PepsiCo Embarks on Strategic Overhaul to Revive Growth

Pepsi US7134481081

Facing persistent sales declines and mounting pressure from activist investors, PepsiCo has initiated a sweeping strategic restructuring. The beverage and snack conglomerate is taking decisive action to streamline its operations and restore profitability, a move that has garnered positive initial reactions from market analysts.

The company’s radical new direction is a direct response to a challenging operating environment. In the third quarter of 2025, PepsiCo reported volume declines of 4% in its North American food business and 3% in beverages. The previous strategy of relying heavily on price increases to drive revenue growth reached its limit with inflation-weary consumers. CEO Ramon Laguarta described the consumer landscape as "stressed," prompting a strategic pivot aimed at reviving sales volume.

At the heart of this transformation is a major efficiency drive. Management plans to eliminate approximately 20% of its product variants (SKUs) in the U.S. market by early 2026. The objective is to cull underperforming niche items and sharpen the company's focus on high-turnover core brands. This portfolio simplification is designed to win back health-conscious shoppers with a cleaner product lineup and more attractive price points on key items.

Operational Consolidation Underway

This product rationalization is accompanied by significant operational cuts. PepsiCo has confirmed the closure of three manufacturing facilities—two Frito-Lay plants in Orlando and one facility in New York. This supply chain consolidation marks a clear departure from prior expansion-focused strategies and is expected to lead to workforce reductions.

Wall Street Reacts with Upgraded Rating

The announcement prompted an immediate response on Wall Street. JPMorgan analyst Andrea Teixeira upgraded PepsiCo shares from "Neutral" to "Overweight" on Wednesday, raising the price target to $164. The bank cited an improved positioning for 2026, driven by anticipated productivity gains and an accelerated innovation pipeline that includes products like protein-enriched Doritos.

Teixeira also highlighted a valuation gap, noting that PepsiCo shares are currently trading at a high-single-digit percentage discount compared to peers. This discount, following recent share price weakness, was presented as an attractive entry point for investors.

Financial Targets and Technical Outlook

Looking ahead, management has set more ambitious goals for the coming fiscal year. For 2026, PepsiCo is targeting organic revenue growth of 2% to 4%, a notable improvement over the modest 1.5% growth recorded in the first nine months of 2025. Earnings per share are projected to increase in the mid- to high-single-digit range.

From a technical analysis perspective, the picture has brightened. With a current share price of 128.08 euros, the stock is trading above its key 200-day moving average of 123.47 euros—a level market technicians often view as a positive signal for the longer-term trend. The upcoming fourth-quarter earnings report will be crucial for the stock's trajectory, as it must demonstrate whether the streamlined portfolio can effectively halt volume erosion without compromising profit margins.