The paragraph is an introduction to PepsiCo's Fourth Quarter and Full Year 2024 Earnings Q&A session. The operator welcomes participants, mentions that the call is being recorded, and introduces Ravi Pamnani, the Senior Vice President of Investor Relations. Ravi thanks attendees, notes the availability of the press release and prepared remarks on the company website, and highlights the cautionary statement about forward-looking statements, which involve risks and are not obligated to be updated. The discussion will include non-GAAP measures, and definitions and reconciliations can be found on their website. He introduces PepsiCo's CEO Ramon Laguarta and CFO Jamie Caulfield, and the operator announces the first question from Lauren Lieberman with Barclays, who wants to discuss Frito.

The paragraph discusses reinvestment efforts in the Frito business, with a focus on the salty and savory category. The company is working to regain momentum and customer engagement through strategic investments funded by non-operating gains in the fourth quarter. The main goal is to improve performance for a strong start in 2025. Despite a sequential deceleration in volumes, Ramon Laguarta mentions positive growth in the category, as indicated by MULO+ and Circana data, with a return of consumer interest and a favorable price/mix trend.

The paragraph discusses the company's strategic focus on learning from past experiences to identify high-ROI investments and innovation opportunities in their category. They are emphasizing the potential in the "away-from-home" market as a significant growth area, especially for their food segment, which they consider underdeveloped compared to their beverage segment. The company is starting to see some positive pricing trends and is preparing strong consumer and commercial programs for the upcoming year to address unmet innovation spaces. They are also reinvesting one-time gains into infrastructure to seize these opportunities by 2025. Following this, Bonnie Herzog from Goldman Sachs questions the company’s guidance for the year regarding EPS leverage and potential increased investments, asking for more details on the types of investments planned.

In the paragraph, Ramon Laguarta discusses Frito's approach for the year, emphasizing continued investments in productivity programs like automation and digitalization, and restructuring price segments to engage more consumers. He notes that despite low global unemployment and improved inflation, geopolitical uncertainties necessitate cautious guidance. The company aims to maintain investment flexibility to adapt to potential changes, especially in the first half of the year.

The paragraph involves a discussion between Jamie Caulfield, Kaumil Gajrawala, and Ramon Laguarta about the impact of foreign exchange rates, debt, and restructuring plans on their company. Caulfield mentions factors such as the stronger dollar, increased net interest expense due to debt rollovers and acquisitions, and rising pension expenses, which are affecting their financial outlook. Gajrawala raises questions about potential splits between beverage and snack businesses and the implications for future mergers and acquisitions (M&A). Laguarta explains that the restructuring is aimed at capturing international growth opportunities by focusing on separate entities for franchise beverage and food operations to ensure category focus and better consumer engagement.

The paragraph discusses a company's strategic focus in the US on leveraging investments in systems, data, and infrastructure to improve business operations and eliminate service duplications. The company aims to maintain distinct category teams while advancing future growth in a more harmonized manner, especially concerning infrastructure and technology investments. The speaker mentions this strategy as key for the next business chapter, focusing on accelerated growth and margin expansion. Following this, Dara Mohsenian from Morgan Stanley seeks insights into the company's management strategy for 2025 amid a slow growth environment in North America, and requests an update on the company's performance in Mexico during Q4.

The paragraph discusses PepsiCo's international business as a major growth opportunity, with consistent investment leading to nearly a $40 billion business. In North America, there is a focus on improving beverage business margins and top-line growth through better pricing and innovation, especially in zero-calorie and functional hydration categories. Operational excellence is emphasized in both beverages and snacks. The snack segment experienced rapid growth over five years but has slowed in 2024, with efforts now focused on stabilizing the category and regaining consumer interest with good ROI investments.

