PepsiCo (PEP) Status Update summary

Strategic Initiatives and Business Outlook

• Actions in 2025 and 2026 focus on accelerating productivity, innovation, and affordability, especially in North America foods, with greater benefits expected in 2026.

• Alignment and constructive engagement with Elliott Management on plans to accelerate organic revenue growth, improve core operating margin, and refresh the Board.

• Investments in innovation, brand communication, and affordability are expected to drive growth in PepsiCo Foods North America, with new products like Simply NKD Cheetos and Doritos Protein.

• Automation, digitalization, and simplification are key to sustaining long-term productivity savings, targeting at least 100 basis points of core operating margin expansion over three years and record productivity savings in 2026.

• Integrated food and beverage model is being piloted in Texas, with a nuanced approach planned for broader rollout.

Commercial Actions and Operational Improvements

• Targeting sharper everyday value through affordable price tiers and increased purchase frequency for mainstream brands.

• Aggressively reducing costs, including plant closures and SKU reductions, to fund marketing and consumer value investments.

• Commercial plans and space gains with customers are in place, supported by incremental A&M investment and early positive results from innovation launches.

• M&A activities and energy transactions are expected to contribute to organic growth in the second half of the year.

• Price investments and space gains are expected to drive higher category share and volume.

Financial Guidance and Capital Allocation

• Preliminary 2026 guidance released early to drive accountability, with organic revenue growth projected at 2–4% and core constant currency EPS growth of 4–6%.

• For 2025, expects low single-digit organic revenue growth and flat core constant currency EPS, with a 0.5% decline in core EPS due to FX headwinds.

• CapEx is expected to remain below 5% of net revenue in 2026, with a focus on growth investments and continued annual dividend increases (pending Board approval).

• Free cash flow conversion is expected to be at least 80% in 2026 and exceed 90% in 2027, with increased cash returns to shareholders.

• Final payment from the Tax Cuts and Jobs Act in 2026 will impact cash flow.