bit volatile. But uh, we feel good about the mitigating actions that we've already taken. We have some other mitigants that we have under consideration. So we've, uh, We've factored that into the, the back half

Speaker Change: Yeah, when it comes to reinvestment, there are a few areas that were obviously first is technology and we've been investing in technology for the long time. Will continue to take a lot of our productivity, put it back into technology. As as we, obviously that gives us additional, uh, intelligence and additional efficiency. So, that's 1 area. We're investing a lot in value, we're doing that. Although very surgically, I think we're getting better at understanding the return on the investment in value. Uh, right now, our biggest Investments have been in entry points have been in everyday low price across most of the, um, you know, the, the, the key categories. And then we're investing as I was saying, in a way from home, we're investing in building new capabilities, so that we can, we can drive physical availability outside of our retail channels. And also Innovation that will um, that will drive. Now, our ANM uh, levels have been pretty high uh, over the last 5 years and we've been putting

Speaker Change: And I think we're, we've been driving the company for the long term. You know, since I started and that continues to be the way we're looking at the business, you know, uh, good levels of productivity to fund. Good levels of investment in the business, going going long term,

Thank you. 1 moment for our next question.

Speaker Change: Great. Thanks so much. Um, I wanted to talk a little bit about portfolio transformation, um, and you've been pretty active on the permissibility side of things and you spoke about the simply restage I can tell you. I've seen a ton of more merch, you know, incremental merchandising and display for, for the simply lines in store. Yeah, a lot. Um, and I would just curious, I guess first specifically how that's going because I know that on simply something that you've spoken about in the past is that the impediment was not.

Speaker Change: On that front and then also in the release, you'd mentioned, um, some upcoming Innovation for Fredo around fiber and protein and other things, and ingredient profile, and I was just curious. If you've done anything in terms of like Consumer Testing, because when I think about the brand equities, I would

Speaker Change: think an open question is whether or not some of your brands have the right to play, if you will in a space like protein in a space like fiber? Um, and just how you're thinking through kind of the risk of of diluting brand Equity by stretching them too far, thanks.

Speaker Change: Yeah that's great. Good um good question. So um,

The the permissible portfolio in foods and obviously no sugar in beverages and some functional Platforms in beverages have been a focus of the of the company for, you know, quite some time, permissible snacks, which is where your question was going is being, it's, it's over 2 billion dollar business already. We're by far the largest permissible snacking company in in the US with multiple platforms. So, uh, Sun Chips, are very successful platform based around multi-grain, we have pop corners more focus on baked never freed. Um, you know, we have multiple now, we have sea. Obviously, uh, as as a new, uh, member of the family and then simply trying to address the uh, um, no artificials and, and and just natural uh, in, in the big brands.

Speaker Change: Those platforms continue to grow and I'm very happy that you're saying you're you're you're seeing more physical availability of Simply. That was the bottleneck for for consumption. It was not really consumer, uh, uh, appetite for the product but more availability of the product. And the right, um, affordability the right price points that drive the trial. I think we've we've, uh, we've worked on both availability and affordability, and that will drive trial. We're seeing increased trial in simply, and those are great products that, um, you know, a lot of consumers that were kind of hitting on the fence of some of our large Brands Doritos Cheetos and, and, uh, laser Ruffles are now, uh, opting to, uh, to come into the brand. So good good, um, good good, good good. Good feelings. And, and, and that will continue to be a, a focus of our A&M, uh, of our sales force, as you saw, and our our customer plans. Now, going into the future, a, a big, a couple of big, uh,

Innovation ideas, 1 is the relaunch of lace and relaunch of Tostitos. Those are 2, huge platforms that we want to elevate the real food, uh, credentials of the 2 Brands. These are very, uh, you know, these are anchor and potatoes, anchor and corn, very traditional, um, you know, uh, uh, uh, cooking methods on both very simple, simple ingredients, and great, great, great food. Uh, for for our, for our, for our consumers, we will relaunch them, we'll put a lot of

