Q2 2026 PepsiCo Inc Earnings Call

July 9, 2026

Speaker #1: it is now my pleasure to introduce Mr. Ravi Pamnani, Senior Vice President of Investor Relations. Mr. Pamnani, you may begin.

Speaker #2: Thank you, Kevin, and good morning, everyone. I hope everyone has had a chance this morning to review our press release and prepare remarks, both of which are available on our website.

Speaker #2: 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, guidance, and outlook.

Speaker #2: Forward-looking statements inherently involve risks and uncertainties, and only reflect our view as of today, July 9, 2026, and we are under no obligation to update.

Speaker #2: When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to our second quarter 2026 earnings release and second quarter 2026 Form 10-Q, available on pepsico.com, for definitions and reconciliations of non-GAAP measures and additional information regarding our results.

Speaker #2: Including a discussion of factors that could cause actual results to materially differ from forward-looking statements. Joining me today are PepsiCo's Chairman and CEO, Ramon Laguarta, and PepsiCo's CFO, Steve Schmidt.

Speaker #2: We ask that you please limit yourself to one question. And with that, I will turn it over to the operator for the first question.

Speaker #3: Thank you. In order to ask a question or make a comment, please press star followed by 11 on your touch-tone phone at any time.

Speaker #3: We will pause for a moment while we compile our Q&A roster. Our first question comes from Bonnie Herzog with Goldman Sachs. Your line is open.

Speaker #4: Thank you. Good morning, everyone. I had a question on PFNA. You know, your volume was flat in the quarter despite what seems to be, you know, stepped up affordability initiatives and innovation.

Speaker #4: So hoping you could spend some time helping us understand the changes you've made and maybe what's working, what's not working, and then whether you need to lean in further, you know, maybe on affordability or maybe innovation to drive better volume growth.

Speaker #4: Thank you.

Speaker #5: Good morning, Bonnie. And just, just me, just step back for a minute and give a full company perspective. there's a lot of things we feel good about the business, and there's a few things that we're going to be very focused in the second half to, to, to accelerate the business.

Speaker #5: So if you step back, you know, the, the company the first half reported almost 7%, you know, revenue growth, and we've grown global volumes 3% in foods, and 2% in beverages.

Speaker #5: That, that's the fastest growth in volumes since 2022. Including that, those volume growth is the volume growth in the US foods business, which, you know, it was very strategic for us to get the category back to volume growth and to get the, our, our business to gain share of volume in the category.

Speaker #5: So we, we feel good about that particular, turnaround, and it's, it's, it's, it's, you know, we feel, we feel good about how the business is performing.

Speaker #5: There are two pillars to, to how that happened. One was, as you mentioned, affordability investments, and the second one has been the, you know, the growth on the permissible part of the portfolio and the portion control part of the portfolio.

Speaker #5: That part is going very well. Now, on the affordability part, we, we feel good about the investments. I think in the second half of the year we're going to have to, optimize the return on investment on some of the, on some of those pricing investments.

Speaker #5: It, it depends by channel, by, by customer, and, you know, teams are learning. But I want you to, to step back and take the bigger picture that a category that was negative in volume now is positive in volume.

Speaker #5: We were losing share in volume. Now we're gaining share in volume, and that is all very, very positive. And it was the first strategic intent that we had, early in the year when we decided to lower the prices of the, of the business.

Speaker #5: I don't know, Steve, anything else from your side?

Speaker #2: No, I think that's pretty much covers it.

Speaker #3: Thank you. One moment for our next question. Our next question comes from Filippo Falorni with City. Your line is open.

Speaker #6: Hi, good morning, everyone. so Ramon, you mentioned in the prepared remarks that, in the US, consumer behavior clearly was impacted by rising inflationary pressures.

Speaker #6: In the quarter, I was wondering if you can give us an update on what you've seen more recently. Have you seen, like, an improvement in consumer behaviors as gas prices and some other inflationary metrics have come down?

Speaker #6: And then, as we think about the backup, before you talked about a potential to get to the higher end of the organic sales, range, can you give us an update on how you're thinking about the backup, at this point?

Speaker #6: Thank you.

Speaker #5: Yeah. So I, I think the, obviously, they ran, war and the impact on gas prices has been meaningful, not only in the US but across the world.

Speaker #5: our international business, as you saw, continues very strong, and we were able to grow 7% accelerating. In the US, we're seeing the consumer, changing behaviors.

Speaker #5: Basically, an acceleration of some of the behaviors we saw in the past. probably some channels more the impulse channels have been impacted where there is more of a correlation with the price of gas.

Speaker #5: Certain, you know, convenience stores and some other independent, we're seeing a, slowdown of the, of the, conversion of traffic into, into purchases. So we're, we're, we're seeing that.

Speaker #5: Now, will it, will it change in the coming months? It all depends on the price of gas. So clearly that, that's something that is beyond, beyond our control.

Speaker #5: We, we continue to, to invest in affordability. In those particular channels, we're working with our, customer partners. In solutions to convert more of the traffic in, in, in the store, bundles, linking to meals, solutions to, to address that particular channel.

Speaker #5: But, but no, we're not, we're not, you know, you know, that, that is the only element that we're seeing in the last, in the last few months.

Speaker #5: Now, we continue to see, as we look at the, second half of the year, a very strong international business. And, you know, it's continuing to perform well into the summer.

Speaker #5: We see an acceleration of our, US business both in the foods and the beverage business. And we continue to have a line of sight to the low end of our long-term, 4 to 6 in the second half of the year.

Speaker #5: We were fighting for that. We see, a lot of green shoes in our portfolio transformation. We feel good about our permissible. We feel good about some of the, innovation that we launched.

Speaker #5: We're going to scale them in the second half. And we see our affordability, investments to return better for us in the, in the second half as we optimize the, the, the tactics for different channels, different, different, different consumers.

Speaker #2: And Ramon and Steve, the, just maybe a little bit on guidance since we talked a little bit about that. So if we think about guidance overall, you saw that we were reaffirmed our guidance for the year.

Speaker #2: If I take a step back and look at the performance of the whole company and to reiterate some of what Ramon said a minute ago, the overall net revenue of the company grew 7% in the first half of the year, and Ramon just talked about the volume growth that we're seeing.

Speaker #2: globally, that makes us feel really good about the health of the brands. Reported EPS grew 6% in the first half, constant currency EPS grew 3.

Speaker #2: we continue to see strong international performance. And a softer North America business than we expected in Q2. And so how does that, how does that play out for the rest of the year?

Speaker #2: So as we look at the second half, we continue to expect the international business to remain strong. we expect the North America business to gradually improve, but a more moderate pace than we thought coming into Q2.

Speaker #2: as Q2 was, was less than what we expected. we do expect some more pressure on the business from a commodity standpoint, but we also expect refund claims for tariffs paid last year to help offset some of the commodity, pressures that we have and allow us to continue to play offense.

Speaker #2: And the refund claims on the tariffs paid last year will be about a full one full point of EPS growth for the year. And the other piece is we expect to, to ma to keep pushing productivity on the business.

Speaker #2: So we've taken costs out. We'll continue to do that. We have more work to do here. I think what's important for, for you to know is we're not making decisions that hurt the top line in our assessment.

Speaker #2: we're going to continue to make investments in growth. The, North America advertising and marketing expenses projected to increase in the second half versus prior years as an example.

Speaker #2: So we're going to continue to play offense. And so when we add it all up, we're in a position to reaffirm our full-year guidance.

Speaker #2: And as Ramon said, it may be, towards the low end of the EPS range that, that we've given.

Speaker #3: Thank you. One moment for our next question. Our next question comes from Dara Mosshadin with Morgan Stanley. Your line is open.

Speaker #7: Hey, good morning.

Speaker #5: Good morning, Dara.

Speaker #7: So, obviously strong international results in the quarter, but I, I wanted to focus on North America a bit. we talked about the sequential improvement in volume and, and PFNA in Q2, but I don't think it was to the level you expected.

Speaker #7: And maybe you can also comment on PBNA where it looked like the volumes were also weaker than expected. A-and just was hoping for a little more of a short-term report card.

Speaker #7: Do you think that's less payback on some of the initiatives you put in place? Is it more the general consumer environment? But really what I wanted to focus on is more longer-term, just your perspective on the level of spending behind that North American business as we look out longer-term.

Speaker #7: Do you think the sort of revitalized organic sales growth in this environment, you might need some level of greater spending? A bit of an earnings reset as, as you look out.

