PEP - Earnings call transcript Q1 2024

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Operator

Good morning, and welcome to PepsiCo's 2024 first 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

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

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

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

Joining first PepsiCo's Chairman Caulfield. Ramon will over operator President you Executive that, CEO, me one And today PepsiCo's please the with to and Jamie that ask it question. We for I are yourself Laguarta; question. Vice to CFO, turn and limit the and

Operator

from [Operator Morgan Dara Instructions] question Our Stanley. first comes with Mohsenian

Dara Mohsenian

then as both looking b, margin us you flow few But, out over the the over So row give are you maybe quarters. perspective us really third here. and last the the term a years, how forward, Give confident through? strong a quarters. the back, international that line from in think long next short over few just the Ramon, of the development and that looking some performance profit quarter top perspective Can international take in the sustainability results of just in And, for last year? a term, on balance step about you some few a, just international also perspective

Ramon Laguarta

you pleased both very an international where of population for And but us has now markets Thank the in yes, QX in scaled in Great. beverages with for and And we're also the investment terms businesses as of been the Dara. the in you, mentioned. quarters, businesses few trying this performance few area profitable build most scale in a growth. of of and to and in snacks years, last

I to outperform categories in feel ability our continue and in growing future. So international beverages to good about very food both to our categories and keep the our

strong. innovation Our is

ever. rituals to local ability food and is and understand better Our local beverage than occasions

adapting portfolio are to our We that.

the and opening of we're in -- and markets talent attract ability We're in we teams been we factories and investing one We've India capacity. China Poland. Vietnam right in the and to in where capable in in in participate in and just the is now, best than Our opened build Mexico better really ever. process

we So markets. in capabilities go-to-market keep our those expanding and our manufacturing

So we think that going feel of a for be us. to source it's big to continue good growth I and

and our mentioned $XX it's with at high very business growing very already we I level and profitability. billion CAGNY, a think single-digit in As good international is

So it for story future of sure. growth PepsiCo is the for part

Operator

One moment question. for our next

question next with from Goldman Our Sachs. Bonnie comes Herzog

Bonnie Herzog

little on a margins, I were op the quarter. a soft in Frito-Lay had which question

think so, to pressures, it Frito-Lay And to the by top So easing expand margins moving ultimately, ultimately range? then key margins bit we takes op And And Frito-Lay's low will commodity we and to or cost hoping talk to then And the some how forward? of 'XX? about level about thinking think in I'm the margins through could of curious effort realistic if context in hear XX% your your quarter return do do in a faster in that? line you reinvestment as is the these puts cost if about on of an maybe assume savings growth? when, that drive and how then can

Jamie Caulfield

in Jamie lapping the year. growth quarter Bonnie, last Yes, keep profit, it's year, is at Frito, here. first mind XX% on the in when the you we're of to thing look last QX

think I to is has the I that we part want see healthy think basis margin growth. that growth margin with margins sustain year. flow you'll improvement very already, back timing, growth XXX do had The hard. we Frito, want make a productivity. in And over this the don't this to to sure points But year, that we at last improvement year, time to push of we're the business investment of P&L last of investing but and business has that

Ramon Laguarta

Yes, Bonnie.

from long top I U.S. term, the in at high share to key Jamie the of parts get grow the and very salty meals and what occasions savory of macro on savory to Frito continue doing gain other been rate for of has to as category category including continue for that is the the to it said, into savory, and and a snacks QX. into continue from goal think

goal. have and if it impact would the in think that margin about have in in role that Frito-Lay ultimate has you the margins, portfolio. high that's the overall business So Because the that's the the that, that PepsiCo we

Operator

BofA. Bryan Our Spillane next from question comes with

Bryan Spillane

the on a -- Gatorade Gatorade The volumes are and on with PBNA still guess, in weak noticeably specifically Ramon, Mountain quarter. I question and Dew.

for so by much recovery stabilize about on for volume guess, thinking And at Mountain talk the then Gatorade you can I trend? we're whole Dew might And in about, the to second, the just the have enterprise for weather? volume what's as affected just tap been and both how the quarter PBNA, one,

Ramon Laguarta

good, Bryan. That's

gained those in about QX, Gatorade, Those share in Dew X Mountain good and feel we so X own actually brands brands. category. Just their actually

performance, So that's meaningful good a I say. would

a you as Gatorade, Now bit impact. mentioned, weather of little

weather concerned programs. not investments, have Gatorade think we're right I the year about right the this So the we as improves, commercial

