PepsiCo (PEP) 12 Oct 222022 Q3 Earnings call transcript

Good morning, and welcome to PepsiCo's 2022 Third Quarter Earnings Question-and-Answer session. [Operator Instructions] Today's call is being recorded and will be archived at www.pepsico.com. It is now my pleasure to introduce Mr. Ravi Pamnani, Senior Vice President of Investor Relations. Mr. begin. may you Pamnani,

I review has prepared our are website. of operator. this remarks a morning which our on to press available hope you, had everyone chance both Thank release and

take we statements and forward-looking call, our note Before XXXX today's please of cautionary may on business statement. our about guidance. our including updated make We plans begin,

obligation regarding discussing XXXX, and as of view results, our third discussion of results, statements that Form Forward-looking and are to definitions XXXX which reflect pepsico.com statements. we only non-GAAP inherently When including could quarter Please quarter factors for to results cause involve from exclude forward-looking risks our earnings information to XXXX and from to reconciliations under refer we certain our no measures materially October our reported and our third XX, available update. refer non-GAAP uncertainties measures, differ on today, and results. items a XX-Q of actual release additional and

are today CEO, will the Johnston. PepsiCo's Chairman you PepsiCo's and me it one I the And to for Joining question. turn first and with please Hugh over ask that question. that, and We yourself operator Ramon Vice to CFO, Laguarta; limit Chairman

Andrew Instructions] [Operator Teixeira comes first Our question from JPMorgan. with

is lines open. Your

you're you may, flow ask for I was growth high the And cash be to the I conservative question. organic single-digit that negative elasticity quarter. X% the the range in out. pricing, but hoping in you're and seems a a of the QX? all negative fourth that on X% or to both We I it against more want clarity I volumes And if expecting X% X% then can, are the appreciate you to got price get called reinvestments you the embedding given that

expected it's three stronger Andrea, to of strong elasticity we've the quarters continue seen Obviously, than be through Hugh. Yes. year. and

we are is that's the still the our with with happens housing consumer carefully broadly exited ticket of other the obviously, very accurate. that big watching obviously you've sure purchases. with consumer. of certainly terms in And math the quarter done, not true We what I'm healthy in math So third the and categories. particular terms

what like your we'll what is quarter, accurate. you but disagree So, look the don't in elasticities I fourth math, see with said

If I squeeze can the -- sorry.

With the is to last in investments, continue this term Yes, balance short we've using Ramon. the regards been few philosophy, years to long to and the term.

in realizing it's think good I performance.

making in We're sustainability our the We long-term continue about Company investing invest bets that to as in we're digitalizing the brands. well. some of and

will with we that, than next in So, the that of and other year. quarter continue any not the be different quarters

looking strength with that next So, you on on quarter at the assume and investment should and in side. the we're the entering side commercial reinvesting 'XX

with Lieberman from question Lauren next comes Our Barclays.

Your open. line is

strength by I though was even holding pricing the how in and particularly particularly on the again volumes off well. just everywhere, Europe really but struck in are

you What being bit So of bit pricing. you just business tell and Thanks. Western management a of put is little if color towards realized? pricing just more much a is Europe magnitude and us to that revenue versus can straight that knowing could context around skewed little about curious how how talk list

have drive pricing per per management and mix good been channels and of more kilo. price which time management, more as business. in had we've than of on say, regions other lean the geographies, stronger summer, and therefore, Yes. been higher already. of a has sales And those pure combination East the a to team in been capabilities investing you for has most Europe, world to West. some liter We've probably the across And impacted it's The will price revenue cost. other had the impulse or than those tends parts into

across pricing So the also home teams call large as reflected QX. and banks have some well Europe. in that you in then of formats in in been is the what courageous the Western And

with brands So the following a being management. realization the are combination few of brands visual points other emerging to the and consumers price we've our as is brands have that off higher to The stretched in you pricing years in in of or the world U.S. in even made the that other in investment are the some Europe and pricing last in and channel us parts volume are truth markets. saw paying the our sense

comes next from with question Our Mohsenian Dara Stanley. Morgan

Your line open. is

on sustainability growth, to so a longer growth recovery beverages. second of pricing elasticity. sales get but obviously, double-digit very we're organic is the term, limited you So demand bit seeing of sales as out levels, the COVID robust the in some straight hoping I there of organic excess with There's was year perspective just look