Speaker #7: And just how do you think about investment levels behind the business looking out, given both the short-term performance you're seeing and the consumer environment?

Speaker #7: Thanks.

Speaker #5: Yeah, it's a good question. Dara and the, the way we think about it is the, you know, we, we still see the, the international businesses obviously continue to be very strong.

Speaker #5: And this is a business now is, is going to cross 40 billion dollars in, in this year. international beverage volumes is two-thirds of the total company volumes.

Speaker #5: And, international foods volumes is over 50%. So clearly the international business is becoming a very scaled, part of our business. And, and profit accretive.

Speaker #5: So we're creating a, a diversification in our business that long-term will, will give us a lot of rewards. Now, when you focus on the US, we continue to think that the, the three pillars that we, said we're going to help us transform and accelerate our, our, our growth in the US, one was affordability investments, make sure that our brands are in consumers' lives, in the portions and prices that, you know, consumers can afford today.

Speaker #5: That's one vector. Continue to transform the portfolio at a faster pace, following you know, the new dietary habits and, and food habits and food and beverage habits of consumers.

Speaker #5: And the third one was accelerate away from home, as the incremental locations for us to, to, you know, to capture new locations for our brands.

Speaker #5: the, the portfolio transformation is working very well. We feel good about the no sugar part of our beverage business. We feel good about the, functional hydration.

Speaker #5: We feel good about our energy business. And we're, we feel good about some of the innovation that we're going to, we're going to scale in the second half of the year.

Speaker #5: So that, that part is good. We feel good about the permissible portfolio in foods. It's already 3 billion dollars of growing almost double digit.

Speaker #5: The portion control. So all those elements that we, we explained quite well in our, prepared remarks, we feel good. And I think that is really the long-term of the business, as you see how consumers will engage with our categories.

Speaker #5: The away from home business continues to be a priority internationally in the US, it, it slowed down a little bit in Q2. We think that it's going to help, help us accelerate in the second half.

Speaker #5: But it's a, it's a strategic, opportunity where we're innovating, creating new business models, and adding some, some incremental locations. Now, the affordability part, which is the one you're referring to, i-it's we, we accomplished what we wanted to accomplish, which was to get volume back into our categories in our core brands.

Speaker #5: And that was a not an obvious thing to do. And we, we managed to do this in the first half of the year. Now, we're optimizing the return on those investments.

Speaker #5: And what we learned is that, yes, because of the consumer environment and the fact that gasoline prices were higher, consumers felt a little bit more, the, the economic impact.

Speaker #5: But we think that we will continue to optimize those investments for grocery, high loaders, one type of investments, for everyday low price other type of investments, etc.

Speaker #5: And the, the system is getting much knowledgeable and much more, intelligent in how we get the best return from those investments. Now, what was different this quarter that we were not planning is the performance on the impulse channels.

Speaker #5: And that is something that we're working on to tell you the truth, in the last few months to try to get more conversion between people getting into the, the gas station and, and converting into purchases of beverages and foods.

Speaker #5: And that's something that we're working with our partners that is new. The gas prices have impacted. You know, the gas prices will at one point come down.

Speaker #5: And then that will become, hopefully less of an issue you know, second half of the year or early into next year. So that's the full picture.

Speaker #5: We don't think we need, any sort of reset because we have a very strong productivity, record productivity in the first half of the year.

Speaker #5: We're going to add new layers of productivity second half of the year. To be able to fund all these growth investments, be it price, be it, portfolio transformation, all the growth into away from home, which will drive the, the portfolio acceleration.

Speaker #5: So that, that's how we're thinking about this now, Steve. Any?

Speaker #2: I think he's covered it well.

Speaker #5: Okay.

Speaker #3: Thank you. One moment for our next question. Our next question comes from Andrew Texeira with JP Morgan. Your line is open.

Speaker #6: thank you. Good morning. on the guidance for the second half, you're now adding about, I believe, 7 to 9 cents in EPS from the tariffs.

Speaker #6: And reinvestment. And then, and you also mentioned that EPS would be more backloaded into the Q4. So I just want to double-click on what, Ramon just said about the affordability pillar.

Speaker #6: Should we expect more price rollback similar to what your biggest customer in the US has recently announced? Rolling into other retailers, and if so, can you give us some examples of how this reinvestments have converted into better volumes?

Speaker #6: You just talked about the, the CNG, the convenience and gas. Anything you can point out to one of your biggest partners that would allow us to think about, like, volumes finally reflecting in some of these channels in away from home?

Speaker #6: And when you think about the 7 to 9 cents reinvestment, so implies more flattish, 3Q. I just want to double, double-check that math. and if that's the case, how you would should we should be thinking?

Speaker #6: Is that mostly to absorb the commodity pressures that you highlighted? Or the A&P investments or AM investments? Or should we think about the affordability reinve price reinvestments being the bulk of it?

Speaker #6: Thank you.

Speaker #5: Andrew, Steve, thank you for your question. It's good to hear from you. I think on the first part of it, we're going to continue to run our play.

Speaker #5: We have a strategy that we believe in. Ramon talked a little bit about maybe, you know, we'll likely have to make some tweaks based on what we're learning from the value standpoint.

Speaker #5: But we're going to continue to run our play there. On the, the, the impact to, from the from the tariffs, maybe I'll talk a little bit about Q3 and then Q4 because you, you mentioned both, look, on the if I talk about Q3 and, and I won't I don't like to give specific guidance on quarters, but I'll but I think it's relevant to give you a little bit about the timing since I shared some in my prepared remarks.

Speaker #5: On the positive side, we, we continue to expect international to be strong. and we do expect, like you said, about approximately one point of EPS benefit from tariff, refund claims, likely, in the quarter.

Speaker #5: we expect a gradual improvement in North America. and, and we will be using the, the tariff essentially the refunds on to help offset some commodity inflation that we're seeing and allow us to continue to play offense in the business.

Speaker #5: So that's how we're, we're thinking about that. also, unique to Q3, we expect to have a higher tax rate year over year than what we've seen so far this year.

Speaker #5: So that should, should go into the into the math. And there will be timing of certain costs and invest investments that we expect to impact Q3 more than Q4.

Speaker #5: So we'll continue to focus on productivity. we expect more productivity in Q4 and Q3. but that's kind of how we're thinking about the overall math of the back half.

Speaker #5: Yeah. Andrea, if you think about the big picture, the, clearly, you know, the impact of the, gas prices, or the oil price in our cost of goods globally, and the impact of higher gas prices in demand, you know, these are new, new elements that obviously we're looking at to compensate with higher productivity, the tariff refunds comes obviously very handy.

Speaker #5: And, and some other trade-offs that we have to make in the business. So these aren't normal trade-offs that we make during the year because there's no new data points on some elements of our P&L.

Speaker #5: that we have to compensate with others. So that's how we're thinking about the overall pool of money that we have available to, to, you know, continue with our guidance, which is the, the higher order, deliverable now, the, the high growth and the and the EPS numbers that we gave you earlier in the year.

Speaker #3: Thank you. One moment for our next question. Our next question comes from Kevin Grundy with BN BNP Paribas. Your line is open.

Speaker #7: Great. thanks. Good morning, everyone. I wanted to come back sorry for beating the dead horse here, but I, I wanted to come back to the North America food performance.

Speaker #7: ask them a little bit different angle, maybe play back some of your comments Ramon. And, and, and specifically the thrust of the question is around performance currently versus the strength that you saw in the test markets back in the fall, where there's a lot of enthusiasm both from a PEPSICO perspective, as well as from a retail perspective, as best we gather.

Speaker #7: So can you help us sort of delineate between the macro factors, you talked about tighter consumer budgets and higher levels of inflation, versus more company-specific factors?

Speaker #7: And how that looks versus, say, you know, nine months ago or so when you when you performed, when, when you did the test market work.

Speaker #7: And I guess on the call, I'm hearing better, you're looking for better ROI on some of the price investment, maybe better execution. The impulse channels, they're really just trying to gauge, you know, the key factors, the big areas that have changed since the test market work, versus what we should expect now going forward.

Speaker #7: And, and why things may get better. So thank you.

Speaker #5: Yeah. The, I would say the higher order is we've been able to accelerate volume growth in the category. Salty snacks is one of the few categories that is growing volume in the overall food space in the US.