Uh, uh, you know, resources against will eliminate artificial from those 2, big Brands and and that will happen Q4 and q1. Uh, and and then and then into into next year. Yes. We're also, uh, in our remarks we're talking about some innovation in more, functional spaces with our food business. Uh, yes, protein, um, in some Brands like PopCorners, some Brands, like the Quaker snacks and eventually in some of our larger Brands. And to your question, we've been very surprised positively surprised how consumers are seeing Our Brands expanding into those, more functional spaces with, with credibility. So we'll, we'll push hard the, the, the big push to prochain though is going to be on the, uh, on our beverage business, or we have some, uh, big launches coming up in Q4 and q1. We will be participating in the uh, liquid project in space with, I think Superior propositions that have no artificial

Speaker Change: That are great tasting and that that I think will will, uh, will give us will give us the, um, you know, the the return on what is a, a clearly a consumer Trend that is, uh, uh, scaling up in the US and it's part of the, uh, of the repertoire of our consumer. So those are the areas, we will, obviously talk more in the in the coming. Quarters is a little bit early and we obviously, for confidential reasons competitive reasons we don't want to disclose too much at this point.

Speaker Change: Thank you. 1 moment for our next question.

Our next question comes from Michael Larry with Piper.

Michael Larry: What's really driving, you know, working there and then maybe if there's any watch outs for the second half, or, or even opportunities for further acceleration, you can flag and and just unpack that a little bit for us.

Yeah, I mean, yeah, International has been a success story for us being a focus of the company. Obviously, we're very developed in the US. And international is a, is a big opportunity for growth. A lot of consumers, uh, and a lot of opportunities for per caps and frequency build in, um, in in, in most of the markets develop and developing. So, we continue to invest in international both foods and snack, uh, foods and beverages. Um, both both categories are doing well, um, meet single digit growth. That's where we're trying to continue, uh, balance of the year and, and that's what's in our, in our guidance. Uh, and our long-term, uh, how we think about the business long term. So, um, yeah, in terms of specific markets, I would say, we're very pleased with latam. We're very pleased with, uh, some parts of Europe where we see, uh, you know, strength we're we're pleased with uh uh, some parts of the Middle East, um, China a little bit weaker.

Michael Larry: Um, as you think about the Chinese consumer post, the Chinese New Year, a little bit softer, uh, India continued to be a, you know, double digit growth. Um, so, you know, overall I would say our, our business, you know, strong competitiveness, uh, we continue to invest in in, in category growth which at the end is the long-term driver of the business. And, uh, the important thing for us is this was a business that was had, um, was was the profitability was below PepsiCo average in the past. Now it is a creative to PepsiCo. So it is it is a very good investment opportunity for us.

Michael Larry: Thank you. 1 moment for our next question.

Speaker Change: Our next question comes from Peter, Graham with UBS, your line is open.

Peter Graham: Thanks operator and good morning everyone. Um, Ramen I wanted to go back to your response to Steve's question. I'm just what success looks like and I think you mentioned potentially returning to the the organic growth and kind of the low end of the algorithm. Can you maybe just give us a sense in terms of your level of confidence or visibility into getting to that. Today where we sit today versus maybe where we've been um you know over the last kind of 12 months you know. It it sounds like um you're more confident today versus where we've been I'm not sure if that's a fair statement or not but if so what what kind of drives that that improved confidence thanks.

Yeah. The um, the confidence comes from uh, we see sustained International growth and we see a sequential Improvement of our North America business when you put that together. Uh, yes, we should go, uh, back to a lower end of our long-term algorithm whether this is 3. Quarters, 4 quarters. I don't know. I don't have the Magic Ball but clearly the business is working on this. We're becoming much more competitive in uh in multiple sub-segments of the category. And we'll continue to be very granular on our investments. Continue to increase our productivity so we can reinvest back in value and and portfolio. Um portfolio Innovation and the away from home business which as I said is giving us a lot of great returns. I will continue to do that.

Thank you. 1 moment for our next question.

Our next question comes from Andrea. Text sharer with JP Morgan, your line is open.

Andrea: Uh, thank you. Good morning everyone. Um so Ramon, you spoke

About permissible offerings and and I know how much effort the company has been um, putting into into these offerings for a very long time.

