Dive Brief:
- Elliott Investment Management has acquired a stake of approximately $4 billion in PepsiCo, with plans to push for changes at the food and beverage giant. The activist investor has outlined ways in which the company can boost revenue and enhance earnings growth in a letter sent to the board of directors. Read more.
- Elliott, now one of the largest investors in PepsiCo, suggests that the company should consider franchising its company-owned bottling network to independent bottlers, similar to its competitor Coca-Cola. Additionally, they recommend reviewing the food operations to divest underperforming assets. PepsiCo is urged to communicate how these initiatives, among others, will be implemented to drive growth and profitability.
- In response, PepsiCo stated that they will review Elliott’s presentation and emphasized the importance of shareholder input in delivering long-term value.
Dive Insight:
PepsiCo has faced challenges within the food and beverage industry, underperforming compared to its competitors, according to Elliott. The company has experienced slowing growth and declining margins in North America, along with losing market share in beverages. Pepsi cola, for example, has dropped to fourth place behind Coke, Dr Pepper, and Sprite.
Elliott highlighted that PepsiCo, once considered a top-performing CPG business, has become a significant underperformer. They believe that strategic changes are necessary to unlock the company’s potential and accelerate growth.
While PepsiCo’s beverage business struggles, its food business has also faced challenges due to a tough consumer environment. The company’s revenue, despite being over $90 billion annually, has been impacted by these factors.
Elliott believes that implementing their suggestions could increase PepsiCo’s stock price by at least 50%, positioning the company for improved financial performance and industry leadership.
In response, PepsiCo emphasized its focus on innovation and international expansion to drive growth and deliver long-term value to shareholders. The company remains confident in its ability to navigate challenges and strengthen its competitive advantage.
PepsiCo’s recent initiatives, such as offering value-based products and healthier options in its snacks business, reflect its commitment to meeting consumer demands and driving growth. The company has also made strategic acquisitions and innovations to enhance its product portfolio.
Overall, PepsiCo is at a critical point where strategic changes and innovations are crucial for future success. By addressing current challenges and embracing new opportunities, the company aims to regain its position as a leading player in the industry.