Steve Schmitt: changed since the debt market work versus what we should expect now going forward and why things may get better. Thank you.

Steve Schmitt: Changed since the debt market work versus what we should expect now going forward and why things may get better. Thank you.

Speaker #1: Since the test market work versus what we should expect now going forward, and why things may get better. So, thank you.

Speaker #5: So that's, that was a positive. That was the number one intent. The second one is for us to be a driver of that volume we're getting share of volume in the US in salty snacks, which was also the other objective.

Speaker #2: Yeah, I would say the higher order is we've been able to accelerate volume growth in the category. Salty snacks is one of the few categories that is growing volume in the overall food space in the U.S., so that was a positive.

Ramon Laguarta: Yeah. I would say the higher order is we've been able to accelerate volume growth in the category. Salty snacks is one of the few categories that is growing volume in the overall food space in the US. That was a positive. That was the number one intent. The second one is for us to be a driver of that volume. We're gaining share of volume in the US in salty snacks, which was also the other objective. That's the number one. Now, is the volume as much as we expected? No, not in Q2. It's a couple of elements. I think the consumer is worse than what we had anticipated and it's driven mainly by gas prices. Second, the execution of the price investment in some customers have had some delays, I would say, because of multiple commercial reasons.

Speaker #5: So that, that's the, the number one. Now, is, is the, is the volume as much as we expected? No. Not in Q2. And we it's a couple of elements.

Speaker #2: That was the number one in ten. The second one is for us to be a driver of that volume—we’re getting share of volume in the U.S. in Salty Snacks, which was also the other objective.

Speaker #5: I think the consumer is worse than what we had anticipated as driven mainly by gas prices. Second, the execution of the price investment in some customers, you know, have had some you know, delays, I would say, because of multiple commercial reasons.

Speaker #2: So that, that's the number 1. Now, is, is the, is the volume as much as we expected? No. Not in Q2. And we it's a couple of elements.

Speaker #2: I think the consumer is worse than what we had anticipated, and it's driven mainly by gas prices. Second, the execution of the price investment in some customers.

Speaker #5: That has been solved. So we'll see an acceleration in the second half. The consumer reaction to the, investments is pretty much along the lines of what we had initially anticipated.

Speaker #2: You know, we have had some delays, I would say, because of multiple commercial reasons. That has been solved, so we'll see an acceleration in the second half.

Speaker #5: So I wouldn't I wouldn't, question the, strategic logic of the investments. There are tweaks that we have to make commercially. And there are obviously different circumstances in the US consumer, budget, trade-offs that consumers are making given the, you know, some of the inflation, recent inflation, especially on gas prices.

Ramon Laguarta: That has been solved, so we'll see an acceleration in the H2. The consumer reaction to the investments is pretty much along the lines of what we had initially anticipated. I wouldn't question the strategic logic of the investment. There are tweaks that we have to make commercially, and there are obviously different circumstances in the US consumer budget trade-offs that consumers are making given some of the recent inflation, especially on gas prices. That's where I would leave it here. We remain focused, as Steve said, on continuing the playbook. We continue to invest in our portfolio. We continue to invest in our affordability. We continue to invest in our away from home, and we think that the food business in the US will continue to grow volume and grow net revenue in the coming quarters.

Speaker #2: The consumer reaction to the investments is pretty much along the lines of what we had initially anticipated. So I wouldn't question the strategic logic of the investments.

Speaker #2: There are tweaks that we have to make commercially, and there are obviously different circumstances in the U.S. consumer budget—trade-offs that consumers are making given the, you know, some of the recent inflation, especially on gas prices.

Speaker #2: So that's where I would leave it here. We remain focused, as Steve said, on continuing the playbook. We continue to invest in our portfolio.

Execution of the price investment in some customers. Um, you know, have had some, you know, delays I would say uh, because of multiple commercial reasons that has been solved. So we'll see an acceleration in the second half the consumer reaction to the, uh, Investments is pretty much along the lines of what we had initially anticipated. So I wouldn't I wouldn't um, question the uh statistic logic of the investment. There are 2 weeks that we have to make commercially and there are obviously a different circumstances in the US consumer budget, trade-offs. That consumers are making given the, uh, you know, some of the inflation, uh, recent inflation, uh, especially on gas prices. So, that's where I would leave it here. We remain focused. As Stephen said, as Steve said on continuing the Playbook, we continue to invest on our portfolio. We continue to invest on our affordability, we continue to invest and away from home. And we we think that

Speaker #2: We continue to invest in our affordability. We continue to invest in our away-from-home business. And we think that the food business in the U.S. will continue to grow volume.

That the um the food business in the US will will uh continue to grow volume and um and and grow that Revenue uh in the coming quarters.

Thank you. 1 moment for our next question.

Speaker #2: And grow net revenue in the coming quarters.

Our next question comes from Peter grow with UBS, your line is open.

Speaker #1: Thank you. One moment before

Operator: Thank you. One moment for our next question. Our next question comes from Peter Grom with UBS. Your line is open.

Speaker #3: Our next question comes from Peter Grom with UBS. Your line is open.

Speaker #4: Great. Thank you. Good morning, everyone. Maybe, you know, there's been a lot of focus on North America this morning, so maybe just pivoting to the international business.

Peter Grom: Great. Thank you. Good morning, everyone. There's been a lot of focus on North America this morning, so maybe just pivoting to the international business. Ramon, maybe you could just give us a walk around the world in terms of what you're seeing around category growth, health of the consumer. Were there any notable differences in any key regions as you move through the quarter here? Then, Steve, maybe not to get too specific, but when you speak to international growth remaining resilient in the balance of the year, should we be extrapolating the growth that we saw in Q2 for the balance of the year? Thanks.

Speaker #4: Ramon, maybe you could just, you know, give us a walk around the world in terms of what you're seeing around category growth and the health of the consumer. Were there any notable differences in any key regions as you moved through the quarter here?

Speaker #4: And then, you know, Steve, maybe not to get too specific, but when you speak to international growth remaining resilient in the balance of the year, should we be extrapolating the growth that we saw in the second quarter for the balance of the year?

Great, thank you. Good morning everyone. Um, maybe you know there's been a lot of focus on North America this morning so maybe just pivoting to to the international business uh remote. Maybe you could just you know give us a walk around the world. In terms of what you're seeing around category with health of the consumer, was there any notable differences in any key regions as As you move through through the quarter here and then, you know, excuse me, not not to get too specific. Um, but when you speak to International growth remaining resilient, uh, in the balance of the year, should we be extrapolating? The growth that we saw in in the second quarter for the balance of the year? Thanks.

Yeah. So um, yeah. Thanks for

For putting the international business in, you know, the center of the conversation.

Speaker #4: Thanks.

Speaker #2: Yeah, so, yeah, thanks for putting the international business at the center of the conversation. Yes. I mean, this is a business that, as you know, we've been investing in for the last five or six years, and it's now, as I said earlier, a big part of our volume globally and a big part of our revenue and profit globally.

Ramon Laguarta: Thanks for putting the international business in the center of the conversation. Yes. This is a business that, as you know, we've been investing in for the last five, six years, and it's now, as I said earlier, a big part of our volume globally and a big part of our revenue and profit globally. This is clearly a success story for the company and will continue to be a big driver of growth for us in the coming years, given the per capita and given the share of market opportunities that we have globally. Around the world, I would say, going into the quarter, we were a little bit concerned, obviously, with the performance around the Middle East and some of the Asian markets where the gasoline prices were more obvious. The truth is that all those markets have remained very resilient.

Speaker #2: So, this is clearly a success story for the company, and it will continue to be a big driver of growth for us in the coming years, given the per capita and given the share of market opportunities that we have globally.

Um, yes, I mean, this is a business. As, you know, we've been investing for the last 5, 6 years. And it's now, um, as I said earlier, a big part of our volume globally, and a big part of our revenue and profit globally. So this is clearly a success story for the company and we'll continue to be a big driver of growth for us in the coming, in the coming years. Given the per capita and given the, uh, the share of Market opportunities that we have globally, the, um, you know, around the world. I would say, uh, you know, going into the, um, into the quarter. We were a little bit concerned obviously, with the performance.

Speaker #2: The, you know, around the world, I would say, you know, going into the, into the quarter we were a little bit concerned, obviously, with the performance around the Middle East and some of the Asian markets.

Speaker #2: Where the gasoline prices were more, obvious. The truth is that all those markets have bec have remained very resilient, if I think about Vietnam, Thailand, you know, China, some of the markets where, where the gas prices were, were in were elevated.