But you're getting to 2 billion out of like close to 27 to 30 billion in sales in North America for convenience foods. And um, assuming that includes also c, um, your Acquisitions. Uh, why do you think? I mean, just as a step back um, that, you know, why do you think the consumer is as the consumer is searching for healthy snack. The share of health is next for you, do not improve that much relative to what I think the uh consumer desire is. Um, so perhaps, you know, in this High single digit percentage of total, how do you can, how can you kind of improve that, um, as you go forward? And do you think that it is more of a form situation, where you obviously have an, A, a massive, um, market share, which, I mean benefits to you. And obviously kudos to, to that effort in chips and then the consumer is more looking for different forms and perhaps, you know, the right to win. It's in in, in, in forms like shakes or

Andrea: Have any, that's the case, why not leaning towards more of that and, and perhaps for acquisition, so I just want to take take a step back. And, and think about strategically,

Yeah. Yeah, Andrea is all you know, is a good. Good question, I think. Um, when you think about permissibility in our category, I would I would include. Uh I mean some of the levers we have obviously is innovation and portfolio as you were referring to. So a lot of the uh multiple choices that we're giving consumers and will give that platform of those platforms, much more visibility and affordability because those were drivers that maybe we were not emphasizing enough in the past. Now clearly there is but think about the other liver of permissibility in our categories portion control. I think portion control will be critical going forward and Our Brands will be in consumer lives more and more that in smaller portions. If you think about the efforts that we've been putting for many, many years now, in building a multi-axis, a multi-back business, a variety pack business. A single serve business right now, uh, over 60% of our volume in um,

Andrea: In the US Food, business is in smaller formats, that will continue to grow. I think it's a great way for Our Brands, to participate in what is a very healthy diet and and improve the permissibility of our category in general. So think about a permissibility probably in broader sense. Uh, obviously there is it is an ingredient element, it is a cooking method element, it is a format and, you know, a number of calories per per per serving. So there's a lot of livers that were playing because I think the number of occasions will continue to grow for our category. We want to participate in those occasions as you know, on on the go Lifestyles will continue to uh, develop and and that is the long-term opportunity for our categories, participated on the go uh on the go, Lifestyles with permissible Solutions, affordable solutions that are in consumer's life, in multiple locations, that's what we're trying to do. Uh, so I'm very optimistic about the growth opportunities of our food business. I'm also extreme

Andrea: Extremely obviously, optimistic about the growth opportunities. In our beverage business where

Andrea: The permissibility within the no sugar offerings, and the functionality, uh, of the category, both with hydration with uh, um, energy with, um, you know, the protein is already more developed than it is in the food business.

Andrea: Thank you. 1 moment for our next question.

Peter Galba: Our next question comes from Peter, galba with Bank of America, your line is open.

Peter Galba: Hey, good morning Ramen, Jamie, thanks for the question. Um, Ramen, you know, just going back through through your comments on kind of sequential Improvement expected in in the food business, you know, over the rest of the year and and maybe even in the next year. Um, just maybe wanted to put that into context of of Q3 in particular, as you kind of lap, some of the promotional efforts from from last year, the volume Compares a bit more difficult. So is it possible that we see maybe a step back in that volume Trend before it react or or kind of how we should think about it there. Again over the over the course of the year. Thanks very much. Hey there, I will now go into the details. My question was a PepsiCo will get to the lot. The low end of its long-term Topline algorithm in the next few quarters as a combination of international business. Continued to perform at a very high level and sequential improvement in our North America business.

Speaker Change: Thank you. 1 of them for our next question.

Speaker Change: Our next question comes from Camille guala with Jeff. Freezer line is open.

Hey guys, good morning. Um Ron that was quite the tease on the big launch in protein. Um, does anything you could add? I'm sure. We'd all be interested, you know, is it an existing brand new brand? Uh, you know, any context and and then on um, you know, when I look at the your your comments in the, you know, opening remarks, uh many of the comments started with a focus on value as being responsible for uh this Improvement in inflections. Could you maybe just talk about sort of the, the journey and offering more value, where you feel you are? Is there more work to do or are things reset into a place that you like? Thank you.

Speaker Change: Solutions, not small Solutions, but Solutions with our big Brands because that's the, that's the beauty of our company and we can provide democratized Solutions at Large Scale. That's what we're trying to do. You will you will you will hear more, uh, in the due in the due time. And it's not, you know, it's not too long for now. It's a few months from now that will will obviously make make more um, detail announcements of our of our uh, new platforms.