DSD was last GX us year Our operationally. impactful to

with to customers better maintain and very deal how in lot product available. I the high to seasonality stock and the category on and a think our we've service and product learned give a

we category. have growing the platform in So a about good feel faster to take Gatorade higher share we to market

of in and to we Baja and to we regards we'll have good the and now. And the year. it's summer. the successful. and strong Blast brand, continue brand. it's investing as consumers with we as will We Dew share category. it successful obviously in programs build launch the to the launched Dew, been in therefore, Hopefully, for permanent will LTR very, It's portfolio it to been flavor incremental expect, been bringing to early us help knew We Now gain Obviously, additional was portfolio a deliver brand the product. very the a and keep permanent has the successful the that Mountain a

good about feeling brands. those So X

Operator

with from Lauren Barclays. comes Our next question Lieberman

Lauren Lieberman

the remarks, and the in of bullets. noticed profitability there. In new PBNA to plans prepared X discussion There I improve were

around package about increasingly the The certain management. second revenue product and consumer deemphasizing combinations precise value proposition. and talking first X An

was well. curious I So new I if there's for you business -- just as know management that could

love helpful. I maybe those color I would to thought would more little get bit be a So around points? X

Ramon Laguarta

time. making PBNA the Lauren, growth, the deliver of in more And put think mentioned we time portfolio there. the over we're to we'll last have get know, from those better of couple parts of choices are was of but intentionally in on not that maybe Yes. I profitable sure don't making a terms for that choices I calls they're parts is the return where those where us probably always the detail, that to emphasizing a the better investments last that attractive and bit the I the there make -- and continue portfolio margins and eliminating we not going

on that ideas So good been margin. that on team will making PBNA organizational has we about in categories but like take-home management management, both the under we've We been feel old have expansion the that continue and PBNA. more a water will we in to the the much focus or profitable feel There's some the productivity the referring less becoming where operating formats, focus margin choices. new of better under and also the packed machine that, we And chain and sales be of at PBNA. supply expanding the putting the based

So expansion about PBNA we growth profitable year. this and delivery margin feel good

Operator

with next Our Andrea Teixeira comes JPMorgan. question from

Andrea Teixeira

can then a And please particular on in for comment and overall Jamie, evolved the about and for consumer comments you in how consumption the if normalization? behavior your clarification snacks margin Ramon, the So on context of outlook.

to more particular, to at even be XXXX? On changed and commodities further the prepared environment clarification this DSD. and some you on going looking benign get but mentioned is remarks, impacting impact perhaps not the or recently a Hoping for has down that oil diesel more in

Ramon Laguarta

Yes.

our X wages from at very good is the see low quite majority the listen, you by very basically we countries unemployment globally, we Andrea. saw -- as unemployment would it's growing business think So say in it supported consumer The and globally of pace resilient. And where low performance. And participate. in, I we a or facts, international

feel X us So things those quite good consumer. about make the

were is surface. you One areas that X that consumers. when -- click, Now Chinese double there probably is probably

consumers are cautious high in very and I rate China. seeing savings the being think Chinese really very we're going

of especially market but through growth is China. in share resilient category still gains delivering we're in Our China,

but us. So for that's of by a an good team, area the performance out watch

to budgets buy, their is emphasizing is making that The in a other choices. That's choosing lot buy a the strategizing in a month. of programs. that's that the, consumer lot what to a is consumer the making is of of consumer -- the income where income U.S. to end our commercial we're lot to the would say, lower get he in I lower in double-click is a And consumer U.S. and The make the stretched,

keep and parts the frequency our sure learning the best plans, digital channels, the Making investments that innovation, the the our the on we're giving and that are physical. want consumer to of think month we and through right that pivoting different that ROIs. value are in innovation, in different I that consumer, categories consumer the right commercial best ROI we our how

say that So those terms we're the specific would more in commercial consumers of paying programs. attention are X I

resilient maintain the baskets we And our market to are and brands our I top the teams, share. But think, consumer is in continue pivoting I gain would at to their want of very say that else. mind everywhere frequency

snacks. to to and applies this beverages So

was think but Your it applies categories. question on to snacks, more both I

on. Jamie now So

Jamie Caulfield

of couple One on emphasize. A Andrea, the points basket. the the no I really in change outlook. is to want the inputs just in diversity Yes. of commodities,

XX% the total. no more commodity single for So of accounts than

I'd that good to So the out. helps smooths make hedge, and And got with planning kind overall. point do tend for that we've that visibility things we year the so business is us of buy the other diversification forward

not inflation QX, the in volatility relatively QX of lot of through And so outlook rate so a inflation benign and quarter-to-quarter.