Ramon Laguarta: I think about Vietnam, Thailand, China, some of the markets where the gas prices were elevated, and the same with the Middle East. Our Middle East business continues to perform a very good level. We're seeing that our procurement global capabilities and the agility of the business is proving to be an advantage for us in some of the markets where we're pivoting faster than competition in terms of raw materials availability and agility to compensate for the inflation. Europe remains resilient. Pretty good. Clearly, the World Cup is helping, and the fact that we're sponsoring the World Cup in our food business is helping us to activate the category in a better way. It's creating occasions. We're capturing, and we started Q3 very strong in international.

Speaker #2: And the same with the Middle East. Our B2B Middle East business continues to perform at a very good level. We're seeing that our procurement, global capabilities, and the agility of the business are proving to be an advantage for us in some of the markets where we're pivoting faster than the competition in terms of raw materials availability.

Speaker #2: And agility to, to compensate for the, for the inflation. Europe remains resilient. More, you know, m-m pretty good. Clearly, the, the World Cup is, is helping, and the fact that we're sponsoring the World Cup in our food business is helping us to activate the category in a better way.

Speaker #2: It's creating occasions. It's, you know, we're capturing and we started Q3 very strong in international. Latin America a little bit, less growth than in the rest of the, of the organi of the, of the business, as you saw.

Ramon Laguarta: Latin America, a little bit less growth than in the rest of the business, as you saw, but clearly trending very positive and the World Cup obviously having a very big impact in that part of the world. Overall, broad good performance. Part of that is category acceleration. Part of that is better share of market. I would say better in beverages than in food. In food, we still have opportunities to improve our share of market in some parts of the world. We continue to see the business trending well throughout the summer and into the winter.

Speaker #2: But clearly trending very positive, and the World Cup obviously having a very big impact in that part of the world. So overall, broad, broad good performance.

Speaker #2: Part of that is category acceleration, and part of that is better share of market. I would say we're better in beverages than in food. In food, we still have opportunities to improve our share of market in some parts of the world.

Availability and Agility to, um, to compensate for the uh, for the inflation. Um, Euro remains resilient more, um, you know, pretty good. Clearly. The the World Cup is is helping, uh, and the fact that we're sponsoring the World Cup in our food business is helping us to activate the category in a better way. It's creating occasions. It's, you know, we're capturing and we started Q3 very strong. International Latin America. A little bit, uh, less growth than in the rest of the of the organization of the of the business as you saw. But clearly trending very positive and the World Cup obviously having a very big impact in that part of the world. So overall broad broad broad good performance. Part of that is category acceleration. Part of that is, is better share of Market, I would say better in beverages. And in Foods in food, we still have opportunities to improve our, our share of Market in some, in some parts of the world. But we continue to see the um, the business Trend in wealth throughout the summer. And

Speaker #2: But we continue to see the business trending well throughout the summer, and into the winter.

Speaker #4: And, Peter, just to answer your question on what we would expect in the second half, as I look at the business, the signs are pointing towards continued strong growth.

Steve Schmitt: Peter, just to answer your question on what we would expect in H2. As I look at the business, the signs are pointing towards continued strong growth. Ramon mentioned the volume growth that we've seen, and that's a pretty good indicator of the health of the business in international. One thing to call out is we do expect some commodity inflation, probably more so in EMEA in H2, but the teams have been very proactive in mitigating some of the inflation that we expect to come through. One thing just to point out to demonstrate not just the top-line growth of the international business, but in Q2, operating margin grew by a 1 percentage point.

Speaker #4: Ramon mentioned the volume growth that we've seen, and that's a pretty good indicator of the health of the business in International. Maybe one thing to call out is that we do expect some commodity inflation, probably more so in EMEA in the back half of the year, but the teams have been very proactive in mitigating some of the inflation that we expect to come through.

And and and into into the winter and uh, Peter just to to answer your question on what we would expect in the second half the the, as I look at the business, the signs are pointing towards continued strong growth. Um Ramen mentioned the volume growth that we've seen and that's a pretty good indicator of the health of the business in international the, uh, maybe 1 thing to call out is, is we do expect some commodity inflation, probably more. So, in Amia in the back half of the year but the teams have been very proactive and, and mitigating some of the inflation that we

Expect to come through.

Speaker #4: And one thing to point out, just to demonstrate not just the top-line growth of the international business, but in the second quarter, operating margin grew by a full point.

And 1 thing that that just to point out to to demonstrate, not just the Topline growth of the international business. But in the second quarter operating margin grew by a full point. And so we feel good about the top line and we also feel good about the efficiency of how sales are running through the p&l.

Thank you. 1 moment for our next question.

Speaker #4: And so we feel good about the top line, and we also feel good about the efficiency of how sales are running through the P&L.

Steve Schmitt: We feel good about the top line, and we also feel good about the efficiency of how sales are running through the P&L.

Our next question comes from Lauren Lieberman with barklay, your line is open.

Speaker #3: Thank you. One moment before our next question. Our next question comes from Lauren Lieberman with Barclays. Your line is open.

Operator: Thank you. One moment for our next question. Our next question comes from Lauren Lieberman with Barclays. Your line is open.

Speaker #5: Great, thanks so much. Good morning. I just want to talk a little bit about the margin pressure that you saw on PBNA this quarter, and how to think about profitability over the balance of the year. Just knowing the ongoing focus on improving margins here, but then you've got the realities of higher inflation, and I'm assuming this is also an area where there'll be some incremental reinvestment to support your volume ambitions.

Lauren Lieberman: Great. Thanks so much. Good morning. Just want to talk a little bit about the margin pressures that you saw in PBNA this quarter and how to think about profitability over the balance of the year, just knowing the ongoing focus on improving margins here, but then you've got the realities of higher inflation. I'm assuming this is also an area where there'll be some incremental reinvestment to support your volume ambitions. Just talking a little bit about profitability and PBNA. Thanks.

Great, thanks so much. Good morning. Um, just want to talk a little bit about the margin pressure that you saw on pbna this quarter and how to think about profitability over the balance of the year, just knowing the ongoing focus on improving margins here. But then you've got the realities of higher inflation. Um, and I'm assuming, this is also an area where there will be some incremental reinvestment to support. Um, your volume Ambitions, they're just talking a little bit about profitability and pbna. Thanks.

sure, I'll take that the, uh, if you think about the pbna business,

Speaker #5: So, just talking a little bit about profitability and PBNA. Thanks.

Speaker #4: Sure. I'll take that. If you think about the PBNA business from a margin perspective, operating margin was down about 90 basis points in the quarter, but that was driven by gross profit rate.

Steve Schmitt: Sure. I'll take that. If you think about the PBNA business from a margin perspective, operating margin was down about 90 basis points in the quarter, but that was driven by gross profit rate. The gross profit rate decline, I'd call out three things. About half of the rate decline was driven by the business we have through Alani and the commercial arrangement we have there. That's about half the gross profit decline. The other pieces would be more around the convenience and gas channel that Ramon was talking about that was particularly soft in the quarter, as well as some of just product mix overall. Those would be the three things that I'd call out. On the G&A side, the team continues to push the productivity envelope there.

Speaker #4: The gross profit rate declined. I'd call out three things. About half of the rate decline was driven by the business we have through Alani and the commercial arrangement we have there.

From a margin perspective. Um, operating margin was down about 90 basis points, um, in the quarter, but that was driven by gross profit rate. Um, the gross profit rate decline. I'd call Out 3 things about half of the rate decline was was driven by the the business. We have through Aulani and the commercial arrangement we have there. That's about half the gross profit decline. The other pieces would be more around um the the convenience and gas channel that Ramen was talking about. That was particularly soft in the quarter, as well as some of

Speaker #4: That's about half the gross profit decline. The other pieces would be more around the convenience and gas channel that Ramon was talking about.

Speaker #4: That was particularly soft in the quarter, as well as some of the just product mix overall. Those are the three things that I'd call out.

Steve Schmitt: Those would be the three things that I'd call out. On the G&A side, the team continues to push the productivity envelope there. Going forward, I think as Ramon talked about, we need to see some improvement in the convenience and gas channel, and hopefully we'll get some tailwinds from gas prices to do that, and we'll continue to push the productivity side.