Speaker Change: And on affordability, for sure. And I mean, unfortunately, or you said values of value has a number of Dimensions 1 of which is affordability, but it's also availability. It's, it's a variety. And, you know, we we pull on all of those levers, um, you and we expect to continue to innovate and, uh, change in response to how the consumers are defining value in the marketplace. So, um, and we're able to do that. Our analytics are getting much sharper as we've invested a lot in uh data and and it. So yeah, we'll uh, we'll continue to use.

Speaker Change: Value as as a lever and uh, affordability, uh, we're addressing with a lot more Precision. So by Channel by pack size, by by time of the month,

Thank you. 1 moment for our next question.

Speaker Change: Our next question comes from Robert atin with evercore isi, your line is open.

Robert atin: Great, thank you very much. Um, just a a couple of follow-up questions. If I may, um, revisiting the international business, um, beverages did did much better than than food. Um, can you talk maybe about a little bit about the drivers of why that the beverages did so well. Um, you mentioned sting, um, you know, I think for the first time that I can remember, uh, you know, I know, it's an energy. Drink, that's big in in Southeast, Asia. I think you got it from the Rockstar, uh, transaction. So, a little bit about your, your International strategy on the beverage side and then a follow-up on the, uh, you know, the comments about North America and that integration, um, is, is the integration that you're working on, um,

Robert atin: To such an extent that it would preclude. Any

Robert atin: Future consideration of referencing or would that be an option uh in the future? Even with the integration? Thank you.

Speaker Change: Yeah, uh, a couple of things. So, sting is a brand that we created in in actually originated in Vietnam and now is available in multiple, uh, markets in developing an emerging markets, and it's part of our Formula 1 now sponsorship, and is a brand that we think. I mean, we've we know it has opportunities in in, in many markets across our, uh, portfolio of markets now, beverages is, is is been a successful story for us. We've been getting, uh, share in multiple markets. Uh, and basically, we have 3 big platforms that we're focusing. On 1 is no sugar, college, no sugar csds, but call us in particular and, and no sugar. Pepsi is been an amazing success. Uh, in many, many markets in, you know, in many markets around the world where leaders uh, in call us because of Pepsi no sugar. Um, second platform is energy and steam plays a, a a big, a big role in that in that portfolio. But not only, we have other

Other brands that are very successful in multiple markets, third platform is hydration and in hydration, Gatorade plays an important role and Gatorade can can grow meaningfully around the world. And we're we're tweaking the American propositions uh, to to, uh, to better fit the, uh, you know, the profile of international consumers in many markets. So those are the, uh, we're we're also. I think our bottlers are, uh, um, improving their performance, their investing, in their Technologies, and in their execution. And, you know, there's there's there's a good, um, a very good, uh, partnership between us and, and, and our bottlers and that obviously is resulting in, um, in, in better performance and that we, we don't see any reason why with this would not continue in the coming years. We have now a very dedicated organization International beverages franchise that is, uh, is is a great is a great, uh, way of connecting end to end the whole world. And

Speaker Change: Foods business and a number of DNA markets. We have what I'll call some basic food products. They tend to be very heavy, but low value per pound. Uh, they also tend to be pretty volatile. If you look at just our Savory snacks within International, uh, and exclude, those, uh, Basic Foods, the growth rate would be about 4 Points, higher,

Speaker Change: Okay, when it comes to North America. What what I said earlier?

Um this is a big opportunity for us to uh and and it's it's not available to many other companies to to, synergize 2, large operating businesses that are sitting side by side servicing, the same geographies, the same customers and, and the same consumers. And that, that is for us. It's a, it's a huge idea to optimize how we do most of the, uh, uh, tasks in our value chain, how we do this low cost and a, and a better performance. So this will be our priority I uh, and and and where we will focus our efforts for the next 3, 4 years to capture value and and come out of this as a lower cost business and better performing business.

Speaker Change: Thank you. 1 moment for our next question.

Speaker Change: Our next question comes from Chris carry with bells. Fargo, your line is open.

