PepsiCo, Inc. (NASDAQ: PEP)

PepsiCo’s Q2 2025 net revenue grew 1.0% to $22.7 billion, with organic revenue growth of 2.1% after adjusting for foreign exchange impacts. The organic growth was driven by effective net pricing strategies, which contributed approximately 4 percentage points, partially offset by volume declines of 1.5%. This pricing strategy helped the company navigate inflationary pressures while maintaining market competitiveness.

The most significant impact on reported results came from $1.86 billion in impairment charges, primarily related to the Rockstar and Be & Cheery brands. These non-cash charges reflected management’s reassessment of brand valuations in challenging market conditions. Excluding these and other one-time items, core operating profit was $3.9 billion, down 5% year-over-year, demonstrating underlying operational resilience.

Reported earnings per share fell dramatically to $0.92 from $2.23 in Q2 2024, primarily due to the impairment charges. However, core EPS of $2.12 provided a more meaningful comparison, declining 7% on a reported basis and 5% on a constant currency basis. This performance reflected the impact of volume pressures and increased investments in market competitiveness.

Foreign exchange impacts continued to be a headwind, reducing net revenue by 1.5 percentage points and EPS by 2 percentage points. However, management noted improved FX outlooks, with expected full-year headwinds moderating from approximately 3 percentage points to 1.5 percentage points, primarily due to U.S. dollar weakening.

Gross profit margin remained relatively stable despite cost pressures, reflecting the company’s effective pricing and cost management strategies. The company’s productivity initiatives and supply chain optimization efforts helped offset commodity and labor inflation, demonstrating operational discipline in a challenging environment.

PepsiCo Foods North America (PFNA) faced challenges with revenue declining 2% organically to $6.48 billion. Volume declines of 1.5% reflected continued consumer pressure and competitive dynamics in the convenient foods category. The segment was impacted by value-conscious consumers moderating their snack purchases and increased promotional activity by competitors.

PepsiCo Beverages North America (PBNA) showed improvement with 1% organic revenue growth to $6.80 billion despite volume declines of 4%. Strong pricing realization of 4.5% more than offset volume pressures, reflecting successful revenue management strategies. The segment benefited from portfolio premiumization and improved execution in key channels.

International Beverages Franchise delivered strong performance with 5% organic growth to $1.37 billion, driven by both volume growth of 1% and effective pricing of 4%. The segment continued to benefit from geographic diversification and strong execution in emerging markets, demonstrating the resilience of the franchise model.

Europe, Middle East & Africa (EMEA) was a standout performer with 7% organic growth to $4.54 billion. Despite volume declines of 4%, exceptional pricing realization of 11% drove strong revenue growth. The segment successfully navigated inflationary pressures through strategic pricing while maintaining market share in key categories.

Latin America Foods showed strong underlying momentum with 6% organic growth despite a 7% reported decline due to foreign exchange impacts. Volume growth of 4% combined with pricing gains of 2% demonstrated strong local market execution and brand strength in the region.

Asia Pacific Foods remained essentially flat organically, with volume growth of 6% offset by pricing pressures of 6%. The segment continued to invest in market share expansion while facing competitive pricing dynamics in key markets.

PepsiCo’s international business continued to demonstrate strong momentum, building on the successful expansion and growth strategies implemented over recent quarters:

North America Performance

The North America business showed improved execution and competitiveness in key subcategories and channels. Both PFNA and PBNA segments demonstrated better performance compared to previous quarters, with PBNA achieving positive organic growth of 1%. Management noted improvements in portfolio innovation and competitive positioning, though volume pressures persisted due to consumer behavior changes.

International Markets Strength

International segments delivered robust performance across multiple regions:

• EMEA Region: Exceptional 7% organic growth with strong pricing realization of 11%, demonstrating effective management of inflationary pressures
• Latin America: Strong underlying growth of 6% organically with volume expansion of 4%, showing continued brand strength and market penetration
• Asia Pacific: Volume growth of 6% reflected successful market expansion initiatives, though pricing pressures limited overall organic growth
• International Beverages: Franchise model continued to deliver with 5% organic growth, benefiting from geographic diversification

The international performance underscored PepsiCo’s successful geographic diversification strategy, with strong local execution and brand relevance driving growth despite challenging global economic conditions. Foreign exchange remained a significant headwind, but underlying business momentum was clearly positive across most international markets.

Management highlighted that international markets provide both growth opportunities and natural hedges against regional economic volatility. The company’s focus on local market customization, brand building, and operational excellence has enabled sustained performance in diverse economic environments.

PepsiCo continued executing on multiple strategic initiatives designed to drive long-term growth and operational efficiency:

Portfolio Innovation and Optimization

• Product Innovation: Increased investment in portfolio innovation to drive growth and improve competitiveness in key subcategories
• Brand Portfolio Management: Strategic assessment leading to impairment of underperforming brands like Rockstar and Be & Cheery to focus resources on higher-potential opportunities
• Premiumization: Continued focus on premium product offerings to drive margin expansion and brand differentiation

Cost Optimization and Productivity

The company’s multi-year productivity plan, expanded through 2030, continued delivering benefits:

• Supply chain optimization initiatives reducing operational costs
• Organizational restructuring to improve efficiency and decision-making speed
• Technology investments enhancing operational capabilities
• Procurement savings through strategic sourcing initiatives

Market Competitiveness Initiatives

PepsiCo implemented several initiatives to improve competitiveness, particularly in North America:

• Enhanced go-to-market strategies in key channels
• Improved promotional effectiveness and trade spending optimization
• Strengthened relationships with key retail partners
• Category management improvements driving shelf presence and velocity

Management emphasized that these initiatives are designed to stimulate growth and profitability while positioning the company for sustainable long-term performance. The combination of cost optimization and growth investments reflects a balanced approach to value creation in a challenging operating environment.

PepsiCo reaffirmed its 2025 financial guidance while providing updates on foreign exchange impacts:

Confirmed 2025 Guidance

• Low-single-digit organic revenue growth – maintained from previous guidance
• Core constant currency EPS approximately even with prior year – reaffirmed confidence in profitability
• Core annual effective tax rate of approximately 20%
• Total cash returns to shareholders of approximately $8.6 billion, including $7.6 billion in dividends and $1.0 billion in share repurchases

Improved Foreign Exchange Outlook

The company updated its foreign exchange expectations, reflecting moderating headwinds:

• Foreign exchange translation headwind revised to approximately 1.5 percentage points from previous 3 percentage points
• Improvement based on current market consensus rates and U.S. dollar weakening
• Updated assumption implies 1.5% decline in core EPS in 2025 (previously 3% decline) compared to 2024 core EPS of $8.16

Strategic Outlook

Management expressed confidence in the company’s ability to deliver on guidance based on:

• Continued international business momentum and expansion opportunities
• Accelerated initiatives to improve North America business performance
• Portfolio innovation and cost optimization activities expected to stimulate growth
• Strong balance sheet and cash generation supporting strategic investments

CEO Ramon Laguarta noted: “We remain confident in our ability to deliver low-single-digit organic revenue growth with core constant currency EPS to be approximately even with the prior year.” This guidance reflects management’s confidence in the underlying business fundamentals despite near-term challenges.