and QX just about slip here, on perspective et in given volatility? short-term cetera, the some October which incrementally long-term September momentum if some couple years, in drivers than Have So far second the long-term different or on, and just macros follow-up question. you're key business a are so can trajectory sustainable underlying And the Andrea's as of part those at just look if of QX generally in some longer last the in, anything you worries then looking for you some saw of positive more Thanks. after you the growth, that's seen I ones to mid-single-digit term? in

been of we've four to our A is you long-term about Hugh. the of the a more on upper to as Yes. on we pushing I how guidance Dara, get the number end basis. consistent Ramon it's revenue one, range ourselves talked six. on know And that and have do to past, things, always couple in

want is right that's might the of project our comment. as call out value strategy, combination not it it's pricing I'm it elasticity, just hard It's practice. more 'XX same, in been than on go give it's aspiration line. organization. guidance hard going high relatively that no long-term that figure low February. remains out we other change We'll long-term our push interesting. to times Given to is, forward. which on creates as the -- the this of It's We think just what talk well the now so about projects But terms at exactly figure into. to a in are point. ultimately any for We And and sort to top going great today's to of think but how forward that as difficult

I I I space. he pleasure continue Yes. faster and growing saying what small of treats say We've key and think, food top of be categories growing than need categories non-food. a and that on to is faster I our moments I was mean going be is seem change. food to would what don't today think, play that's seen, that consumers affordable in our to think state, than

in the that So world. ups economically potentially and of continue should all I will downs, around think that spite assume that, we the

we respect. second to our gain in the think in quality share, assume beverages. that have we share markets, continue and both try better should to The brands should future, to every that continue and gaining our of aspiration, lot as geographies, markets the in given in invest we and people at that the many to assume in we least that snacks of get that's will a we I it's element, quarter and that we're across investments fair many, well is making, are We the assume

our Clearly, remains compare assess should we're average a think month aspiring do do But every you quarter than hopefully many an don't as when are for variables as you performance. term to it we'll saying, at our our lot pricing think quarter, outstanding to the assume X%, of better that's X% is look So a the will beat we and as Those our obviously, I possible. quarters as are to valid. food, performance XX% sustainable we of the we business. better a long-term and long categories. you that with And

question is Herzog next Goldman Our with Sachs. Bonnie

Your open. line is

very fully price but Your it top been growth by line all as driven quarter, the was impressive, discussing, was strong realization. in we've

sense market PBNA, your has in guess I especially. is I your yours and is of then your been And margins So of give businesses? maybe Frito-Lay in improve share priority question your trending how beverage us know on share. both you op a Could to my a

us how profitability forward? give market to share going growth going sense maybe growth with balance you're So a of

our with about Yes. internationally. out philosophy Bonnie, XX% we're seeing talk call, trends let me of that this year, gains and PBNA. we're year beverage in, start share, On will what the with we foods, the in salty seeing in foods, a it say, margin and we I last markets then XX% about would gains and -- share in with markets consistent Hugh we've the snacks, earlier saw XX%, seen convenient on --

total In across accelerating share of you across well our and competing couple markets, was U.S., beverage in share When the we in as volume, U.S., value. good in sports. That's performance also share and particular, of to we're So as the there gains volume It with emerging its markets in measure quarter. a market, we QX that's -- the share both held strong. categories. very markets is savory good developed Frito-Lay and basically, LRB in a points of at geographies, both was gains so very the we almost most was value business developing look what both a performance in in gains. mentioned,

us, the recovery priority the a brand. been has sports for of So category Gatorade

the for couple of years. lot We have last invested a

innovation is Our working.