Speaker #4: and on the, on the G&A side, the content the team continues to, to push the productivity envelope there. Going forward, I think, as Ramon talked about, we, we need to see some pro-pro improvement in the, in the, the convenience and gas channel and, and hopefully we'll get some tailwinds from gas prices to do that.

Just product mix overall. Those are the be the 3 things that I'd call out. Um, and on the, on the GNA side, the the team continues to to push the productivity envelope, there going forward, I think is ramen talked about, we, we need to see some improvement in the and the convenience and gas Channel and and hopefully we'll get some Tailwinds from gas prices to do that. And we'll continue to push the productivity side.

Steve Schmitt: Going forward, I think as Ramon talked about, we need to see some improvement in the convenience and gas channel, and hopefully we'll get some tailwinds from gas prices to do that, and we'll continue to push the productivity side.

Thank you. 1 moment for our next question.

Speaker #4: And we'll continue to push the productivity side.

Our next question comes from Michael Avery with uh PSC. Your lot is open.

Speaker #3: Thank you. One moment before our next question. Our next question comes from Michael Lowry with PSC. Your line is open.

Operator: Thank you. One moment for our next question. Our next question comes from Michael Lavery with Piper Sandler. Your line is open.

Thank you. Good morning.

Speaker #6: Thank you. Good morning. I just wanted to come back to PFNA and see if you could add some color on shelving and distribution updates.

Michael Lavery: Thank you. Good morning. Just wanted to come back to PFNA and see if you could add some color on just shelving and distribution updates. I know at the beginning of the year, you were expecting some upside and curious if you could just maybe give us a sense of timing, how much maybe still is to come, how much might be permanent secondary displays or maybe just temporary ones, and just how to think about how that unfolds.

Speaker #6: I know at the beginning of the year you were expecting some upside, and I’m curious if you could maybe give us a sense of the timing—how much still is to come, how much might be permanent, secondary displays, or maybe just temporary ones?

Just wanted to come back to pfna and um see if you could add some color on just shelving and distribution updates. I know the beginning of the year you were expecting some upside and uh curious. If you could just maybe give us a sense of timing. How much maybe still is to come how much it would be permanent secondary displays or or maybe just temporary ones and just how to think about how that unfolds.

yeah, I would say the, um, you know the

Speaker #6: And just how to think about how that unfolds.

Speaker #2: Yeah, I would say the, you know, the space increase that we had initially planned is being implemented throughout the year. There's still more to come.

Ramon Laguarta: Yeah, I would say the space increase that we had initially planned has been coming throughout the year. There's still more to come. There's been some channels where it's taken a little bit longer to execute that space increases, but we will see those coming in H2 as some of the commercial conversations are coming to fruition. I would say increase in permanent space, the perimeter space, as I said earlier, is going to come more in H2, particularly in some channels where we had to come up with some different solutions with the customers. Long-term, this is going to happen. I mean, long-term, in H2, we should have some acceleration in the return on the investments in those particular customers.

The, uh, the space increase that we had initially, planned is being coming, um, throughout the year. Um, there's still more to come. There's been some, um, channels, where is taken a little bit longer to execute that, uh, space increases, but we will see those coming, um, in the second half.

Speaker #2: There have been some channels where it's taking a little bit longer to execute; that space increases. But we will see those coming in the second half of the year as some of the commercial conversations are coming to fruition.

Speaker #2: so I would say increasing permanent space, the perimeter space, as I said earlier, is gonna come more in the second half of the year, particularly in some, in some channels where we had to, you know, come up with, you know, some different solutions with the customers.

This is going to happen. I mean, longer, I mean, second half of the year, uh, and we should have some acceleration in the return on investments in those, in those particular customers.

Speaker #2: But this is, you know, long term, this is going to happen. I mean, by long term, I mean the second half of the year. And we should have some acceleration in the return on investment in those particular customers.

Thank you. 1 moment for our next question.

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

Speaker #3: Thank you. One moment before our next question. Our next question comes from Steve Powers with Deutsche Bank. Your line is open.

Great. Uh, thanks so much.

Operator: Thank you. One moment for our next question. Our next question comes from Steve Powers with Deutsche Bank. Your line is open.

Speaker #7: Yes. Great, thanks so much. I guess maybe a little bit of a follow-up on that, Ramon. So, you know, from the outside, I think that's what the prior question was getting at.

Steve Powers: Yes, great. Thanks so much. I guess maybe a little bit of a follow-up on that, Ramon. From the outside, and I think that's what the prior question was getting at, it just seems like a lot of the initiatives that were discussed coming into the year, especially along the lines of affordability and package and product innovation, appear largely in the market. I guess the go-forward question there is it more about optimizing and scaling the efforts that you've already put in motion, or are there additional actions that remain ahead that can serve as catalysts? Shelf space is part of that, I guess, but anything more along the lines of

Speaker #7: It just seems like a lot of the innovation, a lot of the initiatives that we discussed coming into the year, especially along the lines of affordability and package and product innovation, you know, appear largely in the market.

Speaker #7: And, and I guess the go-forward question there is, is, is it more about optimizing and scaling the efforts that you've already put in, put in motion, or are there additional actions that could, you know, that remain ahead that can serve as, as catalysts?

I guess the a little bit of a follow up on that Ramen. So it's, you know, from the outside and I think that's what the prior question was getting at it. Just like a lot of the innovate, a lot of the initiatives that we discussed coming into the year. Um, especially along the lines of affordability and packaged and product Innovation, you know, appear largely in the market. And and I guess the go forward question there is is, is it more about optimizing and scaling the efforts that you've already put in put in motion? Or are there additional actions? That could, you know that remain ahead that can serve as as catalysts you know. The Shelf space is part of that, I guess. But anything more, um, you know along the lines of of of yeah, I would say the

Speaker #7: You know, shelf space is part of that, I guess. But anything more, you know, along the lines of that, that's one.

We're we're in the Journey of the 3 pillars that I mentioned. Um um on the portfolio transformation. Uh,

Ramon Laguarta: Yeah. I would say

Steve Powers: That point.

Speaker #2: We're in the journey of the three pillars that I mentioned on the portfolio transformation. Most of the innovation that we launch is working quite well in Food North America.

Ramon Laguarta: We're in the journey of the three pillars that I mentioned. On the portfolio transformation, most of the innovation that we launch is working quite well in Frito-Lay North America. We're scaling up Naked, we're scaling up Doritos protein and some of those new platforms that will contribute to the overall permissible portfolio growth and the portion control. In the portion control, we made some investments in opening price points for multi-packs and variety packs that are also working very well. I think portion control, portfolio transformation, that part is well in its execution, and we're scaling up those platforms. The away from home acceleration, there were a couple of elements between supply chain and customer execution in the away from home part of the business that slowed down in Q2, now it's accelerating in Q3. That will be a pillar of acceleration.

Speaker #2: We're scaling up Naked. We're scaling up Doritos Protein, and some of those new platforms that will contribute to overall permissible portfolio growth and portion control.

Speaker #2: In the portion control area, we made some investments in opening price points for multi-packs and variety packs that are also working very well. So I think the portion control portfolio transformation, that part, is well in its execution, and we're scaling up those platforms.

Speaker #2: The away from home, acceleration, I'd say we, we took a, you know, there were a couple of elements between supply chain and, and customer execution in the away from home, part of the business that slowed down in Q in Q2.

Most of the Innovation that we launched is working quite well in food, North America, we're scaling up naked or scaling up Doritos protein. And some of those new platforms that we contribute to the overall permissible portfolio growth and the portion control in the portion control. We, um, we made some investments in opening price points for multi packs and variety packs that are also working very well. So I think portion control portfolio transformation that part. I think it's well in its execution and we're scaling up those platforms, the away from home. Um, um, acceleration. Let's say we we took a, um, you know, there were a couple of elements between supply chain and and customer execution in the away from home, uh, part of the business that slow down in queue in Q2 now, is accelerating Q3, that will be a pillar of acceleration on the affordability. Uh, Investments, as I mentioned, there are channels where the Investments are working very well.

Speaker #2: Now, it's accelerating in Q3. That will be a pillar of acceleration. On the affordability investments, as I mentioned, there are channels where the investments are working very well.

Ramon Laguarta: On the affordability investments, as I mentioned, there are channels where the investments are working very well, and there are other channels where we had to make some tweaks, and we're executing those tactical mechanics of the value to the consumer. That is being put in place, and we'll see the benefits in the H2. That's more or less in the overall picture of the three pillars of the food business in North America acceleration. That's where we are.

