The paragraph is an introduction to PepsiCo's 2024 Third Quarter Earnings Q&A Session. The operator welcomes participants and introduces Ravi Pamnani, the Senior Vice President of Investor Relations, who discusses forward-looking statements, non-GAAP measures, and directs people to the company's website for more information. Ravi also introduces the company's Chairman and CEO, Ramon Laguarta, and CFO, Jamie Caulfield, while reminding participants to limit their questions to one. The first question is taken from Lauren Lieberman of Barclays.

The paragraph discusses Frito's volume trends and growth strategies for the future, highlighting the challenges faced in the third quarter. The focus is on building blocks for volume growth, particularly through core Lays, multicultural, value offerings, and premium options. The speaker, Ramon Laguarta, expresses optimism about the long-term growth prospects in the U.S. food business, especially due to Gen Z's snacking habits. The past few years saw significant growth for Frito, but this year is seen as a normalization period. Looking ahead, long-term trends suggest continued growth in the category.

The paragraph discusses the strategy for growing the potato chip segment within the Frito-Lay business. It highlights a multi-tier approach for the Lay's brand, offering options like unsalted, flavored, lightly salted, and baked chips to cater to different consumer preferences. The strategy aims to create consumer loyalty and value, while more premium options like Miss Vickie's are also available. The overarching goal is to drive growth and maintain a healthy, expanding category through innovation and brand programs, ensuring long-term value for both the company and its customers.

Ramon Laguarta discusses the company's strategic approach to balancing investment and cost management to stimulate demand and maintain profitability during a challenging economic period. He highlights ongoing efforts in productivity and cost transformation, including automation of the supply chain, large-scale digitalization, and the establishment of Global Capability Centers to optimize operations and labor. These initiatives are designed to enhance growth and efficiency both domestically and internationally.

The paragraph discusses the company's strategy for investing in business growth and maintaining financial returns, even in challenging economic conditions. The company is confident in meeting its earnings per share (EPS) targets and attributes this to effective productivity and cost transformation programs. They emphasize a focus on long-term growth, sustainability, and resource efficiency while delivering short-term results for investors. The conversation shifts to Kaumil Gajrawala inquiring about potential EPS growth despite low organic revenue growth, to which Ramon Laguarta expresses confidence in their productivity tools and notes that the company expects category growth to exceed 1% in the long term.

The paragraph discusses a company's strategic focus on long-term growth in its snack and beverage categories, which are considered substantial global markets with strong growth potential. The company is concentrating on productivity, maintaining consumer engagement with its brands, and developing successful partnerships for profitable growth. The operator then introduces a question from Dara Mohsenian of Morgan Stanley, who inquires about the actions taken in Frito-Lay, the expected payback, future strategies to enhance payoff, and what providing value to consumers will entail, questioning whether this involves promotional efforts or pricing strategies.

Ramon Laguarta discusses a multi-pronged strategy for growing PepsiCo's snack brands. This includes building on the success seen with Lay's potato chips over the summer by increasing investments in Doritos and Tostitos during the fall and winter, aligning with the football season. The plan includes offering bonus packs for group gatherings and hosting large brand events around the NFL. Additionally, there's a focus on expanding their "permissible" healthier snack portfolio, which includes brands like SunChip, Simply, PopCorners, and SmartFood, to meet evolving consumer preferences. There are also efforts to address multicultural markets.

The paragraph discusses a strategy to cater to the growing Hispanic population in the United States by scaling up brands like Sabritas, Santitas, and Gamesa, which are popular in Mexico. The approach involves expanding beyond traditional retail into new, under-penetrated channels to create more opportunities for these brands. The company plans to emphasize value in the short term while maintaining long-term investment in building its brand portfolio. Flexibility provided by productivity programs allows for adjustments based on the effectiveness of different strategies. The operator then opens the floor for questions, and Filippo Falorni from Citi inquires about the impact of geopolitical tensions and weaker consumer markets on the international business, particularly noting a slowdown in snacks and convenience foods compared to steady performance in the beverage sector. Ramon Laguarta acknowledges strengths in certain international markets.

The paragraph discusses market growth and challenges in various regions. Southeast Asia, India, parts of Eastern Europe, and Brazil are experiencing healthy growth. However, there is a deceleration in China from double-digit to single-digit growth, partly due to consumer constraints, and in Mexico, possibly due to election-related economic noise. Western Europe faces challenges from weather and other factors. The Middle East business is affected by geopolitical issues, but local teams are managing to stay relevant. It notes that the global beverage sector is growing faster than the food sector. The paragraph concludes with Peter Grom from UBS asking about guidance for full-year organic revenue, noting a wide range for the fourth quarter and seeking clarity on external challenges.

The paragraph features an exchange in a Q&A session involving Jamie Caulfield and Ramon Laguarta. Robert Moskow asks about investments in Frito-Lay, specifically regarding Tostitos and positive choice brands. Ramon Laguarta responds that investments in Tostitos have been made, particularly to capitalize on its relevance during the fall season with events like TV gatherings and tailgating. These investments include brand promotion, consumer engagement, and offering value through bonus packs to boost brand penetration and growth. Similar investment strategies are being applied to Doritos. As for the positive choice brands, there is an implication of efforts being made to improve their distribution, although they have underperformed despite targeting higher-income consumers.

