PEP - Earnings call 3 2023

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Operator

Good morning, and welcome to PepsiCo's 2023 Third quarter earnings question-and-answer session. [Operator Instructions] Today's call is being recorded and will be archived at www.pepsico.com. It is now my pleasure to introduce Mr. Ravi Pamnani, Senior Vice President of Investor Relations. Mr. begin. may you Pamnani,

Ravi Pamnani

our Good this I press morning both available prepared operator. had release everyone a remarks on are which chance to of morning, you, hope everyone. has and website. Thank review our

Before our We on make statement. our may guidance plans, please and we including forward-looking about take begin, call, of cautionary note today's business statements outlook.

our obligation discussing XX, uncertainties our view as Forward-looking third results, our of and factors are to including could statements XX-Q and which Form reflect we for a cause quarter inherently non-GAAP XXXX When that definitions materially to Please actual and exclude from statements. involve only earnings regarding to XXXX reconciliations forward-looking to under we refer certain no of risks our reported third and differ results, quarter today, October on measures update. refer from pepsico.com and discussion and measures, available of results. non-GAAP results release information additional items

Joining PepsiCo's Chairman [Operator Ramon first and that, Vice for CEO, me over the today PepsiCo's I operator CFO, Johnston. with And to Instructions] the are turn Laguarta; Chairman it Hugh question. and will and

Operator

Bryan [Operator comes Our question America. with from first of Bank Instructions] Spillane

Bryan Spillane

just is So my I just, of just a been for but on lot volume. question around that There's focus Pepsi, not broadly. topic, think, more

that the out your of quarter? might kind how what relative volumes Ramon, packs. then of coming happening And maybe, little there's was some was volumetrically in just -- But as bit you commentary on outlook in a quarter shift know there's evolved have the I for a to remarks, So PBNA small progressed? prepared the could specifically to about XQ, for what if touch

Ramon Laguarta

the broader few back step to PBNA take volume sequential me Let improvement, quarters. if you company. We're last the seeing beyond

consumer managing one units the interaction margin act. to And how big globally, the for we're is thinking that the how business. using -- optimize. to. units overall cases, we're mix we're and through our the variables mentioned improvement specific to with we're that trying volume. is then There's variables we're obviously good across obviously than as proxy a margin improving saw But consumers both is margin our faster two or philosophically businesses that packs. are in And and volume. company. purchasing in that One other optimizing facilitating the for two those the In we're And growing about we're seeing that, more company we're you brands. the it So was then are our a much you maximizing. And And there's smaller We're also that way, our you referred particular pricing strategy. that a moving

almost PBNA, more not So X.X has it optimization. we've to that's and some about When we've thinking points the aggressive comes with we're margin. made and the been especially volume in that promotions we're profitable decisions, a impact. bit to prune that take to able home other volume And of around for water some businesses that than were business, volume how regards

volume we're an transaction unit managing the -- expansion. others some the that brands margin and So and as consumer clearly plants with the volume. revenue these are we're that's making trying important trade-offs in and net us, we're how efficiency for for that maximize to It's interaction but variable metrics between

Operator

Barclays. comes with next Lauren from Lieberman Our question

Lauren Lieberman

as preliminary kind a of into bit some great taking Carrying how price on into perspective to get kind and mix so year to year, out Bryan's XXXX, also question, so early. it curious I next on but was But little was of it about further look more price because as and go next mix you're that just thinking outperform? forward thinking about that continued balancing has volume we And well.

Ramon Laguarta

but be bit will in Lauren, the we'll plans the therefore, equation higher elevated in the had our think past, from would than you the key price in inflation markets more you a commercial I And But and our that. of the that composition couple of mix will our the be of about price different more at not seen that last our plans mix tell we mix all price think it and innovation what historical to have cost 'XX Yes, metrics. still a obviously, business. higher February there versus when plans productivity and we've actual years give there some I this you in previous our will in the comes years, details, the if as obviously point, trends

Hugh Johnston

Yes.

to Lauren, pre-pandemic that. And comments, our right, point of little to X%, kind with add X% you inflation a inflation to is to of elevated Ramon's if will in going think line a range, So roughly relative be in inflation. that be being finer pricing

you shake least at as might give to should things how out. rough sense that a So

Operator

next Andrea JPMorgan. with Our from question comes Teixeira

Andrea Teixeira

end of if you potentially into can how of the going see X.X% we XXXX? that and And this So Or also potentially America, Latin headwind to half comment should thinking about we volumes still volumes about be the should your volumes in to in first back XXXX? year towards was on quarter? the into to the the PBNA, comments included specific you and

