-- Highlights suite of innovation, productivity and affordability
initiatives at PepsiCo Foods North America to accelerate growth and
improve core1 operating margin performance
-- Expects organic revenue, core constant currency and core earnings per
share (EPS) growth to accelerate in fiscal 2026 with strong core
operating margin expansion
-- Prioritizes disciplined capital allocation framework, improving free cash
flow conversion and increasing cash returns to shareholders
-- Aims to optimize North American supply chain and go-to-market systems
-- Follows constructive engagement with supportive PepsiCo shareholder
Elliott Investment Management
-- Live Q&A session at 7:30AM EST on Tuesday, December 9, 2025, with PepsiCo
Chairman and CEO
PURCHASE, N.Y., Dec. 8, 2025 /PRNewswire/ -- PepsiCo, Inc. $(PEP)$ today announced certain commercial and financial priorities to enhance shareholder value, including a preliminary 2026 financial outlook. The announcement followed a comprehensive review of PepsiCo's strategic initiatives and plans (overseen by its Board of Directors).
"Today, we are announcing our plans and initiatives that aim to accelerate organic revenue growth, deliver record productivity savings and improve core operating margin -- starting in 2026," said Ramon Laguarta, Chairman and CEO of PepsiCo. "PepsiCo Foods North America will play a critical role towards achieving these targets and we feel encouraged about the actions and initiatives we are implementing with urgency to improve both marketplace and financial performance."
This announcement incorporates constructive engagement and is supported by PepsiCo shareholder Elliott Investment Management.
"We appreciate our collaborative engagement with PepsiCo's management team and the urgency they have demonstrated," said Marc Steinberg, Partner at Elliott. "We believe the plan announced today to invest in affordability, accelerate innovation and aggressively reduce costs will drive greater revenue and profit growth. In addition, we welcome the comprehensive review of PepsiCo's North America supply chain and go-to-market systems, as well as PepsiCo's commitment to Board refreshment. We are confident that PepsiCo will create substantial value for shareholders as it executes on this plan, and we look forward to continued engagement with the Company."
Commercial Actions and Financial Priorities (Including Preliminary 2026 Financial Outlook)
Accelerating organic revenue growth and improving core operating margin expansion are critical to enhancing long-term shareholder value. To achieve these objectives, we are acting with a high sense of urgency to improve the marketplace competitiveness and financial performance of PepsiCo Foods North America by:
-- Implementing sharper everyday value through a targeted approach on
affordable price tiers by brand and channel, aimed at stimulating growth
and improving the purchase frequency of our mainstream brands.
-- Elevating an expansive innovation agenda, with permissible and functional
offerings that remove artificial colors and flavors, provide simpler
ingredients, and include more protein, fiber and whole grains. This
includes the recent introduction of Simply NKD Cheetos and Doritos, the
restaging of Lay's and Tostitos and the 2026 launch of Doritos Protein.
-- Aggressively reducing operating costs and improving operational
excellence with savings generated to support meaningful investments in
advertising and marketing and consumer value. For example, we have closed
three manufacturing plants and shut several manufacturing lines this year
and are in the process of reducing nearly 20 percent of SKUs in the U.S.
by early next year.
Customers have expressed enthusiasm and support for our commercial plans, and we expect in-store points of presence to increase during the first half of 2026. Therefore, we expect PepsiCo Foods North America to deliver organic revenue growth and core operating margin expansion in fiscal 2026 with good progress being made towards these objectives. We also expect PepsiCo Beverages North America to build upon its business momentum and the international business to sustain its resiliency in fiscal 2026.
As a result, we expect full-year 2026 organic revenue growth to range between 2 and 4 percent and expect to deliver the high end of that range during the second half of 2026. In addition, acquisitions net of divestitures that occurred in 2025 are expected to contribute 1 percentage point to reported net revenue growth in 2026. Based on current foreign exchange spot rates, foreign currency translation is also expected to benefit reported net revenue growth by approximately 1 percentage point in fiscal 2026. The ranges above imply net revenue growth within a range of 4 to 6 percent in fiscal 2026.
