Elliott said the position makes it one of PepsiCo’s largest shareholders. The company sent a letter to its board of directors on Tuesday. PepsiCo said it would consider Elliott’s proposals in the context of its growth strategy, which it said is aimed at accelerating growth and creating long-term value for shareholders.
The soda and snack maker is facing competitive pressure and changing consumer tastes. The company’s market value has fallen more than 20% from its peak since May 2023. In a presentation released Tuesday, Elliott outlined his plans for PepsiCo, including a possible restructuring of its beverage division and a review of its snack offerings.
The company’s shares rose 2.8% at 10:12 a.m. Tuesday.
“PepsiCo maintains an active and productive dialogue with our shareholders and values constructive contributions to delivering long-term shareholder value,” the company said in a statement. According to Elliott, PepsiCo’s beverages, including its namesake sparkling water brand, as well as Gatorade and Mountain Dew, have been losing market share and underperforming for “more than a decade.”
The investor suggested considering re-franchising an “operationally complex” beverage bottling network, following the example of Coca-Cola Co., so PepsiCo could focus on its core strengths.
Coca-Cola bottling partners are independent companies that purchase the soda maker’s brands and syrups for bottling and distribution. This model allows Coca-Cola to focus on building and growing brands, leaving the capital-intensive bottling business to independent operators, many of which are publicly traded companies.
PepsiCo also uses a network of independent partners, but at the same time owns a significant portion of its own bottling operations, which some investors believe the company should abandon.
While the soda business has been offset for years by snack brands Lay’s and Doritos, the food division has also been struggling recently, Elliott said. Food sales have been declining since 2023 as consumers, feeling the pressure of inflation, have become more concerned about nutrition and value.
Elliott believes that PepsiCo should review and optimize its snack portfolio, as well as get rid of loss-making assets.
The investor said his goal is to work with the beverage and snack maker’s board and management to achieve its goals, including aggressive investment in key brands. He also called on management to present a clear plan and new targets.
Source: Reuters