Ramon Laguarta

Andrea. Yes,

regards we portfolio. to optimize the to continue with So PBNA,

of we to of expansion in the continue margin PBNA. good the quarters thinking very to And that, transactions. probably year, the margin be should the to about decisions we optimize you volume about and this that to And a continue we maximize business. few again, we're see -- feel we're saw a balance So where and trying will units quarter trying the couple more

is price comes income snack limited, possible a be when consumers that business, decisions our that price numbers. making, brands making it our continue affordability LatAm, what on sure is our we've and around affordable to to mostly see in know decisions points. again, there there you points Now within been make they based And we that lot this to

portion has the on size been products, And our we're actual that's we regards -- repercussion health again, that volume. we some sure healthier. reducing a consumer size with But very impact are of still obviously, that And that affordable. with an making understand on to the equity full to much we've transactions has a So other that along metrics to used of picture. and use, assess business the brand the consumer metric --

and absorb a more we'll responsible So need for remain limited as make inflation optimizations, brands clearly continue their sure our to that we that Andrea, consumers are choice in to income. make

Operator

Morgan Our next Dara Stanley. question comes with Mohsenian from

Dara Mohsenian

you bit is typical? look motivation And your to areas consumer than environment here? confidence of of what What decision discuss out some are typical of point areas the the the that and the some XXXX as you there's you give visibility think provide a do might you the just Could where behind a more at uncertainty be level year? maybe this guidance is for particularly volatile earlier what given versus

Hugh Johnston

Dara, I can answer that one.

plans, forward I think in couple commodity one as Number level we on about things. we're the know of the is focused general, X inflation, build obviously of we buy months. you a and

investments And of as of had the into of is the past. planning about line line PepsiCo last our quarters, even of next roughly we're on past we've couple gave driving the And of the out global the to talked ahead the plans. we've sight maybe we've think investments structure. year. probably line in even us work spot business and all than outcome that in a costs the of our cost productivity commercial going our of in balance we're been developed that. for within investments digitalization, unnecessary earlier period little for organization. two focus we've historically do in overlaps of put three, services, higher joint I many where tools discussed, what that using been that's the to number terms driving on with a then driving cost the time, markets business would with in expect in good customers. And longer we in Number the in a with be We out in So we've has the Because that

So like of us thought the pricing bit least at give was to and guidance was and there was in it we in community environment, look would the inflationary available earlier investment what a to given some indication given undoubtedly questions prudent evolving on look 'XX 'XX. the information little given what like

decision. what drove the that's So

Operator

comes with Peter question UBS. Grom next from Our

Peter Grom

while I outlook. of context since actually has question to a follow wanted revenue your organic actual there. your short initial expectations the Dara's your of on more growth up fallen it's initial actually But been really in versus historically because performance just

whether choppy remains conservatism confidence and just maybe you outlook backdrop just not stage can this So what characterize or in at pretty the a really the you've for embedded consumer? enough 'XX given your

Hugh Johnston

of we here EPS. history long a where including as internal both this have obviously We or that. guidance, address beat as to expectations expectations, Happy beat well we Sure. exceeding revenue and the meeting quarter, our

In fact, XX we've beat or consensus straight quarters. now met for

So be, you way think, we communicate the in tend to appropriately that all. to we conservative I

from that that into laid expectation we the should you with achieve similar perspective, So we've at that you. think can a for I XXXX go numbers least out

Operator

from comes question Markets. Capital next Our Modi Nik with RBC

Nik Modi

the how will of of guys through I of kind up underpinnings to union you you that kind would this point? state or go just hoping provide some Hugh, that macro of consumer viewpoints shape go the on your the Just kind get as thinking at can was and of you your XXXX? into maybe love are XXXX the economy

Hugh Johnston

see incomes and I things consumer Sure. there. usually the store detect see the channels deep whether selective, you're variety prices channel. Number purchasing on toward in right? the see trade one, we with you good right in some happy Ramon, are Typically, well, down high a are ways, consumer to to results some that in we time, consumer this as stressed, in value. of one see do is revenue up on same see convenience now products they're At look the it the and see as Why terms You that super start stress under those being you trade in, don't think of gas stress, start more I of Number consumer the I'm you at and there's obviously, that when then orientation channels I well. one. but

leading in also that's digits. QX, growing saw in we food a convenience indicator, X% foods still and X% double beverages up channel. that's typically two service, Number is revenue the For in

are that I would year. worse accommodates an that, use challenges during laid face. the in we we've So to to an got revenue consumer Dara's expect the that all we've gone cautious. our consumer be But we to we cost approach than mitigate next the we outlook think continue question, with they given think that to whatever year says, And cautious place I out into plans that increasingly degree