In the paragraph, the speaker discusses Frito's strategy for growth, highlighting recent increases in both volume and pricing. They emphasize a strong program planned for 2025, which focuses on better price execution, innovation, and consumer-friendly options. This includes launching a new line of products without artificial ingredients under the Simply brand, increasing efforts on baked and lightly salted products, portion control, single-serve, and multi-packs. Additionally, Frito is investing in the away-from-home market, aiming to offer more than just conventional snack bags by providing ready-to-eat or mini-meal solutions. Recent acquisitions like Siete and Sabra align with their strategy to offer healthier snacks and participate in meal options. Further details will be shared at the CAGNY conference.

The paragraph discusses the key factors influencing consumer choices in the context of the Frito category. It highlights the importance of value as the main decision maker for consumers, attributing the slowdown in the category to price concerns. There is also a growing consumer awareness and preference for healthier food and drinks, which is part of a long-term global trend. The speaker notes that addressing pricing and promotional strategies will be crucial in maximizing value for consumers, while acknowledging an acceleration in health-conscious behaviors, especially in the US, as opportunity areas for growth.

The paragraph discusses strategies for catering to consumer preferences in the snack and beverage industries. Key strategies include portion control, offering snacks with added health benefits like protein and whole grains, and expanding product lines with innovative ingredients and preparation methods. The focus is also on mini-meals, highlighting the trend of consumers opting for smaller meals throughout the day. This approach spans various brands and aims to provide convenient, lower-calorie options for different times of the day. Additionally, pricing and portion options in beverages are emphasized as crucial factors.

The paragraph discusses a strategy involving three main aspects: focusing on "better for you" beverages, such as zero and more functional beverages like Gatorade and Propel, enhancing away-from-home experiences like Pepsi DRIPS, and delivering across both food and beverages to meet evolving consumer preferences. The dialogue then shifts to a Q&A session where Filippo Falorni from Citi asks about the company's 2025 low-single-digit organic sales guidance, seeking details on the international contribution versus North America. Jamie Caulfield responds, emphasizing a gradual improvement in North America's performance, driven by innovation and new market spaces, while noting the resilience and significant contribution expected from international operations.

In the paragraph, Peter Grom from UBS queries Ramon Laguarta about the recent trends in the salty snack category. Ramon acknowledges that while category growth has been inconsistent over the past year, it is important to consider these trends in the context of the past four years. He highlights that Frito-Lay, a major player in the category, has seen an 8% growth rate over the last four years and gained market share by 200 basis points. Ramon is optimistic as inflation normalizes, affecting costs and consumer behavior, and notes an increase in consumption occasions in the last three months of the year.

The paragraph features a discussion about the consumption trends for a product category, highlighting a rise in both value and premium segments. The company is developing strategies to address opportunities in these segments, focusing on innovation and value offerings while ensuring a return on investment (ROI) for the long term. Steve Powers from Deutsche Bank then asks about specific investments in Frito, particularly regarding pricing and value, and whether there is a shift in strategy that could lead to negative pricing in 2025.

In the paragraph, Ramon Laguarta discusses the company's strategy to address declining category and portfolio volumes without reducing prices. Instead of negative pricing, they plan to offer more targeted consumer options, especially regarding price partitions and product sizing. This includes providing a variety of package sizes, like smaller multi-bag options, to fit different consumer budgets throughout the month. Additionally, they will introduce a sub-$2 option for single-serve products. Their distribution system allows them to implement these price strategies effectively, aiming to create value for consumers, partners, and the company.

The paragraph discusses the strategic financial decisions of the company following high inflation years. The focus is on maintaining a strategic pricing approach to drive growth without resorting to negative pricing. Michael Lavery from Piper Sandler inquires about Frito's investment strategies, particularly infrastructure investments from one-time gains, and advertising and marketing expenses. Jamie Caulfield expects advertising and marketing expenses as a percentage of sales to remain consistent through 2025. Ramon Laguarta emphasizes continued investment in future-focused platforms, such as portion control and away-from-home channels, which require upfront investments to capture new opportunities and support long-term portfolio evolution.