Hi, good morning, everyone.

um,

Speaker Change: I wanted to ask about pbna um well actually and and just in the context of the global beverage business. Um, you know, the president made some comments last night about uh, ingredient changes or ingredient Evolution and, and 1 of your competitors. Um, and and it got me thinking in a way is, you know, how, um, how flexible you know, is the system to responding to, you know, ingredient uh, you know, changes. And and I'm really asking this in the context of um, the prepared remarks, you know, talked about uh, you know, removing artificial flavors from a number of or, you know, ingredients from a number of food offerings. And, you know, it really got me thinking about, you know, the beverage side and and and where you see this portfolio today and that kind of evolution toward healthier, you know, and cleaner ingredients um and and and kind of how you see your your North America versus International.

Speaker Change: Consumer Centric strategy. We're we're following the consumer. If the consumer is telling us that they prefer products that have, uh, sugar and they prefer products that have natural ingredients. We will give the consumer products that have sugar and have natural ingredients. So, this is a journey of following the consumer trying to be a little bit. Maybe 1 step ahead of the consumer, but not too many steps. And uh, it applies to both Beverages and Foods in particular, um, uh, we, we have a a journey to uh, and a and a technical roadmap to eliminate, um, artificial colors and artificial flavors from our beverages, the same as we do for our food business. And we'll be able to execute as the regulations evolve or consumer. Um, consumer preference evolve.

Speaker Change: Thank you. 1 moment for our next question.

Speaker Change: Our last question comes from Kevin Grundy with BN BNP, parabas, your line is open.

Great. Uh, thanks. Good morning everyone. Thanks for taking the question. Um, from what I wanted to come back to um North America Beverages and and energy drinks. It's um an area. We haven't spent a ton of time on but it was certainly an area when when you took over, you kind of drew a line in the sand. I I think if you'd agree with that characterization, say you wanted to see PepsiCo play in a more substantial way. Um, I think Rockstar is probably proven to be a little bit more difficult to return. Kickstart sort of the same deal with Mountain Dew and sort of difficulty gaining traction. So, I'd like to get your updated thoughts on sort of overall satisfaction with the energy drink strategy, kind of how you see the role of Celsius potentially. Alani Nu not asking you to make any comments, of course that you can't. But just looking out over the next 3 to 5 years. What would you share with investors? What would you share with the market success in energy? Drinks look like from a PepsiCo perspective. Thank you.

Yeah, so we we continue to see energy as a, um, large and growing category in our, uh, beverage business and consumers. Um, are adopting those those, uh, beverages in their lifestyle and health. I think that will continue. They will work participating is multiple, right. We're we're, we're we're participating in ownership of some businesses like, sales use. And we're also, uh, you know, creating value by, um, Distributing. Um, you know, some of those brands in the marketplace and that makes our business stronger with our customers, but also we create value from our infrastructure and our, and our and our assets. So that's the way we're participating on top of that, we have a JV with Starbucks that is very successful and I will continue to provide energy solutions, energy plus Solutions not only energy in the coming in the coming years and that's another way. How PepsiCo

Speaker Change: Tracks value both from the ownership of the JV and also obviously the, uh, the distribution of, of those, uh, beverages in the marketplace and and, and as as as the consumer evolves and they might be different. Um, different different spaces that get created how uh um maybe sports drinks and energy get combined in the future will be able to create as well Solutions, with some of our platforms, uh, that, that, that satisfy those needs for consumers. So

Speaker Change: I, I think it's both from an innovation point of view from an ownership of, in the case of the JV with Starbucks or participating in the ownership of Celsius. And then obviously leveraging our vast, uh distribution infrastructure for both, um, away from home and for uh, small format basically where where these drinks, uh, get a lot of consumption. And with a lot of value gets created, we will we will continue to participate. So think about our long-term, uh, value Creation in in energy, which I think is a is a long-term growth part of the category. Um, um, you know, in, in, in that way,

Yeah. Okay, thank you. Uh thank you for for a good call and uh thank you for joining us today. And and as I as we were saying uh during the call, we're very pleased with our performance in Q2 uh also we have the right tools and we're taking the right steps to deliver on the year and create a very a stronger PepsiCo for the long term and we see a lot of opportunities for growth across our categories and we're making the right Investments to to deliver on those opportunities. Thank you again and um have a great summer.

Speaker Change: Thank you, ladies and Gentlemen. Let's conclude today's presentation. You may now disconnect and have a wonderful day. Bye.