Ramon Laguarta

say would tailwinds of the all I thing is Yes. long-term other will And continue. the our categories structural

of demographic a will All been think then plans and that lifestyles, almost you affordability snacking cetera, category, better our beverage confidence about those in our If think and I shifts, obviously, categories our of portfolio. completed. By from lot innovation continue, got have urbanization, they they now, drive are plans, things premiumization et or our -- have our we've package-to-package. commercial categories, driving move our we

as think year next we of share So our market be good will well.

of what's that's kind our confidence for So next year. driving

Operator

next Our have next go looks you Bonnie to to didn't on Do Sachs. a like Herzog with from comes the It and want question move they person? me Goldman question.

Ravi Pamnani

please. Yes,

Operator

question Chris with Carey Fargo. Wells Our from next comes

Christopher Carey

is into of and worse just standpoint this on puts of got And above a the year to rest the PBNA The from that out continued beverage bit the quarter-over-quarter the easing. is where for commodities in segment, is inflation in I'm particularly expectations and Can exactly a outlook next comments Hugh's on just I'm really in given we segment, to trend food? that you you're seeing comment the inflation see trying speaking how whereas specifically, going general, segments, side some year. coming inflation takes the next from? inflation what relative to commodity driving the from parse in average

Hugh Johnston

haven't done. get numbers guidance. by something into that of levels historically we Chris, don't we That's the dissecting commodity Yes. and

a As into rather the of of more of to by get in just little commodities not the segment beverage virtue foods is for know, packaging you reasons. is products. individual But go exposed the than specifics the further any competitive nature I'd that

Operator

with Our next ISI. Ottenstein Robert from comes question Evercore

Robert Ottenstein

doing And what of the little U.S. all of was in kind moves work us accomplish if And in terms investment on the the I to want of trying of -- bit automation the of sense large the business, shift beverage of food vision you're a long you're there? the doing strategic to you to -- light more and kind your the just that just for in wondering productivity. digital underlying the in give can other term. and your business the Instacart kind and you're side vision a business I

see how kind future? does the like into Just it? Instacart the And of what do looking play you business in

Ramon Laguarta

of agro drive we're Good automation an we've well. we our question. -- is these do to the all we our activities do consumers, how to much continue run that as everything our over front and routing our our real-time And our we the time. trying and best to generate to to Yes. on of priority How for and talk consumers? value of at the digitalization to the forward that the better Obviously, decision-making and That company center making with across precision saying, time. make ideally transformation With still invest digitalization, all we more pricing is to company been How continue to end-to-end more how make the the from we Hugh we as we business empower it with give we operations the intelligence consumers. from our in information obviously customers? information. line decisions was the run precise investment with possible everything

So continuous is a that investment.

to Now that DSD enhance there they relationship continuous trying that a the focus. the comes is and in capabilities a store, to our Instacart, of it system have when commercial with shoppers is

activities And Instacart than more the that And just shoppers. investment the that be strategic commercial in to a minor I investment. led of to supporting enhance commercial that with with long-term advantage. capability relation I nothing commitment think in that DSD can from continues very a the terms intentionality we Instacart. think to a And competitive relationship, to there's reinforce

Operator

Bank. Powers question Deutsche Our comes next with from Stephen

Stephen Robert Powers

expecting the following cost a growth a It year? the on bottom on first quarter point. half? we improvement reason if and questions, at this we see even have Should the you Two didn't shipment the perspective. volumetrically top want because level of commercial just visibility given growth, could. One, up of I we occur half And expecting that to the the improvement occur. be outlook Gatorade versus quite throughout to I did this then both is relatively 'XX weighted performance cadence saw and just ask second from that at sequentially were Or did and on there planning line a

third. I down quarter think went we high down single in digits from the second to mid in the

