PepsiCo, Inc
PepsiCo, Inc. is an American multinational food, snack, and beverage corporation. PepsiCo's business encompasses all aspects of the food and beverage market.
It oversees the manufacturing, distribution, and marketing of its products.
PepsiCo has operations all around the world and its products are distributed across more than 200 countries.
Employees: 291,000
Revenue: $86.392B for FY2022
HQ Location: Harrison, New York, USA
What they do:
PepsiCo products are enjoyed by consumers around the world.
PepsiCo’s complementary beverage and convenient foods includes Lay's, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker, and SodaStream.
PepsiCo's product portfolio includes a wide range of enjoyable foods and beverages, including many iconic brands that generate more than $1 billion each in estimated annual retail sales.
Their vision and priorities:
For their consumers
They want to create joyful moments through their delicious and nourishing products and brands.For their customers
They want to be the best partner, changing innovation and delivering a level of growth in their industry that no other brand can beat.For the planet
By conserving nature’s precious resources and fostering a more sustainable planet for it’s children and grandchildren.For their shareholders
Deliver sustainable top-tier TSR (total shareholder return) and embrace best-in-class corporate governance.
Create more smiles with every sip and every bite
To broaden their portfolios with new foods and beverages.
To strengthen their North American businesses.
To accelerate their international expansion and focus on “right to win” markets.
Manage their costs so they can reinvest and win in the marketplace.
Develop and scale their core capabilities through advanced technology.
Invest in talent and create an inclusive workplace culture.
Use their global reach and expertise in areas where they can make the biggest environmental impact: Agriculture, Water, Packaging, Products, Climate Change, and People.
Financial and Business Goals
Pep+ (PepsiCo Positive) is their strategic end-to-end transformation that puts sustainability and human capital at the center of how they will create value and growth by operating within planetary boundaries and inspiring positive change for the planet and people.-
Outlook for 2023
They expect to deliver 6% organic revenue growth
They expect to deliver 8% core constant currency earnings per share growth.
They expect a core annual effective tax rate of 20 percent
They expect a total cash return to shareholders of approximately $7.7 billion, comprised of dividends of $6.7 billion and share repurchases of $1.0 billion.
Things to know right now
They have made a substantial IT investment
They have invested in modernizing and harmonizing their IT systems across certain businesses and countries and expanded the size and scope of their Global Business Services initiative to help them deliver more than $1 billion in productivity savings in 2022.
Automation and Digitization Initiatives advanced
They advanced their automation and digitization initiatives to fortify their supply chain, and leveraged analytics and insights at a more granular level to optimize and sharpen their consumer-centric innovation and revenue management capabilities.
Changes in their business portfolio
They have actively managed parts of their business portfolio to shift towards fast-growing, highly profitable areas. This included closing the divestiture of Tropicana, Naked, and other select juice brands, entering into a new distribution agreement with Celsius Holdings, Inc., and expanding their distribution of low-alcohol products in the U.S. to 11 states
PepsiCo Positive (pep +) continues to progress forward by:
Announcing a global packaging goal intended to double the percentage of all beverage servings sold through reusable models from 10 to 20 percent by 2030
Continuously evolve their portfolio towards positive choices such as portion-control packages, zero sugar beverages, and nutritious convenient foods with lower sodium and low-or-no saturated fat content
Entering into a commercial partnership with Archer Daniels Midland Company (ADM) in an effort to significantly expand regenerative agriculture practices across their shared North American supply chains
Achieving zero freshwater consumption in certain facilities in Latin America and advancing towards their target of improving operational water-use efficiency by 25 percent in high water-risk areas by 2025
Announcing a long-term supply arrangement with Eastman Chemical for PET made using Eastman’s molecular recycling technologies which supports their goals to reduce the use of virgin plastic and increase recycled content in their products
Advancing their people agenda by taking steps to support gender parity, advance pay equity, and increase diverse representation at the managerial level.
Advancing towards completion of the first Frito-Lay North America manufacturing facility to implement site-wide alternative fuel vehicles, on-site renewable energy generation, energy storage equipment, and employee electric vehicle charging stations in California
Issuing a $1.25 billion Green Bond in July 2022 with a ten-year maturity that will focus on investments in virgin plastic waste reduction, decarbonization, water use efficiency, and regenerative agriculture.
What does each business unit do?
PepsiCo Beverages North America (PBNA)
PBNA is responsible for bringing consumers an unrivaled, iconic portfolio of more than 300 beverage choices, including 10 billion-dollar brands like Pepsi, Gatorade, bubbly, and Mountain Dew, as well as emerging brands in the fast-growing energy and value-added protein categories.
Frito-Lay North America (FLNA)
FLNA makes some of the most popular and high-quality snacks in the United States and Canada, including Lay’s and Ruffles potato chips, Doritos tortilla chips, Cheetos cheese-flavored snacks, Tostitos tortilla chips, and branded dips, Santitas tortilla chips, Sun Chips multigrain chips, and Fritos corn chips.