Speaker #2: And there are other channels where we had to make some tweaks, and we're executing those, tactical, mechanics, of the, of the of the value, to the consumer.

Very well. And there are other channels where we had to make some tweaks and we're executing those uh, tactical um, mechanics of the, uh, of the of the value, uh, to the consumer. And that is being put in place. And we'll see the, um, the benefits in the second half. So that's more or less in the overall picture of the 3.

Speaker #2: And that is being put in place, and we'll see the benefits in the second half. So that's more or less the overall picture of the three pillars of the food business in North America acceleration. That's where we are.

Pillars of the uh Food business in North America acceleration. That's where we are.

Thank you. 1 moment for our next question.

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

Speaker #3: Thank you. One moment before our next question. Our next question comes from Peter Galbo with Bank of America. Your line is open.

Operator: Thank you. One moment for our next question. Our next question comes from Peter Galbo with Bank of America. Your line is open.

Speaker #5: Hey, guys. Good morning. Thanks for taking the question. Steve, just to put a finer point on your prepared remarks, you talked a bit about the gradual rate of improvement in North America for the second half.

Peter Galbo: Hey, guys. Good morning. Thanks for taking the question. Steve, just to put a finer point on your prepared remarks, you talked a bit about the gradual rate of improvement in North America for H2. Just wanted to understand if there's big differences in terms of the two segments and the rate of improvement or if they should look relatively similar as we think about H2. Thanks very much.

Hey guys, good morning. Thanks for taking the question. Um Steve in just to put a finer point on on your prepared remarks. Uh you talked a bit about the gradual rate of improvement in North America for the second half. I just wanted to understand if there's, um, big difference is in terms of the, the 2 sections and the rate of improvement or if they should look relatively similar as we think about the back half of the year, thanks very much for.

Speaker #5: I just wanted to understand if there are big differences in terms of the two segments and their rate of improvement, or if they should look relatively similar as we think about the back half of the year.

Speaker #5: Thanks very much.

Speaker #2: Sure. Thanks for your question. Look, if I had to take North America and dissect it a little bit, I would expect more profit improvement, faster, from the PBNA business.

Steve Schmitt: Sure. Thanks for your question. Look, if I had to take North America and dissect it a little bit, I would expect more profit improvement faster from the PBNA business than in Foods as we make the value investments and the tweaks that Ramon talked about on how that ripples through the system. That would be the additional color I'd provide. In Q4, obviously, I would expect better profit performance than in Q3.

Speaker #2: Then in Foods, as we make the value investments and the tweaks that Ramon talked about, on how that ripples through the system. So that would be the additional color I'd provide.

Sure, thanks for your question. Like if I had to, uh, take North America and dissect it a little bit, I would expect more profit Improvement faster from the, the pbna business. Um, then in Foods as we make the value investments in the tweaks that the Ramon talked about on how that ripples through the system. Um, so that would, that would be the additional color I would provide. And then in Q4 obviously, I would expect more more, uh, better profit performance than in Q3.

Thank you. 1 moment for our next question.

Speaker #2: And then in Q4, obviously, I would expect more and better profit performance than in Q3.

our next question comes from Robert, Odin with

Evercore isi. Your line is open.

Speaker #3: Thank you. One moment before our next question. Our next question comes from Robert Ottenstein with Evercore ISI. Your line is open.

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

Great, thank you very much. Um,

Just kind of stepping back a little bit more of a maybe a strategic question.

Speaker #8: Great, thank you very much. Just kind of stepping back—a little bit more of a, maybe a strategic question. I mean, the difference in performance, right, between the U.S. business and the International is pretty stunning.

Robert Ottenstein: Great. Thank you very much. Kind of stepping back, a little bit more of maybe a strategic question. The difference in performance between the US business and the international is pretty stunning. You noted that in a lot of markets around the world, higher gasoline prices were an issue. To what extent do you think that, hey, the US market is just a pretty mature market, and the rest of the world, there's much greater opportunity. Does it make sense? Maybe you're doing it, we don't really have a view into it, but are you perhaps over-investing in the US, under-investing internationally, given the growth potential of both of those markets? You noted that the international business now is margin accretive. That's kind of the big picture question.

Um, I mean the the difference in performance right between the US business and the international is pretty stunning.

And you noted that in a lot of markets around the world, you know, higher gasoline prices were an issue.

um, you know to what extent

Speaker #8: And you noted that in a lot of markets around the world, you know, higher gasoline prices were an issue. you know, to what extent do you think that, hey, you know, the US market is just a pretty mature market?

Speaker #8: And, you know, the rest of the world, there's much greater opportunity. Does that make sense? Or maybe you're doing it — we don't really have a view into it. But, you know, are you perhaps over-investing in the US, under-investing internationally, given the growth potential of both of those markets?

Robert Ottenstein: Does it make sense? Maybe you're doing it, we don't really have a view into it, but are you perhaps over-investing in the US, under-investing internationally, given the growth potential of both of those markets? You noted that the international business now is margin accretive. That's kind of the big picture question. Tied to that, perhaps, is maybe if you could give us an update on the integration testing that you're doing in Texas as a way to lower your cost basis in the US. Thank you.

Speaker #8: And you noted that it's margin accretive, so that's kind of the big picture question. Then, tied to that, perhaps, is if you could give us an update on the integration testing that you're doing in Texas as a way to lower your cost basis in the U.S.

Robert Ottenstein: Tied to that, perhaps, is maybe if you could give us an update on the integration testing that you're doing in Texas as a way to lower your cost basis in the US. Thank you.

Speaker #8: Thank you.

Speaker #2: That's great, Robert, thanks. Yeah, the two are related, but in a way, we've been investing in international for many years, and one of the things we're obviously very careful about is making sure we don't starve international of the capital or the investments to continue to grow that business.

Ramon Laguarta: That's great, Robert, thanks. Yeah, the two are related, in a way, we've been investing in international for many years, one of the, obviously, things we're very careful about is make sure we don't starve international of the capital or of the investments to continue to grow that business. As you said, if you think about the company five, 10 years from now, that will be the biggest source of growth, that is where the biggest opportunity is for us to continue to expand our brands and develop our categories.

Speaker #2: Because, as you said, if you think about the company five or ten years from now, that will be the biggest source of growth, and that is where the biggest opportunity is for us to continue to expand our brand and develop our categories.

The growth potential of both of those markets and you noted that, you know, the international business now, is is margin accretive so that's kind of the, the big picture question and then tied to that uh, perhaps is, maybe if you could give us an update on the integration, uh, testing that you're doing in Texas as a way to lower your, your cost basis, uh, in the US. Thank you. That's great. Robert thanks. Yeah. The, the 2 are, um, related. But in a way, uh, we've been investing in international for many years and 1 of the, uh, obviously, with things were very careful about is, make sure we're on a starve International of the capital or of the Investments, to continue to grow that business. Because, as you said, if you think about the company 5, 10 years from now, that will be the biggest source of growth. And that is where the biggest opportunity is for us to continue to expand Our Brands and develop our categories. Now, the US is critical,

Speaker #2: Now, the US is critical for us in the, short term and the long term. And we believe that the, both keeping our brands, in consumers, occasions that we have today, but also providing new offerings both in foods and beverages that cater to the new trends in food consumption in the US, and also expanding our away from home is a way for our North America business to continue to be a, a compounder for us.

Ramon Laguarta: Now, the US is critical for us in the short term and the long term, we believe that both keeping our brands in consumers' occasions that we have today, but also providing new offerings, both in foods and beverages that cater to the new trends in food consumption in the US and also expanding on our away from home, is a way for our North America business to continue to be a compounder for us at a good pace. It's not currently we're growing at a 1%, it's more towards the 3% levels that we think the US total business can grow in the future. Now, to fund that growth, we don't want to starve international.

For us in the short term and the long term. And we believe that the, uh, both keeping Our Brands, um, in consumers, uh, occasions that we have today, but also providing new offerings both in foods and beverages that cater to the new trends in food, consumption in the US. And also expanding our away from home is a way for our North, America business to continue to be a, a compounder for us at at a good pace. And it's not current

We're growing at a 1% is more towards the uh, the 3% levels that within the US total business can grow in the future. Now,

Speaker #2: At a at a good pace. And it's not currently we're growing at a 1%. It's more towards the, the 3% levels that we think the US total business can grow in the future.