So business I you that some perspective would love how just view performing? on

Ramon Laguarta

DSD on brand. et in summer. Listen, platform improvement the we summer, cetera, over performance better a the seeing in go comes early August performance more the time. the June Gatorade it the When inventory secondary in et on of We're we details very that saw GX location, of the cetera. Gatorade, display that sequential pleased number the into 'XX. and to we're of We'll cover DSD and will to or movement with February not in

that is working. So move

being also less brands the brand, brand the our to smaller from Prime good G have some we're Gatorade a the some by of size seeing say the of that -- which category DSD good brand. the us season. in velocity of very true have some its for is that the in transactions go the we less with of that But saw of way, Gatorlyte, I a innovation the than share of Prime into new improving fall, getting velocity. infrastructure during emergence Prime On optimism or that our that the going is as proportionally very Gatorade. have We're consumers impacted the 'XX business, the received in well size good gives very peak would other the tablets category we very we are with in Gatorade It the category the we the powders a to Fit, that G Zero, and with took

So But weaker what potentially don't to next competition. we go stronger obviously, foundation know I their have are. with plans into year a

Operator

next Falorni Filippo Citi. question with Our comes from

Filippo Falorni

drugs around in of the your market So lot U.S. impact clearly, on business. GLP-X adoption the been the and potential concern a of there's in

in based So maybe if food behaviors? greater comment is the both how of you're studies, couple standpoint, years, you've consumer bit make your on far on could can that that the side? And what on from change a consumer next And emerge you and the a can that? seen then Pepsi-specific than new evolve beverage so to thinking portfolio what you adopt preferences can your changes these option consumer to over

Ramon Laguarta

for category. positive looking negative obviously, we're this risk our other along and with our at business Good question. potential Listen, and many

So our medical the regards usage of question is are the with on you this if to Overall, obviously of take it drugs impact business. a consumer when scalability negligible far, comes choices. in global the there or or the consumption, testing impact is obesity marks lot really to of what

a So question marks. of lot

We as continue that our to that earlier we I I the structural conversation. to that categories trends remain, mentioned, to the had positive all believe referred in

seeing We're both we're meals of more eat, to our unstructured big of driver more seeing the class middle as the snacks. mini-meals seeing our urbanization of a driver adoption beverages becoming being categories. categories, and a day, snacking and during development. much lifestyle some So and people We're big

will So we're continue seeing a that lot to categories. drive of tailwinds our

Of and course, drugs its observing growth we're new potential the of impact. these

last at fat, pillars. it us help We'll if X in some reducing one reducing when adding strategic future. the everything we've Obviously, pivot are the our positive methods our needed reducing continue cooking it. of the to those looking will it's X, when to we're sodium, reducing comes to that do it sound sugar, trends our And of transformation. new very thing strategy snacks, products, doing been key our other The all years portions for portfolio is the portfolio to comes

So very potential we to I of comes and strategy, trends now. impact remain these see even these lot developments are from we very category, again, negligible them solid some of solid a it our that And when years today, our structural portfolio a X, against think, think, in protection is accelerating. future XX

Operator

last Our from Brett Edge. Cooper Consumer with comes question

Brett Cooper

American on North A business. you for Beverage question the

the you that organic distributed you past or portfolio you business. in CELSIUS with beverage the component is to whole love goal own in share performance. hold assess in how hold Are said brands hear when You've share? with that our begin a add you to to I'd share the business, looking to at your

Ramon Laguarta

Yes.

ability or a participation channel, cooler It portfolio. go-to our in the so, we convenience of little our as more the for what full drink Sorry, system is ask. in more we CELSIUS hopefully, obviously positive third-party got in system, drive, distribute in store, cooler in strategy. a CELSIUS We our had of relevant distribution the to in doubled of missed makes of our some key bit Obviously, efficient. energy our last trying store which our a strategy. part question, said especially you're multiple in of pillars and but well store. energy It the and makes we in year our grow. that are eventually is to of a more halo part salesmen is the the channel That to that CELSIUS rest presence the and effect makes We've brands consumption. those the the our continues all have brand

the energy rest of really you in question get we answering the the the I'm So -- distribution, the the we sense guess I sell-through it in know of But from importance monetization of couldn't but the value that I has I a of our halo portfolio. actual well. and couldn't strategy it both don't very get hear because also if

Okay.

stay for much So Thank thank your healthy. joining And confidence us your We and you you you safe in thank you today. especially all very us. for investment. very placed and with the questions much. for you've hope

Operator

conclude today's presentation. and Ladies this does gentlemen,

wonderful now disconnect, have and a day. may You

PepsiCo (PEP) 10 Oct 232023 Q3 Earnings call transcript