Our brand is building working.

working sharing execution happy, share is quarter, in in makes the gained getting share us We're has coffees. that which the we put very brand. obviously, commercial teas. given We're gaining Our and in team meaningful the efforts

as working brand where say continue is in business doing double-digit for LRB categories which multiple pretty our the would a CSDs. are overall, LRB flat well, to the saw gain we're But and very is total performance a losing we quarter well. is is to Dew quite the that PBNA. Mountain good in I performance measure you So, we share performing total to share category Pepsi is on was share. and growth,

that, Bonnie. build And Right. I'll on

efficient and waste it. by in were margins down balance then clearly on I short focus making gain well. quarter. as were we're as that's don't the do as we points noted. find We successful try an is you've as bit that We an always view I margins. were And Obviously, to I we a One goal. both. out it frankly, it little think a to can and can that quarter that and of price be I'm can as we that as and. structure, as possibly the XX basis set able of to to we sure ought view third wherever that sure share both cost in and the on the But also about to either/or, do. grow we Gross We of our be goals we to something through inflation eliminate try

So, were about points. operating basis up XX margins

So the deliver that, is a bit be position going our the does a growth exactly ideally a able driving structure balance do focus that If be little short price to plan to of we're still share to of bit, on continue in financial little so through to if to we'll inflation. up we're soften the cost gain revenue start to results. superior that

of Regarding there to much That out specifically absolutely margin the the very, PBNA intact. very still that and plan. is mid-teens, goal is we've set that getting

stand. we where that's So

Our question with Grundy Jefferies. comes next from Kevin

open. Your line is

thoughts going we're ability and key soften that year? thoughts respect will here more out on A to there preliminary and growth willing your as you the be but outlook to bit your you'd so and looking from more given among two-part Is been pricing offset pricing? be So to well get Congratulations inflation oil, assume you're here be of don't it it little for constrained be you hedge taken question feel commodity little want outlook, on tools. to on Hoping strong know updated a reliant to forward continue pricing with see anything would on a a revenue results. of inflation management to And that's fair then positions, aluminum, starting management, the forward, question, cost be to to I may cost as Do RGM to extent guidance, aware. resin, helpful. inputs maybe with little next far? give share concerned. bit to the you Hugh opposed bit any like your kind you'd others,

we've Anyway, a it Yes. four not with we'll is things, That's try, think this number two, year, parts, Happy have although land. I go not high past. where what been anyway. of Kevin, the in teens we're commodity change for to but talked about to going a it to might relative couple one,

and be that's That practice. but out months, year. the the operating consistent positions with somewhat not through and we're to hedge clearly of the That's near commodity forward by, six anywhere tend to terms as us next In we way past before, into year, we've nine discussed puts about way all next cycle.

early that doubt will regarding commodities As some specific forward. single play into you, I'm some won't our inputs commodity you you've couple then for February us The seen softening for think Company. frankly, basket. give too our its it to a a way that up model addition, observed, XX% although just commodity dispersed. that productive to next a you us, But for little for just sure is bit pretty a reasons. of I'll give of basket rely in we'll prices lot numbers going and which for we'll by At is number you, or I not And which talk about commodity think year, place for surprise can this that. to of telling of doing really accounts biggest just have frankly, no it's a the point, you analysis, we that of on. And I a in the you've even remind There's in is wind something for I of don't able the line to you be takes and partial better you more where, sight

brands, that point. at forward, still we made quarter investments think in of whatever pricing what going pricing, of fourth at knew we based we're taking the Regarding on I capable prices we've the we need. increased beginning the with that And

comes question Powers from next Deutsche Stephen Our with Bank.

is Your open. line

to ask Twitch. I wanted Fast Ramon, on and Gatorade

we've a particular But the how and drink more about role for as ranks you wondering, nutrition end in able that I'm sports to it I'd energy expand just broad intersection the that First, investment? where thinking detail guess, innovation of the what categories love more may priorities generally. of -- I your How the portfolio be drink for some see far terms the in the you around playing energy expectations into Gatorade And basis? you're on broadly, of think Gatorade Gatorade thought traditionally in market? future

the one franchise Thank obviously can that Steve. spending how you, occasions starting high great a left very the a sugar the under than or with that working working category. performance with, recent or performance just It's incremental about Then would exercise the into a take are which What I lot at It's not the is high And lot a regularly, consumers say, would that. obviously level. good been two brand also but very say, that very broader -- to labs well, far people Gatorade, we're consumers a the the success Zero. thinking time GFit last we question. incremental one. strong bringing the have brand, X.X Gatorlyte of athletes long well of That's a especially, innovation we much brought and for the brand innovations, Gatorade. put Zero that is so, we're of in we of because content, seeing at for lot is I years X has years franchise

also more and hydration or at or happy we're Fast three of that the Twitch, Gatorade innovations. with the game so what So, parts before caffeine during is but their are seeing then core of obviously the exercise. athletes we're drinking With more end game, to regards and game different the other the the new

and other and space, stimulant athletes also the by we single but in play the there by a the work the that Gatorade to trainers providing one We've in is to them. additional hydration with people been providing to for help some told consumption. go So, that think role performance,

think and been this that the of very athletes, a that developed I credibility So Gatorade ring trainers play has has to performance. space of, better occasion with with we lot in in the developed with plays for well. And hydration mind. It caffeine think, that

it, as full of next the with NFL launching know, year. and you we're we'll So go blast as early