Speaker #2: Now, to fund that growth, we don't want to starve International. Therefore, you know, some of the big productivity initiatives we have in the U.S. are precisely for that.

Ramon Laguarta: Therefore, some of the big productivity initiatives we have in the US are precisely for that, to make sure that we can fund the transformation of the US business without starving the international business. To those points, I think automation, we are expanding automation through our business. We're expanding some of the digitalization that would make us much more effective and productive. One of the pillars that you referred to is how do we combine the scale of our two American businesses to change the cost structure of the overall business, especially on the logistics side of the business, the warehousing, the transportation, and delivery. We're making good progress. We'll have an update for you with more detail later in the year, early next year. I would say where we're testing in Texoma, we're seeing mixing centers being a big idea for us, that is scaling.

Speaker #2: You know, to make sure that we can fund the transformation of the U.S. business without starving the international business. To those points, I think automation—we are expanding automation throughout our business.

Speaker #2: We're expanding, you know, some of the digitalization, and that would make us much more effective and productive. And one of the pillars that you referred to is how do we combine the scale of our two American businesses to change the cost structure of the overall business, especially on the logistics side of the business, right?

Speaker #2: The warehousing, the transportation, and delivery—we're making good progress. We'll have an update for you with more detail later in the year or early next year.

To fund that growth. We don't want to starve International. Therefore, you know, some of the big productivity initiatives we have in the US are precisely for that, you know, to make sure that we can fund the transformation of the US Business Without starving the international business to those point. I think automation, we are expanding automation, through our business. We're expanding, you know, some of the digitalization and that would would make us much more effective and productive and 1 of the pillars that you refer to is. How do we combine the scale of our 2, American businesses to change the, um, the cost structure of the overall business, especially on the logistics side of the business, right? The, the warehouse in the transportation and delivery and we're making good progress, we'll have an update for you with more detail later in the year early next year. But I would say where we're testing in in Texoma. We're seeing, you know, mixing centers being a big idea for us and that is scaling. These are combined mixing centers where

Speaker #2: But I would say, where we're testing in Texoma, we're seeing, you know, mixing centers being a big idea for us, and that is scaling.

Speaker #2: These are combined mixing centers, where we put the inventory from the two categories. That gives us a lot of flexibility to service our customers and lowers our costs.

Ramon Laguarta: These are combined mixing centers where we put the inventory from the two categories. That gives us a lot of flexibility to service our customers and lowers our costs. We're testing incremental ideas like combined delivery, combined fleet. Those are big transformations, and it requires systems, it requires assets, but all of this is in motion and with positive return so far. There are other transformations that we're doing in terms of integrating our G&A and integrating our systems that would allow us to have a lower cost business that is more affordable and can invest in the growth spaces in the US. Great question, and one of the clear strategic funding resourcing decisions that we have in the company. What we want to tell you is that we're not starving the international business to fund the US business.

Speaker #2: Now, we're testing incremental ideas combined with fleet—those are big, big transformations. And we're, you know, it requires systems, it requires assets, but all of this is in motion.

We put the the inventory from the 2 categories that gives us a lot of flexibility to service our customers and lowers our cost. Now we're testing um incremental ideas like uh combined delivery combined. Um, Fleet those are those are big big Transformations and we're, you know,

Speaker #2: And with positive, positive return so far. Now, there are other transformations that we're doing in terms of integrating our G&A and integrating our systems that would allow us to have a lower-cost business that is more affordable and can invest in the growth spaces in the U.S.

Speaker #2: So, great question. And one of the clear, strategic funding and resourcing decisions that we have in the company. What we want to tell you is that we are not starving the international business to fund the U.S. business.

Ramon Laguarta: What we want to tell you is that we're not starving the international business to fund the US business. The international business has enough capital, enough A&M, enough talent, investment to continue to be a great source of growth for us and a compounder at the levels that you're seeing for the last five, six years.

Speaker #2: The international business has enough capital, enough A&M, enough talent investment to continue to be a great source of growth for us and a compounder at the levels that you're seeing for the last five, six years.

Ramon Laguarta: The international business has enough capital, enough A&M, enough talent, investment to continue to be a great source of growth for us and a compounder at the levels that you're seeing for the last five, six years.

Require systems required assets, but all of this is in motion and with positive positive uh, uh, return so far. Now, there there are other Transformations that we're doing in terms of integrating our DNA and integrating our systems that would allow us to have a lower cost business, that is more affordable and can invest in the growth spaces in the US. So, great question. And, and 1 of the clear, uh, statistic, uh, um, funding, uh, resourcing has, uh, decisions that we have in the company. And, and what we, what we want to tell you is that we are not starving the international business to fund the US business. The international business has enough Capital enough A&M enough Talent investment to continue to be a, a great source of uh, of growth for us. And a compounder at the levels that you're seeing for the last 5, 6 years.

Thank you. 1 moment for our next question.

Our next question comes from Robert Moscow, with TD cow and your line is open.

Speaker #3: Thank you. One moment before our next question. Our next question comes from Robert Moscow with TD Cowen. Your line is open.

Operator: Thank you. One moment for our next question. Our next question comes from Robert Moskow with TD Cowen. Your line is open.

Speaker #9: Hi. Thanks, Ramon and Steve. There was an article in the press about six weeks ago about a 10 to 20 percent price increase that you’re taking on Frito-Lay smaller bags.

Robert Moskow: Hi. Thanks, Ramon and Steve. There was an article in the press about 6 weeks ago about a 10% to 20% price increase that you're taking on Frito-Lay smaller bags, and I suspect that that is really for the convenience channel. Today's results indicate that convenience has been weak. In terms of the investments you're making, are you taking steps to kind of cushion the blow for consumers so that affordability doesn't kind of get worse in that channel from here?

Speaker #9: And I suspect that that is really for the convenience channel. And now, you know, today's results indicate that convenience has been weak.

Hi, thanks Ramen and Steve. Uh, there was an article on the Press about 6 weeks ago, about a 10 to 10 to 20% price increase that you're taking on Fredo, a smaller bags. And I I suspect that that is really for the convenience Channel and and now you know, today's results indicate that convenience has been weak, um it it in terms of the Investments you're making are are you taking?

Steps to kind of cushion the blow for consumers. So that affordability doesn't you know kind of get worse uh in that channel from here.

Speaker #9: In terms of the investments you're making, are you taking steps to cushion the blow for consumers so that affordability doesn't, you know, get worse in that channel from here?

Speaker #2: I mean, that channel is critical for us. And, you know, the way we're trying to increase the incidence of purchasing in that channel is through bundles and some other incentives for purchase that were, you know, we're actually partnering with our customers across the country on.

Ramon Laguarta: That channel is critical for us, and the way we're trying to increase the incidence of purchase in that channel is through bundles and some other incentives for purchase that we're actually partnering with our customers across the country. That we see the benefit when we have good offers and bundles, beverages and foods, or foods and foods, or snacks and foods. We see that being a great accelerator of the performance of the different customers. We're not trying to raise prices in the single-serve business to pay for the investments in the take-home business. That's not what we're trying to do.

Speaker #2: And we see the benefit when we have good offers and bundles—beverages and foods, or foods and foods, or snacks and foods.

Speaker #2: We see that being a great accelerator of the performance of the different customers. So we're not trying to raise prices in the single-serve business to pay for the investments in the take-home business.

With our customers across across the country. Uh, and that, that we see the benefit, when we have good offers and bundles very do some foods, uh, of food and Foods or snacks and Foods, we see that being a great accelerator of the performance of of the different customers. So, we're, we're not trying to, um, raise prices in the, uh, single serve business to pay for the investments in the take-home business. That's not what we're trying to do.

Thank you. 1 moment for our next question.

Speaker #2: That's not what we're trying to do.

Our next question comes from Chris, carry with Wells. Fargo security. Is your line is open.

Speaker #3: Thank you. One moment for our next question. Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open.

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

Speaker #10: Hi. Good morning. Can you just give us a sense of, performance, and opportunities of some of your recent acquisitions? Perhaps the most specifically Siete and, and Poppy and, and in general, give us a sense of, how you're viewing the M&A environment, you know, willingness for additional acquisitions and how in general that, that factors in your, your medium-term plans.

Chris Carey: Hi, good morning. Can you just give us a sense of performance and opportunities of some of your recent acquisitions, perhaps most specifically Siete and poppi, and in general, give us a sense of how you're viewing the M&A environment, willingness for additional acquisitions, and how in general that factors in your medium-term plans. Thank you.

