Revenue Sustainability, North American Volume, and Margin Guidance
Q: Dara Mohsenian with Morgan Stanley asked about the sustainability of international revenue growth, strategy tweaks for North American snacks and beverages, and the drivers of the fourth-quarter margin revision and outlook for 2027 margins.
A: Steve Schmitt and Ramon Laguarta answered that Q3 organic revenue accelerated to 3.1%, global beverage volume was up 3%, and international organic revenue grew 8%. Steve Schmitt explained that the Q4 guidance reduction is driven by higher input costs, a mix headwind, and the absence of a beverage tariff benefit, while Ramon Laguarta noted that snacks volume in North America shifted to low single-digit positive growth and that soft drinks execution requires urgent improvement.
North American Foods Portfolio and M&A Strategy
Q: Bonnie Herzog with Goldman Sachs asked about accelerating SKU rationalization for underperforming brands in PepsiCo Foods North America, the reasoning behind the current portfolio, and potential M&A to reignite growth.
A: Ramon Laguarta stated that the company is focusing on affordability and portion control packs like 100-calorie and 120-calorie options, growing permissible platforms such as SunChips and Smartfood, and remaining open to small tuck-in M&A opportunities in foods and beverages.
North American Soft Drinks Performance and Organic Sales Outlook
Q: Peter Grom with UBS asked why soft drinks performance fell short of expectations and whether organic sales growth in the fourth quarter is expected to show sequential improvement.
A: Ramon Laguarta explained that hydration and energy are growing while soft drinks underperform, noting plans to increase brand investment and execution in soft drinks. Steve Schmitt and Ramon Laguarta also confirmed that sequential improvement in top-line growth is expected for Q4 and next year.
Fourth-Quarter Margin Pressures and A&M Spending Quality
Q: Lauren Lieberman with Barclays asked how much margin pressure is due to incremental investment versus unexpected inflation, and whether PepsiCo needs to reevaluate its communication and A&P approach rather than being strictly tactical.
A: Steve Schmitt noted that input costs are ramping up as 6 to 12-month hedges roll off, and a beverage tariff benefit from Q3 will not repeat. Ramon Laguarta added that the company is cutting non-growth overhead costs while improving A&M quality through data partnerships to drive higher returns.
North American Foods Pricing and Beverage Urgency
Q: An analyst with Jefferies asked about the precise pricing plan for North American Foods and what urgency means regarding the beverage business.
A: Ramon Laguarta stated that urgency means cutting non-growth costs aggressively and raising execution standards, and noted that pricing next year will be managed carefully through net revenue management and productivity to keep products affordable.
Strategic Options and Structural Value
Q: Kevin Grundy with BNP Paribas asked about the Board's consideration of bigger strategic changes, such as splitting North American and international operations or separating snacks and beverages.
A: Ramon Laguarta responded that management and the Board are open to revisiting every option, including accelerating refranchising in parts of the country and reallocating resources to maximize long-term growth and performance.
International Partnerships and U.S. Integration
Q: Robert Ottenstein with Evercore ISI asked for an update on the U.S. food and beverage integration pilot in Texas and insights from international partnerships like Carlsberg.
A: Ramon Laguarta explained that the Carlsberg partnership provides on-premise scale and is working well, including the Britvic acquisition in the U.K. Regarding North America, he noted that physical integration in warehouses is progressing while execution in smaller shops is being refined using a hybrid geographic approach.
Urgency, Execution Complexity, and System Savings
Q: Andrea Teixeira with JPMorgan asked how to measure success and timing regarding the urgency, hybrid system, and potential execution synergies in DSD.
A: Steve Schmitt and Ramon Laguarta reiterated that the company is applying a high sense of urgency to review all costs and overheads, combining solutions across geographies to drive growth, marketplace execution, and margin.
North American Beverage Pricing and Inflation
Q: Michael Lavery with Piper Sandler asked how to balance pricing needs in North American Beverages, given rising aluminum, diesel, and the loss of the tariff refund, with the need to compete effectively.
A: Ramon Laguarta replied that the approach involves a mix of net revenue management tactics to provide consumer value and aggressive structural productivity, including network rationalization and eliminating overhead duplications.
Fourth-Quarter Inflation and 2027 Framework
Q: Peter Galbo with Bank of America asked for the order of magnitude of inflation driving the Q4 guidance reduction and how to think about commodity pressures and hedges heading into 2027.
A: Steve Schmitt stated that commodities are ramping up as 6 to 12-month hedges roll off, impacting Q4, and indicated that a more complete view for 2027 will be provided in February.