Our go Ottenstein Robert Evercore next with question comes ahead. Please ISI. from

Great.

pricing a North Frito-Lay follow-up the on just on America. First question,

could a bit you additional you a and and question supply lot Can the into different package little complexity And give If headline is, breakout of about real Thank product with how just a of portfolio pricing, between channel. introducing flavors then my at us kind mix a side? sizes. chain looking talk you. from you're you're that

at as in gain share case our revenue listen, increase brands our multiple Yes, ways kilo as of and per businesses, that. any with we're in looking the continuing with to we this obviously do one consumer maintain our to

use We'll levers. strategy. multiple the that's So

promotions, our well tools lower consumer per done full the per the All international America in commercial or have way pushing into kilo, moving emerging where we any we doing developed. obviously, price where revenue different the that's because the So Frito's integrated program. more or or our same are visual into those expectations. for And liter price being channels, pricing, formats or higher but developing has it, markets of beverages North can is

a that's investing. to also -- applies to more as second becoming supply becoming digital, that more question, insightful We're been and much your that a chain. consistent our So applies we've company. linking And capability much precise

throughout we much the have forecasting other all of perfect or of level say the able in our the organizations execution better transportation of supply not a of and world. automating and supply Frito-Lay the any higher company cope that to business. still able question complexity -- of this into around at would in integrated we're I our in certain given say more demand respect. at given point, forecast your becoming to the we're we're we're higher ingredients think would execute bottlenecks, I that we're becoming We're complexity running I to but a some in challenges there chain levels is with

being I business our quarterly one However, pretty processes have businesses, portfolio elimination of of very are through the will in so of rationalization and strict that of that we goes each strict regularly. say of one complexity process optimization run unnecessary each a

is think, respect, we at in one side, key, complexity go eliminate supply rigid time, personalization we keep lot business. want and is what given the us appreciate it more in processes So But the cost because our that of have any a categories. for on down chain consumers complexity and run unnecessary I same a a varieties to good given that know but through our we to advantage

Our Kaumil is next with Suisse. question Credit Gajrawala

is Your line open.

Can we flow? interesting talk on what excess with environment given kind coming balance the looks perhaps year in are update assets just cash on moment, is more sheet the been an same expected, a maybe about around that? they going difficult we're if a And context, of cash the bit would more or any maybe thoughts more then in just there a And better I the at than the like wonder before. have period? through than M&A

jump to that Kaumil. on in happy well, I'm Yes,

cash of flow, right. terms you're In

this necessarily about wouldn't strong terrific We cash position. it characterize that. we're obviously, a relatively certainly, coming cash I well and cash. are feel from on performing year flow as But excess

very XX terms sheet. years I In our point. actually on you now, know that, Well, of rates how we in maturity addition our think, at about and this are manage average the philosophy to is balance our debt much and fixed we

are what we do of elements refinancing to small. the need relatively So

going billion towers Our forward. year a $X.X about to $X going billion are forward

we've a interest rising flexibility of got in terms of lot So managing rates.

about of we'll take in 'XX. talk In where that again, future, the might that us in terms

where, might We're our the that, as not know, on terms We to really happen anything. any of value. beyond not past. we've role allocation on in you no all, M&A at capital at But M&A, But indications we something might has but a played real speculate it's obviously in of look largely policies what horizon But Regarding always certainly whatsoever. frankly, pass we setting difficult we'll on a things. got looking transact. at taking anything be or still rarely focus really can tuck-ins broadly, our in change don't

don't all I expect in any change at that So regard.

