PepsiCo, the Purchase, New York-based food and beverage behemoth saw a net revenue increase of 2.6%. For the third quarter ending Sept. 30, the company posted revenues of $23.94 billion. Despite the positive revenue growth, the company is still struggling overall as net income fell 11% down to $2.6 billion over the same period. Despite these hurdles, PepsiCo’s adjusted earnings per share stood at $2.29, surpassing analysts’ expectations of $2.26.
Or maybe the company just had lower sales volumes in one region compared to others. Though PepsiCo experienced positive sales volumes growth in Latin America and Asia, the North American market was difficult. In North America, Frito-Lay snacks and other food sales volumes fell 2%. At the same time, beverage category sales volumes fell by 3%. This drop in demand has led to understandable worries as the company continues to battle changing consumer tastes and economic headwinds.
PepsiCo is ahead of the curve in actively and aggressively responding to these external pressures. Elliott Investment Management, an activist investor, recently raised its stake in the company to $4 billion. The activist investment firm has pressured PepsiCo to find ways to relieve Wall Street’s concerns about the company’s product prices and profit margins. PepsiCo is clearly making moves to address the increasing perception that its products are overpriced. The company has begun massively increasing the distribution of its value brands such as Chester’s and Chester’s Santitas.
In one of the more surprising leadership shakeups, PepsiCo’s new chief financial officer is going to be Steve Schmitt. Schmitt has a strong private sector background, having most recently served as Walmart’s U.S. division CFO, and before that as CFO at Walmart Canada. His appointment comes at a critical time as PepsiCo looks to rebound from negative financial cycles within an intensifying competitive environment.
As for PepsiCo, the company is in the midst of exploring strategic alternatives for its North American bottlers. This move is strikingly similar to what Coca-Cola attempted in 2017. While still speculative, this possible path forward would be indicative of the company’s overall apparent strategy to reduce complexity and boost financial optionality amid a rapidly evolving market landscape.
