Earnings Results: • Strong international profit results for the third quarter in a row • Frito-Lay North America (FLNA) op margins were soft in the quarter • PepsiCo Beverages North America (PBNA) volume trends, particularly Gatorade and Mountain Dew, were weak
Future Guidance: • Expect sequential improvement in Frito-Lay North America volume trajectory, particularly in the second half • Outlook for commodities remains relatively benign with low volatility expected • Reaffirming guidance to grow net revenue by at least 4% in 2024 • Expect PBNA margins to expand and deliver profitable growth
PepsiCo’s Q1 2024 earnings call highlighted the company’s strong international performance, driven by investments in snacks and beverages, innovation, local understanding, and expanded manufacturing and go-to-market capabilities. However, the company faced challenges in its North American businesses, with soft margins in Frito-Lay and weak volume trends in PepsiCo Beverages, particularly in Gatorade and Mountain Dew.
Despite these challenges, management remains optimistic about the resilience of global consumers, supported by low unemployment and wage growth. The company is making strategic choices in PBNA to focus on profitable growth and expects sequential improvement in Frito-Lay volumes. PepsiCo is also adapting to the shift in consumption from at-home to away-from-home channels.
The outlook for commodities remains relatively stable, and PepsiCo reaffirmed its guidance to grow net revenue by at least 4% in 2024. The company’s productivity initiatives and reinvestment strategies, particularly in Europe, have created a flywheel effect that is driving growth and profitability.
Notable quotes: • “Our innovation is strong. Our ability to understand local rituals and local food and beverage occasions is better than ever.” - Ramon Laguarta • “The consumer globally, we think is very resilient. And we see it in, as you saw from our international business performance.” - Ramon Laguarta • “Europe will be expanding its portfolio along the lines of what the U.S. has been doing, which will give us additional consumers and additional penetration in households across developed and developing markets.” - Ramon Laguarta