PepsiCo, Inc. (NASDAQ:PEP) Q2 2023 Earnings Call Transcript

So we feel good. We’re seeing all the execution metrics for Gatorade improving. So inventory on display, service levels to our customers, which were a little bit handicapped in the past due to supply chain issues. So we’re seeing the health of the brand and the category at a pretty good level. It is true that there are some new entrants in the category like Prime that have been taken some space, especially with younger audiences. They’ve been affecting Gatorade, but they’ve been affecting more of some other brands in the category that had that kind of profile. So we feel good about the execution. We feel good about how the brand is performing. We’ve increased advertising substantially against Gatorade and we’ll continue to do so in the back end of the summer and the year.

So we feel good about Gatorade. And I think the G2 DSD is going to be a structural move that will give us better execution and capacity to respond to weather changes and opportunity in the marketplace going forward.

Operator: Thank you. One moment for our next question. Our next question comes from Andrea Teixeira with JPMorgan. Your line is open.

Andrea Teixeira: Hi. Good morning, everyone. So my question is more on the balance of pricing and volumes. Obviously, you’re lapping some of the most strong price increases from last year. And you’re expecting, I would say, are you expecting still high-single digits in the second half with volumes more flattish or it’s still negative because to get to the math of 10%, perhaps you’re lapping Russia, but it seems that the UK and France and Spain have lagged a bit for the top line. So I’m trying to reconcile the implied organic 7.5%-ish with better volumes. So in other words, you are seeing some improvement there as pricing kind of resolve for the consumer. How we should be thinking to Ramon’s comment on some of the discounters and that happening or are you still seeing room for continued pricing, but to a lesser extent, as you mentioned, at CNBC interview? Thank you.

Hugh Johnston: Hi. Ramon, go ahead.

Ramon Laguarta: Yeah. No, we can have Hugh continue the CNBC interview.

Hugh Johnston: Hi, Andrea. So balance sheet (ph) revenue, the squeeze is 7.5%. What I think we’re going to see is volumes will be sort of in the flattish range for the balance of the year. Obviously, there’s still carryover pricing. And I don’t think we’ll do anything different than our normal cycles on pricing in the balance of the year. You tend to see pricing in the beverage business in the fourth quarter. Frito tends not to go in the balance of the year, but that’s TBD. We’ll see how the year plays out. But the implication that we have in the forecast right now is kind of back to our relatively more normal pricing. And obviously, that sets us up for ’24. And then a lot of ways to think about it as the back half of the year is a little bit ahead of our long-term guidance, which I think is the momentum that we’ll carry forward.

Operator: Thank you. One moment for our next question. Our next question comes from Chris Carey with Wells Fargo Securities. Your line is open.

Christopher Carey: Hi. Good morning.

Hugh Johnston: Good morning, Chris.