In addition, FLNA, through a joint venture with Strauss Group, makes, markets, distributes and sells Sabra refrigerated dips and spreads. Its emerging brands include Bare Snacks, Off The Eaten Path, and Popcorners.
Quaker Foods North America
They are a leading expert in oats and are committed to making oats delicious and convenient by developing everything from breakfast items to snacks to tasty recipe ideas.
They offer numerous products and choices including hot cereals, cold cereals, snack bars, rice snacks, and more. Quaker Foods North America also makes, markets, distributes, and sells cereals, rice, pasta, dairy, and products such as Cheetos Mac‘N Cheese, Pearl Milling Company pancake mixes and syrups, Cap’n Crunch cereal, Life cereal, Rice-A-Roni, and Near East side dishes.
International Business (PepsiCo Global)
Latin America - sells beverages, salty snacks, cookies and crackers, oats, nuts, and seeds. Their portfolio includes major global brands such as Pepsi, Lay’s, Quaker, Gatorade, 7UP, Doritos, Cheetos, and Ruffles, as well as regional and local brands like Gamesa, Mafer, Tortrix, and Kero Coco.
Europe - They manufacture and supply delicious foods and beverages.
Their portfolio of snacks, soft drinks, dairy, juices, and grains encompasses world-famous brands such as Pepsi, Lay’s, Doritos, 7UP, Tropicana, and Quaker Oats, alongside their much-loved, local and regional brands, including Walkers crisps, Alvalle Gazpacho Duyvis nuts, and Agusha baby food.
They are now the leading manufacturer of savory snacks, hot cereals, and juices in the Europe sector and the second-largest producer of carbonated soft drinks and dairy.
Asia Pacific, Australia, New Zealand, and China (APAC) -offer a number of leading snack brands such as Cheetos, Doritos, Lay’s, and Smith’s as well as various beverage brands including 7UP, Aquafina, Mirinda, Mountain Dew, and Pepsi.
It also sells ready-to-drink tea products through a joint venture with Unilever under the Lipton brand and licenses Tropicana through a strategic alliance with Tingyi (Cayman Islands) Holding Corp.
Africa, Middle East, and South Asia (AMESA) - features many leading global snack brands, including Lay’s, Cheetos, and Doritos, along with local favorites such as Chipsy (Egypt), Simba (South Africa) and Kurkure (India and Pakistan), as well as various beverage brands like 7UP, Pepsi, Aquafina, Mountain Dew, Mirinda, and Sting.
It also boasts brands from Africa such as Weet-Bix, Bokomo, and Ceres.
Competitors
Kellogg
Conagra Brands
The Coca-Cola Company
Keurig Dr Pepper
Danone
Nestle
Britvic
Red Bull
Mondelez International
Monster Beverage.
Their financial calendar
Q1: April-June - Earnings 26th April 2023
Q2: August-October - Earnings 12th July 2023
Q3: November-January - Earnings 12th October 2023
Q4: February-April - Earnings 9th February 2024
Next Earnings Report:
Around 26th April 2023
Reported GAAP
Organic GAAP
Positives from the last earnings report Q4FY22:
Organic revenue increased 14.6% and represents their fifth consecutive quarter of double-digit organic revenue growth.
Their top-line performance was broad-based across geographies. North America and International businesses delivered 14% and 16% organic revenue growth, respectively.
Gross profit increased 11%
Core operating profit increased 7%
Per Operating Segment:
Frito-Lay North America
Operating profit increased by 9%, primarily reflecting effective net pricing and productivity savings.
PepsiCo Beverages North America
Operating profit increased 13%, primarily reflecting effective net pricing, higher income from joint ventures, and productivity savings.
Latin America
Operating profit increased 5%, primarily reflecting net revenue growth, productivity savings, a 7- percentage-point favorable impact of adjusting certain non-income tax accruals in Mexico, and a 3- percentage-point favorable impact of lower charges taken as a result of the novel coronavirus (COVID-19) pandemic.
A favorable adjustment to the final purchase price associated with our sale of certain non-strategic brands contributed 3 percentage points to operating profit growth.
Challenges from the last earnings report Q4FY22:
Per Operating Segment
Quaker Foods North America
Operating profit decreased 3%, primarily reflecting a 48%-point impact of higher commodity costs, mainly grains and packaging materials, certain operating cost increases, including incremental transportation costs, and higher advertising and marketing expenses.
Higher restructuring and impairment charges negatively impacted operating profit performance by 3 percentage points.
PepsiCo Beverages North America
Lower net revenue was due to the sale of Tropicana, Naked, and other select juice brands and higher restructuring and impairment charges which reduced operating profit growth by 32 percentage points and 9 percentage points, respectively.
Europe
Operating profit decreased 420%, primarily reflecting a 400-percentage-point unfavorable impact of impairment charges related to the SodaStream brand (other impairment charges).
Operating profit performance was also negatively impacted by a 141-percentage-point impact of higher commodity costs, primarily packaging materials, cooking oil and potatoes, and certain operating cost increases.