In addition to the aggressive cost reduction actions being taken at PepsiCo Foods North America, we also intend to advance and accelerate our global productivity initiatives through more automation, digitalization and simplification initiatives. We aim to deliver a record year of productivity savings in 2026, benefiting in part from the actions taken in the second half of 2025.
With these savings and ongoing efforts to operate more efficiently, we expect PepsiCo to deliver at least 100 basis points of core operating margin expansion in aggregate over the next three fiscal years.
We expect the core effective annual tax rate to be approximately 22 percent in 2026 due to the pending impact of global minimum tax regulations (which may continue to evolve).
Based on current foreign exchange spot rates, foreign currency translation is expected to benefit core EPS by approximately 1 percentage point in fiscal 2026.
As a result of the factors mentioned above, we expect core EPS to increase approximately 5 to 7 percent in fiscal 2026 -- or approximately 7 to 9 percent when excluding the impact of global minimum tax regulations. For more information, including our preliminary core constant currency EPS outlook for 2026, please refer to our "2026 Preliminary Financial Outlook" below.
Review of North America Go-to-Market
With respect to our North America supply chain and go-to-market optimization initiatives, we are carefully evaluating an integrated model and intend to take a nuanced approach factoring in key components such as return on investment, scale and market share at a U.S. state level. We intend to provide a comprehensive update on the North America Supply Chain and Go-To-Market optimization initiatives to analysts and investors in late 2026.
Capital Allocation and Free Cash Flow Conversion
Our disciplined long-term capital allocation framework will feature the following priorities:
-- Invest in the business, with capital spending expected to be below 5
percent of net revenue in 2026;
-- Pay and increase annual dividends (following 53 consecutive years of
increases), subject to Board approval; and
-- Carefully consider and balance portfolio optimization activities versus
share buybacks, while ensuring access to Tier 1 commercial paper.
We also expect a free cash flow conversion ratio of at least 80 percent in 2026 (which includes a final tax payment of nearly $1 billion related to the Tax Cuts and Jobs Act of 2017), and at least 90 percent in fiscal 2027. Subject to Board approval, we expect to increase annual cash returns to shareholders (which includes cash dividends and share repurchases) in 2026 and 2027.
Governance
PepsiCo intends to continue its ongoing Board refreshment with a focus on global leaders who can help us meet our meaningful growth and profitability objectives. Elliott is supportive of PepsiCo and these actions. Both PepsiCo and Elliott look forward to continued collaboration as they work to maximize shareholder value.
2025 Financial Outlook
The Company affirmed its 2025 financial outlook. For more information, please refer to "2025 Financial Outlook" below.
Please make note of upcoming communications for analysts and investors:
-- A brief discussion of today's update, led by Chairman and CEO Ramon
Laguarta, will take place on Tuesday, December 9th at 7:30AM EST. Further
details will be accessible on the Company's website at
https://www.pepsico.com/investors.
-- PepsiCo will issue its fourth-quarter and full-year 2025 (ending December
27) financial results and other related information on Tuesday, February
3, 2026 by posting the following materials and links on the company's
website at https://www.pepsico.com/investors/earnings.
-- Press release and 10-K at approximately 6:00 a.m. EST
-- Prepared management remarks (PDF format) at approximately 6:30
a.m. EST
-- Live question and answer session for analysts with Ramon Laguarta,
Chairman and Chief Executive Officer, and Steve Schmitt, EVP and
Chief Financial Officer at 8:15 a.m. EST
-- PepsiCo Chairman and CEO Ramon Laguarta and EVP and CFO Steve Schmitt
will present at the annual Consumer Analyst Group Of New York (CAGNY)
conference on Wednesday, February 18th, 2026. The event will be webcast
via the company's website at -
https://www.pepsico.com/investors/events-presentations
(1) Please refer to the Glossary for the definitions of non-GAAP financial measures, including "organic revenue," "core," "constant currency," "free cash flow" and "free cash flow conversion." PepsiCo provides guidance on a non-GAAP basis as we cannot predict certain elements which are included in reported GAAP results, including the impact of foreign exchange and commodity mark-to-market net impacts.
Contacts: Investor Relations Communications
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