PepsiCo’s (PEP) Next Challenge: Health, Wellness and GLP-1s

SPEAKER_1 (0:00)

PepsiCo, a little change this morning. We're up about a percent right now after reporting a top and bottom line earnings beat and narrowing full year guidance for its earnings. The North American snack volumes were flat year over year while the international business continues to grow. For more on this, let's welcome in our panel. Joining us, Tsvetta Kaleynska, the consulting founder and CEO at RealA Global, and Noah Kann, co-founder and co-CEO at Vinari Asset Management. Great to have you both with us. Now, Tsvetta, as I look at this, Pepsi beat on both revenue and EPS, but they did cut their full year EPS growth guidance to two and a half to three percent, down from five to seven percent. How do you think investors should interpret that combination?

Tsvetta Kaleynska (0:39)

It's a great analysis that you just mentioned, and I actually went online and looked for basically what investors said about PepsiCo, just so I could compare that directly. So just analyzing the last quarter of conversations among US investors, there are about 150,000 social media posts specifically about the company. Going into today, investors were incredibly cautious, and today's earnings actually told us exactly why these investors were cautious because international growth as we heard was great, but the North American beverage definitely continued to struggle. So investors over the last three months, what I've noticed online, they've been very much sounding the alarm on exactly why they were cautious, with almost 14 percent negative sentiment, and by the way, increasingly, quarter over quarter, they continue to be incredibly negative about the stock. So overall sentiment is shaky.

A major talking point last quarter is actually the recall, the Gatorade recall, which I'm sure you remember, and generally investors are pretty much concerned about the brand reputation. So here's what's interesting to me as an analyst. Basically, while the sentiment seems to be incredibly growingly negative and generally deteriorating, PepsiCo's marketing campaigns continuously create marketing buzz among consumers. So the bottom line here I think is that retail investors aren't necessarily giving up on PepsiCo just yet, but they definitely want to know and they want to see proof that management can actually deliver on a turnaround.

SPEAKER_1 (2:12)

And Noah, Tsvetta's point gets to the bigger issue here, this negative sentiment but still looking for and seemingly somewhat hopeful for this turnaround. Did Pepsi do enough to break that bearish narrative and was this quarter actually evidence that we are having any kind of turnaround in North America? Or do you view us as still waiting for one?

Noah Kann (2:34)

Yeah. So in terms of the sentiment to what she just said, a lot of it is the industry as a whole. So we're seeing shifts from these higher sugar beverages into more of the like quote unquote healthier beverages. So this is zero sugar and more functional options. Maybe it's fiber.

When they had their acquisition of Poppi, I believe this was back in May of 2025, the North American sales have kind of been shifting over away from the high fructose corn syrup and from these high sugar contents until these more quote unquote healthier drinks. So in terms of the lower expectations of guidance, I'm not entirely surprised because it's been on a decline for almost a decade now. But if they can have more of a stabilization, maybe the sentiment will shift overall.

SPEAKER_1 (3:23)

And Tsvetta, your data also shows what Noah was just talking about there, that consumers are increasingly focused on healthier products. They want lower sugar. They want things that feel like they're having some added health benefit, added protein, things like that.

As we look at Pepsi's weakness, how much of it are you viewing as being cyclical versus a structural shift in what consumers actually want?

Tsvetta Kaleynska (3:47)

Both, you and Noah actually just hit the point that I actually wanted to make. So this is totally not a structural thing. It's not a temporary thing. What we've been seeing across social media discussions now actually around consumers, this is pretty much over the last 18 months that I'm talking about, is we're seeing the whole beverage industry going through a whole broader shift of consumer behavior, which has to do with the same things that you mentioned, which is health related, wellness related, and also weight related. So GLP-1 has been a huge trend I've been noticing in drinks and the same acquisition that my fellow guest just mentioned of Poppi is a great example of that. So within the whole beverage space, we're seeing the shift ongoingly moving these companies away from what they used to, what the products that used to make them popular to now the healthier lifestyles. The GLP-1, mark my words, we should continue monitoring because we actually see that trend coming very heavily into the beverage and snacking space.