Hi, good morning. Can you just give us a sense of uh performance and opportunities of some of your recent acquisitions perhaps most specifically yet day and Poppy. And and in general gives us a sense of uh how you're viewing the m&a environment, you know, willingness for additional Acquisitions and how in general that that factors in your your medium-term plans. Thank you.

So I I the both.

Speaker #10: Thank you.

Speaker #2: So I, I—the, both Siete and Poppy are doing well. Poppy, we had a—the transition between the distributor system that Poppy had and our system had a few, you know, obviously, it's a—it's a big transition.

Ramon Laguarta: Both Siete and poppi are doing well. poppi, we had the transition between the distributor system that poppi had and our system. Obviously, there's a big transition. There's a lot of distributors. We had a bit of an impact in the first part of the year. Now, that is pretty much solved. The business is flowing through our supply chain. We're seeing the benefits of that in additional consumption points and additional customers. That will continue. We're seeing poppi growing again at a good pace. Siete as well. Siete was integrated earlier. We had some issues with some of the ingredients in Siete that impacted the performance of the business in the April-May timeframe. That has been solved as well. They're both very critical parts of our strategy to transform our part of our portfolio.

Speaker #2: There are a lot of distributors, and we had a bit of an impact in the first part of the year. Now, that is pretty much solved.

Speaker #2: You know, the business is flowing through our business, through our supply chain, and we're seeing the benefits of that—in additional consumption points and additional customers. And that will continue.

Speaker #2: We're seeing Poppy growing again at a good pace. Siete as well. Siete was integrated earlier. We had some issues with some of the ingredients in Siete that impacted the performance of the business in the April–May timeframe.

Speaker #2: That has been solved as well. So we—there are both very critical parts of our strategy to transform our part of our portfolio.

Cat and Poppy are doing well, uh, poppy. We had a, the transition between the distributor system that Poppy had and our system had a few. Um, you know, obviously it's a, it's a big transition. There's a lot of Distributors and we had a bit of an impact in the first part of the year. Now that is pretty much solved. The um you know, the business is flowing through our business through our supply chain. And we're seeing the benefits of that in additional uh, consumption points and additional customers. Um, and that will continue. We're seeing poppy growing again at a good Pace, uh, c as well C was integrated earlier. Um, we had some issues with some of the, uh, ingredients in in C that impacted the performance of the business. In, in the April May time frame, that has been solved as well. So we, they're both very critical parts of our strategy to transform our part of of of of our portfolio. And we we mentioned we're going to be innovating With Our Brands into news.

Speaker #2: And we mentioned we're going to be innovating with our brands into new spaces, but there will be spaces where we continue to think that buying a brand and expanding that brand within our system is a great return.

Ramon Laguarta: We mentioned we're going to be innovating with our brands into new spaces. There will be spaces where we continue to think that buying a brand and expanding that brand within our system is a great return, Siete and poppi are good examples. We're also looking at partnerships like the Celsius Alani Nu. That's another way that we're using to expand our offerings to consumers and to leverage our capabilities, be it go-to-market, be it others, to provide customers opportunities in spaces where it would be hard to scale an innovation for ourselves. As you saw from our prepared remarks, we're innovating with our brands in many of these new spaces and leveraging our R&D and our brands and our teams to provide new solutions, be it new packs, new functionality, new occasions that could continue to add business to our brands in the US.

Speaker #2: And Siete and Poppy are good examples. We also looking at partnerships like the Celsius Alani News. That's another way that we're using to expand our offerings to consumers and to leverage our capabilities, be it go-to-market, be it others, to, to provide consumers, opportunities in spaces where it would be hard to scale an innovation from ourselves.

Spaces. But they will be spaces where we continue to think that buying a brand and expanding that brand within our system is a great is a great return and see a 10 POI, a good examples. We also looking at Partnerships like the Celsius Alani Nu. That's another way that we're using to expand our offerings to Consumers and to leverage our capabilities be it, go to market, be it others to um to provide consumers um opportunities in spaces, where it would be hard.

Speaker #2: But as you saw from our prepared remarks, we're innovating with our brands in many of these new spaces. And leveraging our R&D and our, our brands and our teams to, to provide new solutions, be it new packs, new, new functionality, new, new, new occasions, that could continue to add, you know, business to our to our brand in the US.

Hard to scale an innovation from ourselves. But as you saw from our prepared remarks, we're innovating with our brands, in many of these new spaces, and leveraging, our R&D, and our, Our Brands, and our teams to, um, to provide new Solutions, be new packs, new, uh, new functionality, new new, um, new occasions that can continue to add, um, you know, business to our, to Our Brands, in the US,

Thank you. 1 moment for our next question.

Our last question comes from camil graduate with Jeff is open.

Speaker #3: Thank you. One moment for our next question. Our last question comes from Camille Grajwale with Jeff. Your line is open.

Operator: Thank you. One moment for our next question. Our last question comes from Kaumil Gajrawala with Jefferies. Your line is open.

Speaker #11: hey, guys. Good morning. I guess, I'm just struggling a little bit to understand what imp you know, optimizing return on investment means. You know, does that mean that perhaps some you know, discounts were not working and there you know, they're not worth doing anymore?

Kaumil Gajrawala: Hey, guys. Good morning. I guess I'm just struggling a little bit to understand what optimizing return on investment means. Does that mean that perhaps some discounts were not working? They're not worth doing anymore? Is it something else to drive more volume? Just sort of, I understand it conceptually, not practically in terms of what's actually changing and what the goals are for that. Is it a profit? Is it intentions for ROIs or profits, intentions for shifting where you're deploying capital to drive volumes faster than however they're growing now?

Speaker #11: Or is it you know, is it is it something else to drive more volume? And just, sort of I understand it conceptually, but not practically in terms of, like, what's actually changing.

Speaker #11: and what the goals are for that. Is it a is it a profit? Is it intentions for ROI for profits or intentions for shifting where you're deploying capital to drive volumes faster than, whatever they're like you know, how, however they're growing now.

Uh Hey guys. Good morning. Um I guess I I'm just struggling a little bit to understand what improve you know, optimizing return on investment means. You know, does that mean that perhaps some you know, discounts were not working and there, you know, they're not worth doing anymore or is it? You know, is it, is it something else to drive more volume and just um sort of I understand it conceptually but not practically in terms of like what's actually changing uh and what the goals are for that. Is it a, is it a profit? Is it an intentions for Roi for profits or intentions? For shifting, where you're deploying Capital to drive volumes faster than, um, whatever. They're like, you know, how, how, how they're growing now.

Speaker #2: I think it's trying to get more volume from the investments, Camille. And, you know, there's high-low customers, there's everyday-low customers, and the mechanics of how you can maximize the return on the trade investment or offers that you make to the consumers can derive more volume or less.

Ramon Laguarta: I think it is trying to get more volume from the investments, Kaumil. There's high-low customers, there's everyday low customers, the mechanics, how you can maximize the return on the trade investment or offers that you make to the consumers can derive more volume or less. That is what we mean by optimizing the return on investment. It's a very specific customer-by-customer, holiday-by-holiday, beginning of the month versus end of the month, all those details and how we execute that with our customers. It's simple on the everyday low price customers, a bit more complex on the high-low, that's what we're expecting it to be. Thank you very much all for your conversation and for joining us today the confidence you're placing with your investment in our stock. Thank you very much. Have a great day.

Speaker #2: So that is how we are what we mean by optimizing the return on the investment. Then it will it's a very specific customer-by-customer holiday-by-holiday beginning of the month versus end of the month.

Speaker #2: All those details and how we execute that with our customers. It's simple with the everyday low-price customers; it's a bit more complex on the high-low.

I think it's trying to get more volume from the Investments Camille and um, you know, there's there's high low customers, there's everyday low customers, and the mechanics, how you can maximize the return on the uh, trade Investments or, or, uh, offers that you make to the consumers, can derive more volume or less. So, that is how we are what we mean, by optimizing the return on the Investments and it will, it's a very specific customer by customer Holiday by holiday, beginning of the month, versus end of the month, all those details, and how we execute that with our customers and it's simple on the everyday low price, customers a bit more complex on the high low. And that's what we're trying to tweak.

Speaker #2: And that's what we're trying to tweak. So, thank you very much, all, for your conversation and for joining us today, and for the confidence you're placing with your investments in our stock.

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