Higher restructuring and impairment charges negatively impacted operating profit performance by 10 percentage points.
Africa, Middle East and South Asia
Operating profit decreased 148%, primarily reflecting a 105-percentage-point impact of impairment and other charges associated with our decision to sell or discontinue certain non-strategic brands and an investment (brand portfolio impairment charges) and a 21-percentage-point impact of impairment charges 3 primarily related to certain juice brands from the Pioneer Food Group Ltd. (Pioneer Foods) acquisition (other impairment charges).
Operating profit performance was also negatively impacted by a 167- percentage-point impact of higher commodity costs, primarily grains, cooking oil, and packaging materials, certain operating cost increases, and higher advertising and marketing expenses, partially offset by net revenue growth and productivity savings.
Unfavorable foreign exchange negatively impacted operating profit performance by 15 percentage points.
Asia Pacific, Australia and New Zealand, and China Region
Operating profit decreased 215%, primarily reflecting a 237-percentage-point impact of impairment charges related to the Be & Cheery brand (other impairment charges) and a 6-percentage-point impact of impairment charges on certain property, plant, and equipment due to the discontinuation of a non-strategic brand (brand portfolio impairment charges) in China.
Operating profit performance was also negatively impacted by a 96-percentage-point impact of higher commodity costs, primarily potatoes, and cooking oil, certain operating cost increases, and higher advertising and marketing expenses, partially offset by net revenue growth and productivity savings.
Unfavorable foreign exchange negatively impacted operating profit performance by 11 percentage points.
Positives for the FY2022:
Per Operating Segment
Frito-Lay North America
Operating profit increased 9%, primarily reflecting the effective net pricing and productivity savings.
Quaker Foods North America
Operating profit grew 4.5%, primarily reflecting the effective net pricing and productivity savings.
PepsiCo Beverages North America
Operating profit increased 122%, primarily reflecting a 124-percentage-point impact of the gain of $3.0 billion associated with the sale of Tropicana, Naked, and other select juice brands
Operating profit growth was also driven by net revenue growth and productivity savings
Latin America
Operating profit increased 19%, primarily reflecting the net revenue growth, productivity savings, and a 3- percentage-point favorable impact of lower charges taken as a result of the COVID-19 pandemic.
Challenges for the FY2022:
Per Operating Segment
Frito-Lay North America
Impairment charges associated with a baked fruit convenient food brand reduced operating profit growth by 1.5 percentage points (other impairment charges).
PepsiCo Beverages North America
Operating profit growth was reduced by a 15-percentage-point impact of the lower net revenue due to the sale of Tropicana, Naked, and other select juice brands.
Latin America
Impairment and other charges associated with the sale of certain nonstrategic brands reduced operating profit growth by 4.5 percentage points (brand portfolio impairment charges).
Europe
Operating profit decreased 207%, primarily reflecting a 110-percentage-point unfavorable impact of charges associated with the Russia-Ukraine conflict, a 98-percentage-point unfavorable impact of impairment charges related to the SodaStream brand (other impairment charges), and a 20-percentage point unfavorable impact primarily related to the impairment of intangible assets due to the discontinuation or repositioning of certain juice and dairy brands in Russia (brand portfolio impairment charges), partially offset by a 23-percentage-point favorable impact of the gain associated with the Juice Transaction.
Operating profit performance was also negatively impacted by a 91-percentage-point impact of higher commodity costs, primarily packaging materials, raw milk, and potatoes, certain operating cost increases, the organic volume decline, a 4-percentage-point impact of less favorable settlements of promotional spending accruals compared to the prior year and a 4-percentage-point impact of payments to employees for a change in pension benefits.
Unfavorable foreign exchange negatively impacted operating profit performance by 7 percentage points.
Africa, Middle East and South Asia
Operating profit decreased 22%, primarily reflecting a 19-percentage-point impact of impairment and other charges associated with our decision to sell or discontinue certain non-strategic brands and an investment (brand portfolio impairment charges) and a 4-percentage-point impact of impairment charges primarily related to certain juice brands from the Pioneer Foods acquisition (other impairment charges).
Operating profit performance was also negatively impacted by a 74-percentage-point impact of higher commodity costs, primarily packaging materials, grains, and cooking oil, certain operating cost increases, and higher advertising and marketing expenses
Unfavorable foreign exchange negatively impacted operating profit performance by 9 percentage points.
Asia Pacific, Australia and New Zealand, and China Region
Operating profit decreased 20%, primarily reflecting a 25-percentage-point impact of impairment charges related to the Be & Cheery brand (other impairment charges).
Operating profit performance was also negatively impacted by a 25-percentage-point impact of higher commodity costs, primarily cooking oil and potatoes, certain operating cost increases, and higher advertising and marketing expenses.
Prior-year impairment charges associated with an equity method investment positively contributed 3 percentage points to operating profit performance.
Unfavorable foreign exchange negatively impacted operating profit performance by 4 percentage points.