Elliott Management Pressures PepsiCo With a $4 Billion Stock Buy

Perennial top performer PepsiCo has at least one detractor. Investment firm Elliott Management this week disclosed it’s amassed a $4 billion stake – about 2% of all PEP stock – in the soft drink etc. company, saying PepsiCo is underperforming, particularly against rival Coca-Cola.

“PepsiCo is a storied company with iconic core brands and unmatched scale, but its stock has underperformed in recent years and trades near decade-low valuation levels,” the activist investment firm said on its website. “Elliott’s materials detail a clear agenda to improve focus, boost operational efficiency and target investment to the most promising opportunities at PepsiCo, while restoring the Company’s momentum in North America.”

Indeed, North America was PepsiCo’s Achilles’ heel last year. Overall, the big company had a marginally good 2024, upping its sales by “only” $383 million to nearly $91.9 billion. But every North American business segment lost sales last year. The Frito-Lay division was down $439 million; Quaker Foods down $189 million; PepsiCo Beverages down $282 million. The savior was the European segment, eclipsing $2 billion from just $767 million in 2023.

PepsiCo’s stock price neared $200 a share in April 2023, but dipped to $130 this June before heading back up toward $150. Today, Sept. 3, it closed at $148.64.

Elliott’s initial letter to PepsiCo recommended reviewing the North American beverages business, “evaluat[ing] the potential refranchising of PBNA’s operationally intensive bottling network – as its closest peer has.” And “aligning PFNA’s [PepsiCo Foods North America] costs to the present volume reality. Additionally, PFNA should streamline its portfolio by divesting non-core and underperforming assets.”

PepsiCo has made some moves this year. Early this year PepsiCo paid $1.95 billion to acquire prebiotic soda-maker Poppi … then, curiously, launched its own prebiotic version of Pepsi two months later. Just last month, the company paid $585 million to increase its ownership of Celsius Holdings to 11%, with PepsiCo also handing over to Celsius its Rockstar Energy brand while taking over distribution of Celsius’ recently acquired Alani Nu energy brand.

PepsiCo said on its website: “PepsiCo maintains an active and productive dialogue with our shareholders and values constructive input on delivering long-term shareholder value. We note Elliott Investment Management’s disclosure of its presentation and will review its perspectives within the context of our strategy to drive sustainable growth.

“That strategy includes targeted investments in innovation, portfolio transformation, and international growth as well as corporate-wide, multiyear productivity initiatives. We are confident that the successful execution of these initiatives positions PepsiCo to accelerate growth, strengthen our competitive advantage, and deliver meaningful, long-term value for our shareholders.”