The paragraph discusses the evolving business strategies of a snack brand, shifting focus from Lays to Doritos, which is showing positive responses in recent months. While multi-packs and variety packs have slowed due to affordability issues, the company now offers smaller 10-count multi-packs and bonus packs, which are gaining traction. The brand is also emphasizing making core products more permissible, with reduced sodium and fat, creating a positive perception. This includes expanding a portfolio of accessible brands like SunChips, the Simply range, SmartFoods, PopCorners, and possibly adding Siete, aiming to increase accessibility and penetration among consumers despite affordability challenges.

The paragraph discusses the company's outlook on its business growth. They believe that, despite current challenges, the business will continue to grow long-term by strategically investing in its brands to improve visibility and drive trials. With advancements in digital advertising and data insights, they expect higher returns and better platform building. Currently, their business is valued at $2 billion and is expanding. During a Q&A, Steve Powers from Deutsche Bank inquires about the revised projection from 4% organic sales growth to low single digits. Jamie Caulfield explains that the slower-than-expected recovery of the U.S. consumer and some geopolitical factors affecting international markets contributed to the adjustment. Additionally, they are investing in brand building and adjusting pricing strategies within Frito-Lay, which may impact pricing dynamics moving forward.

During the discussion, the speaker addresses the impact of pricing strategies and reinvestments on PepsiCo's revenue growth, particularly in international markets. They mention the need for increased marketing reinvestment in regions like Latin America (LatAm) to sustain volume growth and maintain momentum in Europe. The inquiry specifically highlights affordability strategies used in the U.S. and questions their applicability in LatAm, focusing on Mexico. The speaker acknowledges the importance of effective revenue management and price structuring in these regions. Furthermore, the speaker notes pressures on Frito-Lay North America's margins, with a recent decline in operating margin, and suggests that these pressures may continue until next summer.

The paragraph discusses PepsiCo's strategy in Latin America, where they focus on enhancing their brands and competing effectively using precise data-driven execution. Jamie Caulfield explains that the company manages margins at a total portfolio level, prioritizing stimulating consumer demand responsibly. While currently emphasizing consumer demand, the company plans to focus more on margins as the market improves. Ramon Laguarta highlights that the company's approach allows for both investment in Frito and expansion of PepsiCo's overall margin. The dialogue is part of a broader conversation where Chris Carey from Wells Fargo is preparing to ask a question.

The paragraph discusses pricing and strategic investments in the company, particularly focusing on Frito-Lay and broader business trends. It questions whether recent slowdowns are cyclical or indicate permanent changes in consumer habits, and mentions the Siete acquisition as a potential strategic direction. The speaker, Ramon Laguarta, addresses questions about company margins, emphasizing efforts to improve U.S. beverage business margins and highlighting successful efficiency initiatives by the team. Additionally, he notes margin improvements internationally, indicating positive progress towards achieving mid-teens margins for their PBNA sector in the coming years.

The paragraph discusses PepsiCo's strategy for expanding its margins through scale, efficiency, and productivity. It highlights the company's balanced approach to margin growth and its commitment to investing in the future while offering consumer value. The focus is on evolving PepsiCo's food portfolio to align with global market trends, such as the demand for more permissible snacks and mini meals. This shift reflects changing consumer habits, with people increasingly opting for smaller, more frequent meals instead of traditional larger ones. The company is confident in its research and development efforts and the improved offerings in its snack category to meet these evolving consumer needs.

The article discusses the growing popularity of mini meals, particularly among Gen Z, and the increasing focus on health and wellness in the meal category. The company is innovating to move its brands into these spaces, highlighting the acquisition of Siete as a strategic step to capture opportunities in the market. Additionally, Robert Ottenstein from Evercore ISI asks about the Gatorade transition and the DSD system in PBNA, inquiring whether improvements have made the system less volume-dependent, contributing to future margin goals. Ramon Laguarta responds that while the Gatorade strategy has improved from last year, there is still room for improvement in service levels.

The paragraph discusses PepsiCo's positive performance in the sports drink category, highlighting Gatorade's market share growth and Propel's double-digit growth as part of a broader transformation strategy. PepsiCo is optimizing various aspects of its distribution, warehousing, and delivery, which enhances productivity and efficiency in its North American Beverage (PBNA) business. The company is confident in achieving mid-teens operating margins, benefiting both PepsiCo overall and its North American beverage operations. Following this discussion, Kevin Grundy from BNP Paribas asks about the energy drink category's progress within the context of PepsiCo's broader North American beverage strategy, noting that the category has been weak compared to salty snacks in the U.S.

Ramon Laguarta addresses questions about the energy drinks category and the performance of the Celsius brand. He expresses confidence in the sustained consumer demand for energy boosts, which can be met through various products like soft drinks, coffee, tea, and energy drinks. Laguarta notes a short-term impact on the energy category in the U.S. due to decreased traffic in convenience stores, which he attributes to the current economic cycle, suggesting a future recovery. Regarding Celsius, he reiterates confidence in the partnership, highlighting improvements in distribution and service levels, and maintains an optimistic outlook for the brand's momentum within PepsiCo's system. He concludes by thanking investors for their support and expressing hope for continued success and well-being.

The operator concluded the presentation and instructed participants to disconnect, wishing them a wonderful day.

This summary was generated with AI and may contain some inaccuracies.