Elliott’s plan for PepsiCo includes investing in some of its iconic brands,

Company: PepsiCo

Business: PepsiCo is one of the world’s largest consumer packaged goods companies, with a portfolio of some of the most iconic brands in food and beverage. Its brands include: Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream. Its segments include Frito-Lay North America (FLNA); Quaker Foods North America (QFNA); PepsiCo Beverages North America (PBNA); Latin America (LatAm); Europe; Africa, Middle East and South Asia (AMESA), and Asia Pacific, Australia and New Zealand and China Region (APAC). FLNA makes, markets, distributes and sells branded convenient foods, which include branded dips, Cheetos cheese-flavored snacks, Doritos tortilla chips, Fritos corn chips, Lay’s potato chips, and others. QFNA’s products include Cap’n Crunch cereal, Life cereal, Pearl Milling Company syrups and mixes, Quaker Chewy granola bars, Quaker grits, Quaker oatmeal and others. PBNA makes, markets and sells beverage concentrates and fountain syrups under various beverage brands, including Aquafina, Bubly, Diet Pepsi, Gatorade and others.

Stock Market Value: $211.28 billion ($154.32 per share)

Activist: Elliott Investment Management

Ownership: ~1.9%

Average Cost: n/a

Activist Commentary: Elliott is a multistrategy investment firm that manages about $76.1 billion in assets (as of June 30, 2025) and is one of the oldest firms of its type under continuous management. Known for its extensive due diligence and resources, Elliott regularly follows companies for years before making an investment. Elliott is the most active of activist investors, engaging with companies across industries and multiple geographies.

What’s happening

On Tuesday, Elliott sent a presentation and letter to the board of PepsiCo detailing the company’s opportunity to reaccelerate growth and improve performance through greater focus, improved operations, strategic reinvestment and enhanced accountability.

Behind the scenes

PepsiCo is one of the world’s largest consumer packaged goods companies, with a portfolio of some of the most iconic brands in food and beverage. Globally, the company is the number one player in snacking and the number two player in beverages trailing only Coca-Cola.

Pepsi is divided between its North America business (60% of revenue) and International (40%). Within North America, its segments are PepsiCo Foods North America and PepsiCo Beverages North America, each of which account for about 30% of the company’s total revenue. Frito-Lay North America, which makes up about 90% of PFNA, is the dominant leader in salty snacks and a consistent growth driver. PBNA has a portfolio of iconic brands, like its flagship Pepsi, Mountain Dew, and Gatorade, and a reach that rivals Coca-Cola in a very attractive and high-margin end market. Despite its scale, brand strength and track record of growth, Pepsi’s stock has underperformed, losing almost $40 billion in market cap over the past three years and trailing its benchmark, the S&P Consumer Staples Index, by 169 percentage points over the past 20 years.

Strategic missteps in the company’s core North America businesses are at the root of this underperformance. In 2010, both Coca-Cola and Pepsi acquired most of their bottlers. However, while Coca-Cola moved to refranchise its bottling business, Pepsi kept these vertically integrated. This decision has proven to be a costly mistake for the PBNA segment.

Prior to this strategic divergence, PBNA’s operating margins were 300 bps higher than Coca-Cola. Now, PBNA’s operating margins are 1,000 bps lower, reflecting the cost pressures that come with keeping these cost-intensive and lower margin operations in house.

PBNA’s second misstep was its response to the changes in consumer soda preferences. As soda consumption declined in the early 2000s, PBNA shifted its focus away from soda and towards healthier categories. While this was justified at the time, soda preferences have since stabilized, yet PBNA has not been reinvesting into soda. This lack of focus on its core products has had serious repercussions, including the delayed launch of Pepsi Zero Sugar and reduced investments in core brands like Mountain Dew. Moreover, instead of putting money into these proven brands and products, Pepsi has overextended into weaker brands like Starry, Rockstar, and SodaStream, while also expanding into other stock-keeping units, or SKUs, including limited-time offerings and flavor extensions, resulting in higher manufacturing and distribution costs. As a result, PBNA has around 70% more SKUs than Coca-Cola despite generating about 15% less in retail sales.

PBNA’s weaknesses have forced Pepsi to become increasingly dependent on PFNA, and its FLNA core, to sustain overall growth and meet performance targets.

In 2020, expecting increased demand…