Operator

Our next Peter UBS. from with Grom comes question

Peter Grom

kind weeks and the agreement I just energy spoke structure So CELSIUS this partnership, of get changes to on was positively point. an update the at release, were back. In incentive some think a strategy your few but hoping I you to the broader the drink there about

So thoughts benefit share does can portfolio? in maybe of how first, provide it just maybe brand for like But CELSIUS, just really the it if part any performing is of you as with anything? specifically, help And your agreement? does changed then Pepsi? energy anything And drink terms what what the how on maybe

Ramon Laguarta

volume the Yes. some not gain than Peter. much economics channels alignment The in it's with go-to-market, the us justify it's helping and other where of saying it's about interest some to the to I our of for and CELSIUS companies, of the long-term PepsiCo shareholders. call. of strong you, scale both great partnership a Thank specifically agreement too talk will need is good we that in

is So for partnership. Energy the our We're with fast-growing role continues. great a profitable, that is category, that portfolio. pleased

would what going say. build continue I the and partnership forward. We pleased partnership that's So the we'll remain with to

Operator

question Our Filippo Citi. with next Falorni from comes

Filippo Falorni

line go to were toughest trends. year on of I comp So the but you guys wanted in Frito Frito-Lay. setting the top back the to Clearly,

You mentioned you expect improvement. sequential some

particularly shift the maybe this could towards talk volume pack spoke about about cycling of in So smaller trajectory, past business? the you for sizes. you the And Ramon,

impact potential you maybe an that is year? any us on update reduction So cycling last and not the from benefit from give can also

Ramon Laguarta

for Frito-Lay and say more overlap, occasion category. category, the occasions I snacks broader to snacking. create stores, the continues savory category or earlier, Frito-Lay do bring from how our we would continue the big macro as snacks them store more opportunity Yes. And I meals outperform bringing for said is to

pricing and gain the and those of so than big continue are So and innovation large And against objectives to is strategic objective do Frito-Lay. X and that our it everything mix channel faster shares. that all else we others,

is look the you at said, performance, we we lap. as this toughest the -- as So as business

better think but high it lap much that XX% in than I last year, we then QX, half gets X. QX still grew and in is

properly, we'll our Frito-Lay, sure gradual be a it our disproportionate especially improvement category it's very to half business. make should and for and the fast-growing expect second the of of for of in we volume ahead customers, and of generates what our generates to a the customers savory So the sequential and we that continue and year for valued guardian capture profitable share growth of food continue

Operator

Kaumil Our next question Gajrawala comes Jefferies. from with

Kaumil Gajrawala

year so? Just what you in grow as to at just mentioned multiple the or maybe times context the within think us on give you they're some least you on share give growing some or Could multiple about us next categories category. -- expected you what regions, what are gaining can -- the just

Ramon Laguarta

that is food beverages. our said I We -- faster I to is categories what than grow goal our overall for mean, yes, always like and

very that profitable. makes our our And partners, we a attractive think growth retail deliver partner for with categories us I them. and are

So and growth for combination customers. our good it's a profitability of

So that's to what we're trying do.

the categories given think continue we've trends I and for the in been urbanization our trends about to countries of and foods the around food world, both that and talking faster beverages. the secular beverages convenient than grow majority the on will

so So world better, that good and well. we is the how programs, to our where we around we there for emphasizing deliver feel partners. we're that do goal in we company. well. keep do the that's that our and less don't innovation and investments we commercial better are our the others the do are And Obviously, And ones to ones about managing countries do improve

Operator

Our question TD Robert from Cowen. comes next with Moskow

Robert Moskow

pretty from or industry to it architecture lot -- imagine evolve where more shifting The for help left. be to different consumers is impressive rest Or those I Can lot same? of delineate maybe to it you if pretty you which do X% pack price sizes. a mix the a not benefit in in is just it food expect expect little bit the about a of a more is there's year? Frito-Lay you America constant? it's And North pack price other? like pricing even the driving how what's And it the Do of than of

Jamie Caulfield

it Robert, moderate on our we it's X/X for at of majority of an comment it's the element to X/X mix but price and Jamie. I'd is them fairly probably And of there's mix. the the price, trends, And expect there. fairly yes, balance earlier smooth in put balance be inflationary year, through the year.

