Expert Insights - Investor Desk

cola cans and advertisements praising the brand’s taste superiority over Coke. While, as of now PepsiCo is not only considered as beverage behemoth but its its business now extends beyond this industry, with Frito-Lay and Quaker products accounting for over half of sales and over 65% of profits. A diversified portfolio across snacks and beverages can be considered as competitive edge of PepsiCo.

After years of sluggish sales growth and underinvestment, Pepsi has committed to reinvigorating its top line. To that end, it has made significant investments in manufacturing capacity (for example, production lines to meet demand for reformulated packaging), system capacity (route optimization and sales technology), and productivity (harmonization and automation.

These investments can be considered as prudent as they will allow the company to strengthen its key trademarks such as Mountain Dew and Gatorade while deepening its presence in growth markets like sub-Saharan Africa, and also yielding enough cost savings to reinvest and widen profits. Pepsi’s growth trajectory is not without risk, as the company faces secular headwinds such as shifts in consumer behavior. Additionally, changing go-to-market dynamics, such as online commerce that encourages real-time price comparisons and obviates the extent of Pepsi’s retail distribution advantage, allow for more nimble and aggressive competition.

Financial Strength

Pepsi’s financial health can be considered as excellent. While leverage has ticked up due to recent acquisitions the company still has a strong balance sheet with manageable debt levels and robust free cash flow generation. Strong interest coverage ratios also lend credence to the firm’s health in this regard. For the year2020, PespiCo has reported revenue of USD Mil 70,372 while its estimated revenue for the year 2021 is USD Mil 76,632 which is up by 8.9% compared to the previous year. The firm in the year 20220 has reported EBIT of USD Mil 10,080 while its estimated EBIT in the year 2021 is USD Mil 11,746 which is 16.5% up compare to the previous year.The firm has reported free cash flow USD Mil 584 which is 83.8% down compared to the previous year. The major reason for the same is PepsiCo has ramped up strategic investments across the business and booked a slew of nonrecurring cash charge.

Bulls Say

In still beverages- a category facing fewer secular challenges, particularly in the U.S.-Pepsi is a much more formidable competitor to Coca-Cola.
Pepsi’s global dominance in salty snacks may be underappreciated; with volume share more than 10 times that of the next-largest competitor, the firm benefits from unparalleled unit economics and go-to market optionality.
The firm’s consolidated beverage and snack distribution operations, combined with its direct store delivery capabilities, allow for better execution in merchandising.

Company Profile

PepsiCo is one of the largest food and beverage companies globally. It makes, markets, and sells a slew of brands across the beverage and snack categories, including Pepsi, Mountain Dew, Gatorade, Doritos, Lays, and Ruffles. The firm uses a largely integrated go-to-market model, though it does leverage third-party bottlers, contract manufacturers, and distributors in certain markets. In addition to company-owned trademarks, Pepsi manufactures and distributes other brands through partnerships and joint ventures with companies such as Starbucks. The firm segments its operations into five primary geographies, with North America (comprising Frito-Lay North America, Quaker Foods North America, and North America beverages) constituting over 60% of consolidated revenue

(Source: Morningstar)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.