PepsiCo’s Strategic Overhaul Gains Momentum

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PepsiCo is undertaking a significant transformation of its business model. This comprehensive corporate restructuring, involving tough portfolio choices and pressure from an activist investor, coincides with initial positive signals from market analysts. The critical question now is whether the shift in focus from "growth at any cost" to more profitable operations will deliver the intended results.

The company's restructuring efforts are not occurring in isolation but against a backdrop of notable pressure from Elliott Investment Management. The activist investor holds a stake valued at approximately $4 billion and has long advocated for a strategic review, particularly concerning PepsiCo's integrated bottling model and what it views as a bloated product portfolio from an investor perspective.

Operational performance in 2025 has been sluggish so far. For the third quarter ending September 6, 2025, PepsiCo reported organic sales growth of just 1.3%. In the same period, rival Coca-Cola achieved 6% growth, highlighting PepsiCo's current lag in expansion.

Despite this, the announced efficiency measures are resonating in the market. On December 15, JPMorgan analyst Andrea Teixeira upgraded the stock from "Neutral" to "Overweight," setting a price target of $164 based on the recent strategic decisions. This represents a potential upside of roughly 10.2% from recent levels. Teixeira cited the streamlined portfolio and constructive dialogue with Elliott as factors expected to bolster margins.

Analyst consensus, however, is not unanimous. While Rothschild & Co Redburn slightly increased its price target to $120, it maintained a "Sell" rating. This divergence illustrates that while the market recognizes the potential of the overhaul, it also perceives significant execution risks.

In terms of recent stock performance, the shares show modest gains of 3.68% on a weekly view and 1.13% over the past 30 days when measured in euros. On an annual basis, however, the stock remains down by nearly 12%, indicating a slow recovery from previous setbacks.

Leadership and Organizational Shifts

Central to this realignment are changes at the top management and organizational levels. On December 15, PepsiCo announced the appointment of Steven Williams as Executive Vice President and Vice Chairman, effective December 28, 2025. He will also assume the role of Global Chief Commercial Officer & Corporate Affairs.

This move consolidates the company's worldwide sales and communications activities under a single leader. The objective is to standardize commercial strategies across regions and steer them more efficiently.

Concurrently, media reports indicate PepsiCo is preparing for workforce reductions in the United States and Canada. Headquarters staff have reportedly been asked to work remotely during this phase. These actions form part of a broader efficiency program that has been taking shape for some time.

A particularly decisive measure involves plans to eliminate around 20% of its product portfolio. Based on current information, this will affect approximately 12 out of 60 core brands, which are slated to be removed from the market by early 2026. This deliberate reduction in complexity aims to lower costs and sharpen focus on higher-margin brands.

Shifting from Volume to Profitability

The portfolio cuts signify a strategic pivot: profitable growth is now the top priority over maintaining the broadest possible market presence. Underperforming or low-margin brands are being removed to redirect capital and management attention toward so-called "Power Brands."

This approach is not unprecedented in the consumer goods sector. In several instances, turnaround programs focused on a smaller number of strong brands have led to better cost control and improved margins. PepsiCo is now attempting to apply a similar model to its own structure.

Despite the ongoing transformation, the company remains a reliable source of shareholder returns. PepsiCo has increased its dividend for 53 consecutive years, earning it a place among the "Dividend Kings." The recent dividend yield of approximately 3.76% provides a buffer for income-focused investors during this period of change.

Key Points of the Current Situation:

• Portfolio reduction targeting roughly 20% of core brands
• Planned workforce reductions in the U.S. and Canada
• Activist investor Elliott Management holds a ~$4 billion stake
• Q3 2025 organic growth: 1.3% (versus Coca-Cola's 6%)
• Widely differing analyst opinions (Overweight vs. Sell)

The 2026 Outlook: Execution is Key

For 2026, management is targeting organic revenue growth of 2% to 4%—a clear improvement over the weak third quarter of 2025, yet still moderate. Achieving this goal depends heavily on how effectively Steven Williams steps into his new role from late December and how smoothly the portfolio rationalization and workforce measures are implemented.

The focus for the coming months will therefore center on three main areas: which specific brands will be discontinued, how quickly the announced efficiency programs will translate into visible financial results, and whether PepsiCo can narrow the growth gap with Coca-Cola. Successful execution along these lines would fulfill the core purpose of the current strategic shift: less operational drag, higher profitability, and renewed momentum in the core business.