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PepsiCo Wants to Boost Sales, Cut Costs. The Street Is Doubtful.

Dec 09, 2025 17:42:00 -0500 by Evie Liu | #Consumer

Elliott Investment Management disclosed a stake in PepsiCo this year. (Justin Sullivan/Getty Images)

Key Points

PepsiCo investors are unimpressed by the company’s latest plans to boost sales growth, cut costs, and increase profits.

The initiative, disclosed Monday, came after “constructive engagement” with Elliott Investment Management, the activist investor that revealed a $4 billion stake in PepsiCo three months ago.

To stimulate sales, PepsiCo plans to offer smaller packages and containers at lower prices. It intends to improve its products by removing artificial colors and flavors and offering simpler ingredients.

To boost margins, the company plans to reduce operating costs, cutting the number of products it offers in the U.S. by nearly 20%. It closed three manufacturing plants and shut down several manufacturing lines this year.

These changes are expected to bring organic sales growth of 2% to 4% in 2026. Including acquisitions and the effect of favorable currency exchange rates, PepsiCo expects net revenue to increase 4% to 6% and core earnings per share to rise 5% to 7%.

“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,” the company said.

Still, PepsiCo stock was largely flat on Monday and Tuesday. The shares have fallen nearly 10% over the past 12 months as a result of softer sales trends and concern about the turnaround, while Coca-Cola stock has gained nearly 12%.

“There is a lot of work to do and the dual initiatives of a top-line rebound and cost cuts will be hard,” wrote Jefferies analyst Kaumil Gajrawala in a Tuesday note, “Accelerating cost cuts and rejuvenating growth at the same time is a difficult needle to thread.”

Despite the new pricing strategy, the customers PepsiCo has lost because of high prices will be difficult to win back, wrote the analyst. Efforts to innovate in terms of products don’t always go well. And while a leaner portfolio can be good over the long term, it is almost always a drag on sales in the near term, he said.

“We view many of the steps outlined in the release as necessary, but iterative in comparison to some of the more strategic changes some investors were discussing in recent weeks,” wrote UBS analyst Peter Grom.

Elliott has suggested cutting overhead and freeing up more cash by outsourcing PepsiCo’s low-margin, asset-heavy bottling operations to franchisers. On Monday, PepsiCo said a full refranchising of its North American beverage operation is “not under consideration.”

Rather, the company is integrating its food and beverage businesses in Texas to save money in areas such as transportation, and is considering a national rollout for that approach. CEO Ramon Laguarta said PepsiCo will take a nuanced approach that considers points such as businesses’ scale and sales channels to limit the disruption.

Gajrawala anticipates that at least three or four of PepsiCo’s board members won’t stand for re-election next year, opening the door for “fresh ideas.” While Laguarta serves as both chairman and CEO at PepsiCo, Gajrawala believes those roles should be separate.

“While PepsiCo Foods remains a good asset, it is struggling,” said Gajrawala, “Innovation, openness to ideas, a new CFO and a ‘refreshed’ board should help, but it is too early to call for a turnaround in fundamentals.”

Investors are still waiting for evidence that PepsiCo’s actions are driving an improvement in sales trends. Still, Grom thinks the latest changes are “a step in the right direction.” He says the stock could rise because PepsiCo’s valuation is low compared with those of its peers.

Write to Evie Liu at evie.liu@barrons.com