The company is focused on long-term business strategies, aiming to offer consumers options across various price ranges, particularly in healthier and nutritious products like lower-fat and lower-sodium options, and high-protein snacks. There is also an emphasis on expanding the away-from-home segment with mini-meals and ready-to-eat solutions, anticipating high demand that requires investment. During the Q&A session, Drew Levine from JPMorgan inquires about PepsiCo's energy category strategy, noting its absence in the prepared remarks. Ramon Laguarta responds that energy remains a key component of their beverage growth strategy, with no significant updates, as the company continues to provide comprehensive solutions to meet consumer and customer needs.

In the paragraph, Greg, an analyst from Evercore ISI, inquires about the PBNA pricing strategy for 2025 and promotions within that segment, as well as the incrementality of Baja Blast and the Mountain Dew franchise's position. Ramon Laguarta responds by emphasizing Baja Blast's significant role in expanding Mountain Dew's market presence, particularly among Gen Z and in less-developed regions. He notes that Baja Blast contributes close to $1 billion to their business and plans to heavily promote it, including during the Super Bowl, to attract new consumers. Regarding the pricing strategy, Laguarta mentions a disciplined approach focusing on pricing, pack options, and promotional offers to create value and profitability for both partners and consumers.

In the paragraph, Robert Moskow inquires about the impact of GLP usage on the slowdown in salty snacks and the company's strategy in the fast-growing protein drinks market. Ramon Laguarta responds by acknowledging the company's efforts to tap into the functional beverage market, particularly in protein and hydration categories, through products like Gatorade, Propel, and Muscle Milk. While acknowledging the health and wellness awareness trend among American consumers, he mentions that the current adoption of GLP treatments has minimal impact on their business.

The paragraph discusses the growing consumer awareness of health and wellness, which is influencing behavior and consumption patterns. The company is responding by focusing on portion control and evolving its product portfolio to include options with lower sodium, fat, and sugar, as well as incorporating positive ingredients like plant-based proteins and whole grains. They are accelerating these efforts to provide various options for different consumer needs and occasions. Although they haven't seen a direct impact from GLP, the general trend towards health and wellness is affecting food and beverage consumption, and the company feels well-prepared with a diverse range of products. This approach is part of a long-term strategy involving innovation and mergers and acquisitions, such as the acquisitions of Siete and Sabra, to enter new markets like meals. Additionally, they see potential in expanding protein offerings, particularly within the Quaker brand, beyond just beverages.

The paragraph discusses the positive performance of the company's European segment, which has achieved increased volume even as pricing stabilizes. The speaker, Ramon Laguarta, attributes this success to a consistent strategy that focuses on simplifying the business, cutting unnecessary costs, and reinvesting in growth areas like zero-sugar beverages and healthier snacks. While international operations, including Europe, offer significant opportunities for revenue and profit growth, they are not intended solely to fund North American investments, but rather provide overall flexibility in resource allocation. The European teams have been effective in executing strategies related to cost reduction, product availability, and entering new market spaces.

The paragraph discusses the company's confidence in achieving a long-term organic sales growth rate of 4% to 6%. Kevin Grundy from BNP Paribas questions whether the challenges in the snacks business are temporary or permanent, while expressing confidence in business strength outside the U.S. Ramon Laguarta responds, affirming belief in reaching the upper end of their growth guidance, driven by high international growth and expected acceleration in North America. He highlights significant opportunities, particularly in non-domestic settings, where the company can expand with targeted products and strategies.

The company expresses its strong commitment to achieving high single-digit EPS growth and highlights its past success in exceeding long-term guidance for top-line and bottom-line growth over the last five years. They are optimistic about maintaining this performance in the next five years. The speaker thanks the audience for their questions and investment, looks forward to the upcoming CAGNY meeting, and hopes they enjoy the company's products during the Super Bowl. The presentation ends with the operator's conclusion.

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