Elliott Investment Management has conducted an in-depth review of PepsiCo Inc (NASDAQ:PEP), uncovering both the challenges behind its underperformance and the opportunities to unlock significant value.
Our Diligence on PepsiCo
We have conducted exhaustive research to better understand PepsiCo, including working with a team of top-tier advisors to both evaluate PepsiCo and develop a perspective on its potential for value creation
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- Former Employees and Industry Executives
Engaged in more than 100 conversations with former PepsiCo employees and current industry executives to understand PepsiCo’s operations, strategy and competitive positioning
- Leading Strategy Consulting Firm
Worked with a global consulting firm to help us analyze the competitive positioning, market dynamics and future growth opportunities for PepsiCo’s business in the U.S. and abroad
- Specialty Beverage-Focused Consulting Firm
Worked with a boutique market specialist focused on beverage distribution dynamics in the U.S. to better assess the potential refranchising opportunity in North American Beverages
- Cost and Optimization Consulting Firm
Worked with a leading management consulting firm focused on cost and optimization to assess PepsiCo’s opportunity for operational improvements and quantify the potential cost savings
- Customer Surveys (Retailers & Consumers)
Conducted multiple third-party surveys of nearly 15,000 consumers and 1,700 retail customers across the U.S., Mexico, Brazil and the UK to understand PepsiCo’s value proposition for key products across both food and beverage offerings
- Leading Investment Bank
Worked with a leading investment bank to inform our views on the competitive landscape and opportunities within PepsiCo’s portfolio, including potential strategic transactions
- Legal & Policy Diligence
Retained a team of legal advisors to help conduct extensive research across corporate governance and political and regulatory matters
Executive Summary
PepsiCo is a world-class company with iconic brands and unmatched global reach. Yet, the Company’s strategic and operational challenges have led to poor financial results, sharp stock-price underperformance and a highly dislocated valuation.
Elliott sees a clear path to a better performing and higher valued PepsiCo through greater focus, improved operations, strategic reinvestment and enhanced accountability.
With the right strategic actions, PepsiCo can accelerate performance and reclaim its reputation as a world-class operator.
PepsiCo At a Glance - An Iconic CPG Leader
PepsiCo is one of the world’s largest Consumer Packaged Goods (“CPG”) companies, with a portfolio of some of the most beloved brands in food and beverage
- Global Scale & Market Leadership
With sales in over 200 countries and more than $90 billion in revenue, PepsiCo commands dual category leadership in both snacks and beverages, which are two of the largest and fastest-growing segments in CPG
- Diversified & Iconic Brand Portfolio
PepsiCo has a highly diversified portfolio of beloved global brands with strong equity across categories. Pepsi is both a household name among consumers and a critical partner to retailers
Today, PepsiCo is Deeply Undervalued
Despite its unmatched scale, brand strength and track record of growth, PepsiCo’s valuation is deeply discounted relative to its own history and the industry. This discount offers investors a unique opportunity
Drivers of PepsiCo’s Underperformance
Challenges in PepsiCo’s North American business – both recent and longer-term – have substantially weighed on the Company’s financial performance, driving long-term underperformance
Resetting the PepsiCo Story
There are actionable steps that PepsiCo can take to increase strategic focus, re-accelerate growth and enhance margins, returning to a best-in-class financial profile
- Review Of PBNA Structure And Portfolio
Evaluate refranchising of PepsiCo’s North American bottling network as well as opportunities for brand and SKU rationalization
- Re-alignment Of PFNA Asset Base And Portfolio
Review the opportunity to right-size the PFNA organization to align with the current demand environment, as well as streamline the portfolio by divesting non-core assets
- Reinvestment Plan
Establish clear and targeted re-investment priorities, including organic and inorganic opportunities to re-accelerate the core and expand into new growth vectors
- Updated Financial Targets
Provide details around operational improvement plan, including updated medium-term financial targets
- Oversight And Accountability
Ensure proper capabilities to successfully execute on the reviews and go-forward plan
Elliott looks forward to working with Management and the Board to ensure that PepsiCo successfully captures this unique opportunity.
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