volatility expect So I that buying lot relationship. of revenue wouldn't a in

Operator

Our from next with ISI. Ottenstein Evercore question comes Robert

Robert Ottenstein

Frito-Lay discontinuing Two kind sets? about shelf it side? how do about on on what -- please side, you're seeing the pretty may. on the of you spring follow-ups, And if good much understand you're feel your talk I both Can and I some done? the side SKUs. Is And beverage the you beverage

an how Maybe of evolving on if a strategy earlier Starbucks, in drink Dew the give idea an And energy to follow-up of us you drink strategy? are your where on is Rockstar, shelf overall energy just going you question you So and to? what's want gaining space overall Mountain with then terms CELSIUS.

Ramon Laguarta

our way a I'll overall, took negotiations of across We're less longer, where bit. I reset beverages. weeks think X question completed all parts the European positive of and say on To business. a -- good improvement Listen, very and step customer but I the are U.S. Yes. good. especially including impact good, world snacks gains, I to performance negotiations probably good say, It's impacted the by to a world have about for I not normally our bit it's say, good and reset another Europe and this the other yet. back would going little it's or are your us completed feeling would space already be so. would feel It's type a We business been we've the time specific in over seen

done well by good, teams. commercial that's So the

good guidance to year. reaffirming at why revenue So in and feel net least this overall, our we that's are over yes, our for we X% grow

Operator

Fargo from Chris comes question with Carey next Our Wells Securities.

Christopher Carey

might cautious in So own as away-from-home as on see question from a perhaps balanced division. wonder came double-digit that here the consumption are the how business think that a you Ramon, growth just forward? which on I bit shift, sneak results trends consumer in I Chinese could acceleration relative whether one just versus you or income more there's you the yet well? going your expectations more quarter in global in whether basis the And globally, in to if you APAC as on a seeing bit were and of some China. APAC from dynamic any timing these lower the be consumer, your weaker see any I at-home helping durable or

Ramon Laguarta

things, Two Good questions. thanks.

little Chinese of the I bit think APAC performance a timing is the New impacted Year. by

that products and probably X consistently the already year been share is impact might profitable as our we're China, ours. a not in said in X, as than bit of in earlier, very very China, creating that let's And the harder versus not earlier region would So is was I lot. as a there consumer earlier, year. numbers China. outside I impact much think APAC consumer bit our this mentioned QX. is still, is categories the the but low this and of it is of. other years, cautious It bit truth the capable some price, It for a a I saving a reality only I say, But China business might say, team is proud so is improving, gaining QX last the benefit and ours. The

pre-pandemic that U.S., COVID seeing, obviously, And that we I question to we're the more we're obviously, in-home, on of and all the home country from between would in it's the impact think away seeing anymore. is your times having I in say, going and other to home, consumption mobility away-from-home, food back Now probably especially impact. forgot

than So also and as in yes, and growing food both for our those is as at our more some to huge that business, home. I in-home trying CAGNY, away home and beverage with as food I meal and more of of mentioned belong the that our for brands. is us and business, our targeting as to for that I products we're building buy in in to would consumption faster away and we're say from business pivoting from innovation away-from-home that solutions capture as our both from space away help this Tostitos, possible availability some of brands of a our creating to And away much new global resources we're business current improve growth home. Internationally that meals replacement like both moving consumers is meal well, wide location are think occasions brands models us our large can well-known Doritos, home Lays, from some capture trying and

Operator

Our question Bank. Powers comes next Deutsche from with Steve

Stephen Robert Powers

think unexpected last beverage ties X-plus savory unexpected in mentioned even consumption many think of over in your seen categories, across sweet across maybe immediate you most number really where categories maybe well. many comments at back I pressures arguably a slowing but on months, as we've arguably U.S. now snacks, the it it snacks, lower-income was or away on the to categories earlier just the But the from home. Ramon, I consumers home if versus

across slowing we And And you how stack that do that think up so, unexpected American demand American on do your are momentum on of North you sort drivers? just the comments? sequentially sorry, with about the think if you -- -- expectations your factor -- how kind curious see in that do drivers? does agree comps businesses? your I I'm improving. obvious. cycle? the are itself How I'm expectations North the into recovery Where Do you easing of beverages

Ramon Laguarta

great. That's

inflation bigger and great inflation. a inflation Obviously, years we and in at need input couple huge there think to question last over was step this of Now numbers. driven the is operating and cost I look our by the categories back

a are see not we world. would optimistic that U.S. feel growing below, Number what above packaged is data. and inflation we but food think the wages makes consumer us our inflation, one, say, of couple the total see in I CPI. only Now across I And

the consumers X in will categories at -- and frequency numbers same comfortable the So past. higher the than of our feel level start the make or those to coming us that back frequency with

trying balance we and Obviously, improve those that But business, each over that's pivot our to So of commercial good in to how that our of we we the numbers. further is big about are think us our programs, one X year the the see innovation, we into mix with channel that our volume price sequentially years. feel continue accelerate strategy will back.

