Activist shareholder Elliott Investment Management, which holds a $4 billion position in PepsiCo, sent a comprehensive presentation and letter to the company's board detailing a plan to reaccelerate growth and improve performance. The plan emphasizes greater focus, improved operations, strategic reinvestment, and enhanced accountability.
Key recommendations for PepsiCo Beverages North America (PBNA) include refranchising the bottling network, a move Elliott believes would restore operating margins that are currently 1,000 basis points lower than Coca-Cola's. Elliott also suggests portfolio optimization by rationalizing the SKU count and divesting underperforming brands, such as Rockstar.
For PepsiCo Foods North America (PFNA), Elliott recommends halting aggressive growth strategies and realigning the cost base, with a specific suggestion to divest Quaker, which is seen as outside Frito-Lay's snack core. These changes aim to free up capital for reinvestment in core franchises and new growth categories like protein and probiotics, potentially providing at least 50% upside to shareholders.
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