Episode summary
PepsiCo’s Snacks Business Starts to Rebound After Price Cuts | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney, Scarlet Fu · Guests: Ken Shea, Siddharth Phillip, Herman Chan, Matthew Griffin
Summary
PepsiCo’s first-quarter results were presented as an early sign that the company’s pricing reset is working. The host and a guest said PepsiCo cut prices on many snack lines, added more innovation, and moved toward a better balance between volume and price after years in which sales gains were driven mainly by price increases. Frito-Lay North America and Quaker posted a 1% volume gain, which the guest said was especially encouraging given the prior declines. International, beverage, and food all performed well, and the guest said the quarter suggested PepsiCo is on track to hit its full-year targets.
The discussion also framed the earnings as a response to activist pressure from Elliott Investment Management, which has been pushing PepsiCo to improve margins and the food business. The guest said PepsiCo is still benefiting from its hedging programs and a strong supply chain even as oil and aluminum costs rise. Management signaled that inflation could pick up later in the year and that pricing is not off the table if needed, even after earlier cuts. The host also tied the story to PepsiCo’s dividend and capital returns, noting the company’s steady payout and balanced capital allocation strategy.
Key takeaways
- The guest said PepsiCo’s first quarter showed a better balance between volume and pricing, which investors viewed positively.
- Frito-Lay North America and Quaker posted a 1% volume gain after the company cut snack prices.
- The guest said Elliott Investment Management’s push for lower prices and better margins appears to be taking hold.
- PepsiCo said hedging and supply-chain strength should cushion rising oil and aluminum costs for about 6 to 9 months.
- Management left open the possibility of more pricing later this year if inflation worsens.
Notable quotes
“The first quarter showed good progress. Top line volumes, international business was particularly fairly strong”
“They reduced prices in their in their most of their snack lines. They're also adding a lot innovation”
“And Frito-Lay North America combined with Quaker put up a 1% volume gain”
“I think right now, if you're an activist, you have to be pretty pleased with the balance of the growth”
“pricing is not off the table just because we took it, you know, early this year as part of this plan”
How the episode opens
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All right, let's keep to the earnings outflow here. We got Pepsi reporting earnings here. Ken Shea joins us here, senior consumer products analyst for Bloomberg Intelligence.
He's based down in Princeton. And again, Scarlet, you probably know my my feeling here. I am a Coca-Cola person.
I identify as a Coca-Cola person. But you put a Pepsi in front of me, I'm just as happy. I really don't care.
Like my brand loyalty is pretty low there. They're both good. Hey Ken, talk us about Pepsi.
What what are we seeing in their earnings report? Hi Paul. So the PepsiCo report was pretty encouraging if you're bullish on the story here.
The first quarter showed good progress. Top line volumes, international business was particularly fairly strong. I guess the key takeaway here for investors, why they're looking at it positively today, is because their efforts to have a better balance between volume and pricing really came through in the quarter.
Companies critics of the company over the last couple years have been saying, look, you know, all your sales gains are coming when not all but most of your sales gains are driven by price increases. And so they made a real effort. They reduced prices in their in their most of their snack lines.
They're also adding a lot innovation. And Frito-Lay North America combined with Quaker put up a 1% volume gain. And that doesn't sound like a huge deal, but relative to declines, it was a positive sign.
So all in all, it was it was a positive sign and I think it it it showed or it signaled that they're going to hit their targets for the year at least so far.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- pepsico price cuts
- snack sales rebound
- spirit airlines liquidation risk
- u.s. bank earnings
- industrial ipo
Companies and tickers mentioned
- PEP
- USB
- PepsiCo
- Spirit Airlines
- U.S. Bancorp
- Madison Air Solutions Corp.
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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