comes Chris from with Fargo. Wells go Please ahead. question Our Carey next

perhaps just if be I the there's debate back way environment slow? might typically deflation a need confront typical across consistent Can pricing you how And promotion, price especially with starts to other a during reversal if historically of not environment flows it promotion? about of environment. the comment or especially are such they're of demand growing the goes commodity these rollbacks are a recession commodity pricing suppose increases dealt on of that an accelerated would price changes, a not out practice. versus on business that of stickiness in What entirely your whether lot CPG, even they either thoughts list been it's to price demand question, the if the some

challenges is listen, a difficult to industry and inflationary Yes, clearly The the value of of have I answer. its to this still the to maximize is environment lot think very with across chain behaviors a trying question responsible supply everybody brands.

philosophy our same. So the is

we consumers have We mean for the invest marketing, how of to sure and focus the That's that the in We're do bring to to how the continue innovation, be around the play center with our continue customers. category, I occasions you our the very our create majority categories, strong and new our trying role our Company I plans. our we and commercial drivers bring value develop we to customers at of put we conversation that's continue to look growth to think organization. into growth the if strong we and long customers, category, make term. very where advertising -- into to

nimble these and -- doing want to Obviously, years. willing what focus, flexible, is environment cost philosophy. years that Company. we that that that's the across brands. with in and more more two to taught to where have goes us and with continue if we'll we're value more we're the last that We'll anything to and create agile become higher coming for more continue consumers And we'll trying consumers that our pay see for can brands So are stand the

Our Peter with Grom comes last question UBS. from

open. is line Your

well. you're hope I doing

So was is I transition the of I right about going? your to wanted one PepsiCo? initial just to start, agreement. for on to And structure kind distribution of the Celsius why views the partnership ask guess here, And guess, what bigger that you brands? gives last, I your can partnership of confidence I the maybe you picture, success just like just from have What in it Bang ahead? greater learned distribution if the Maybe looking really how maybe any with squeeze either this Thanks. in then own happened network this

to talk Peter. past Happy Sure. that,

First, We're this we and down to folks it going think we're over be off proud and us. trucks happy and the the nicely transition business. differentiated terrific at to business into and got is a it to our think think Celsius. the Celsius same We very it's system, going about proposition, We're, have PepsiCo the great excited on probably a for it's thing hear integrated point, from XX% well. at the think I you'd and a start,

value to that. it position us in participate doesn't to set a we'd enabled the we knew we look, of a distribution going frankly, looked the create like terms should any In up structure, and puts Company preferred. additional further And what now it were a than in some we right you It us and at value. us do like that we and that to where felt for structure but we said, it's we agreement, take do see

relatively convert on have get point. could at we down position either or some at small the preferred based paid road we'll the So, the

broadly, PepsiCo. matter, different or like than one because think different will We building of energy for been position Energy types like take states. or approach it the I ways now we best read here, of anything position into But business. Obviously, felt consumers was different it that. portfolio, portfolio the to a Celsius into our we're compete, starts more with to having good the Starbucks we doing of structure So approach Energy a segment consumer's Rockstar of value-creating or think advantage category on Mountain even then capture for as that. ultimately has of have to what us need it's a And brands. we we Dew whether approach that to more in or Coffee three wouldn't that and energy we're Having business. that a four portfolio types

So growth. where we in like we sit that

would I what saying. would -- Peter, I Yes. endorse was he

it's from Celsius the or that of we better rest feel this earlier. complement think vectors portfolio of brings a I had good. point brands of to -- the view, probably growth in category We

I what think Starbucks that of some to what to different or the appeal appeal consumers appeals would than Gatorade are or the consumers of it some obviously, to. Rockstar would

we're better also think continue and much value And broader I both is be a to much the -- our to is durable bring going And We've more to more a So how it sure strong. said, for creative and play partnership build stronger franchise. learned in to place in statistically the on partnerships. more companies. category aligned Hugh hopefully, consumers I'm to as this one, to the

the early commercial and of it's signs too still two it's and strong. very Xst, XX% October very started early, positive, the between companies alignment collaboration is So, the We but obviously. and the only territories, are

Okay.

think So Q&A is the I over.

thank that So confidence you've healthy. very us stay all everyone in like placed for your to for, obviously, joining I'd you and the that and investments. much. Thank us today you We with safe hope guys

this conclude today's gentlemen, and does presentation. Ladies

a wonderful have and disconnect, now day. may You