Our ahead programs food said ahead North we that, LRB earlier, remains Star savory consumption and continue drive and of innovation programs ahead overall and make to liquid have I of is channel to macro and consumer ahead the that same, sure beverages. snacks, snacks with of of as food and same the

value So for and that about term. drives long our that business that's how and we the think drives company customers for our driving value

Operator

Our Research. with comes Consumer Brett Cooper next from question Edge

Brett Cooper

question the international A on business.

international delivery if margins business, pre-COVID these over the managing years, at recruitment. spoken provide they're PepsiCo consumers in has levels. the profit international we versus and up support to On look to And affordability calls about

very So that term what evidence I look you proper for the can help long at ensure can you category affordability we development that financial us to you're results understand support guess, see, to of the levels business? headline providing for of beyond

Ramon Laguarta

participate. And other we're value that always we of products potential of our -- Yes. versus substitute the the in the conscious relative very product categories

And snacks. big types market, So of every that snacks, always think other for about in packaged the value or snacks if snacks packet ratio into in every to macro opportunities at transform look geography we snacks you consumers. and savory into different

very us beverages right, with same the opportunity beverages beverages, carefully. look commercial an industry. is at that always the that for moving noncommercial to from Now as We

more leverage getting and markets, how businesses strategy our our and because large the that's in fixed we cost much Now long internationally as scale our affordability including profitable of we affordability KPI do, the But continuous to fast measure key value and is pace. a we very with time is for markets, why all in that to whilst because We of especially our at term, relative categories keep that other are the things and obviously, you we're every key gain as our that's that at of it's growth we margins grow international category innovation. source make availability better with center continue obviously, a mentioned, categories. market expanding because the our

Operator

Our Securities. from with Gerald next comes question Pascarelli Wedbush

Gerald Pascarelli

Question on Europe.

Another really strong double-digit it consecutive seventh underlying growth. It on quarter quarter X-year of the an looks like accelerated here, like revenue basis.

So you U.S.? And ones expectations? how maybe than could compare, to developed seeing what would maybe in that the driver came some if relative performing provide your in you better on are markets the we're how Europe color then in markets,

Ramon Laguarta

you Thank and a observation. Yes. good

money driving competitive more developing and is driving more. duplication I doing and markets also think into reinvesting a markets availability and control, the and that Europe simplifying bit then in eliminating both Obviously, flywheel a across our our preference. business becoming It is that in driving is brands for that Europe. developed team And and fantastic our started strong a productivity, cost us and work. back working with developing our brand

than of little So Western think markets growing you if bit a are Europe Eastern faster about markets. kind Europe

which good atypical in Western been in think Europe. first of But quarter we Europe in that's by this little Europe not the have impacted bit a and flywheel have I markets a the negotiations some expanding additional lines developed of consumers what along the will markets. its households additional developing been and be give portfolio us penetration and in across U.S. will Europe and doing, has

about in Europe. good feel flywheel the we So

is, cost strong and both of discipline into then we're center our way, into better very company, availability, and do affordability, full driving investments a center and sustainability a future, to equity is a strategy back elevating trying digitalization the investment. that investing at the at But that our brand and what the of that productivity, reinvestment their across productivity in

all Europe at doing to the is for it. we're flywheel So Clearly, a it's a job do that good world. trying implementing

Operator

call to and Ladies you. would the closing this turn Laguarta Thank gentlemen, conclude back I Ramon like question-and-answer the any does for to remarks. session.

Ramon Laguarta

morning safe. everyone, placed stay Yes. healthy in we hope And us that us and this confidence in joining for all that and the Thank you've you, our and for you stock.

Operator

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

You may have and now disconnect, wonderful a day.

Ravi Pamnani

I Thank you, your appreciate help. gentlemen.

PepsiCo (PEP) 23 Apr 242024 Q1 Earnings call transcript