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PepsiCo, which has been under investor pressure to rev up its performance, turned in Q4 with solid 5.6% revenue growth while reiterating pricing and innovation initiatives that should yield accelerated improvement as new year progresses. PEP revenue rose 5.6% to $29.3 bil despite 2% volume decline. Gross margin widened a bit to 53.2% from 52.6%. Operating profit rose 58.1% to $3.6 bil. For full year, revenues edged up 2.3% to $93.9 bil. Full-year operating income dropped 10.8% in part due to impairment charges taken earlier in fiscal year vs divested juice brands. Jefferies' Kaumil Gajrawala credited co with "modest beat" on earnings amid "signals that trends may be headed in a better direction." For now, tho, PEP is sticking with forecast of 2-4% organic revenue growth in 2026 fiscal year. Shares were up in early trading today as investors digested report.In core PepsiCo Beverages North America arm, revenues rose 4%, +2% on organic basis, boosted in part by Poppi acquisition. Volume fell 4%, 2.5 pts of that related to transition of co's low-profit casepack water biz to 3d-party. For full year, PBNA edged up 1.5% on 5% in pricing offset by 3.5% volume decline, from what we can glean from 10-K filing. That volume decline was driven by 6% decline in noncarbs and "slight" decline in CSDs. Operating profit dropped 53% on host of factors including $1.5 bil Rockstar Energy impairment charge - nearly half of $4 bil purchase price - and tariff payments. Among highlights of full-yr performance was growth in volume and revenue of Pepsi trademark, thanks to double-digit growth in Pepsi Zero Sugar, abetted by blind taste tests vs Coke Zero, and flavor innovation like Pepsi Wild Cherry & Cream. As we've reported, that revived Pepsi Challenge will be featured in Super Bowl ad on Sun.With lower- and middle-income consumers financially stressed, PEP has been culling costs so it can invest proceeds in affordable pricing, particularly on snack side, where Wall St Jnl reported that tags may be slashed as much as 15%. But it's also innovating on premium side in response to consumers' desire for greater functionality in their food/bev purchases, including protein-oriented Starbucks and Propel offerings and fiber-enhanced entries like Pepsi-Cola Prebiotic.In new year, "we aim to accelerate growth by restaging large, global brands, introducing an expansive set of product innovation in emerging and functional spaces, and offering sharper value to address consumer affordability dynamics," with efforts funded by productivity savings, reminded chmn/CEO Ramon Laguarta. Those global brands - first Lay's and Tostitos, then Gatorade and Quaker - are getting makeovers to improve quality, update graphics and move to simpler ingredients. As for the innovation, much of it will be centered around hydration, whole grains, fewer artificial ingredients, protein and fiber, Laguarta indicated. Several of these should be appealing to growing legion of Americans on GLP-1 weight-loss drugs, he noted. Prices will be eased to generate greater velocity, too, at time of consumers' affordability concerns, a move that on snack side has been rewarded by retailers with expanded facings as spring resets takes place, he said.CEO reiterated list of revamps and innovations that have been heralded so far: reformulation of Muscle Milk without artificial flavors or sweeteners, protein-infused Starbucks Coffee and Propel Water offerings, Pure Leaf Mental Focus tea, Gatorade and Propel tablets and enhancers, and effort to riff off dirty-soda trend with Dirty Mountain Dew Cream Soda. Acquired Poppi brand is delivering, with sales popping by 45% for year to $745 mil at retail. And Pepsi's own Pepsi Prebiotic, with smidgen of 3 g of fiber, sold out in less than 30 hrs following debut on Black Friday, warranting retail rollout. With Celsius, Alani Nu and Rockstar energy drinks consolidated now at Celsius Holdings and all moving thru blue system, co is optimistic about prospects for portfolio, tho distribution cutover of Alani is not quite complete yet, Ramon said.Asked on investor call this morning about Mountain Dew, CEO acknowledged that's longer work in progress but pointed to success of Baja subline, particularly with Hispanic consumers, and marketing that needs to be targeted to greater local differences than with most Pepsi brands. "It will take a little bit longer . . . we're seeing progress," he assured.Under pressure from activist investor, PEP has been reconsidering its stance on refranchising its bottling system, as rival Coca-Cola had done a decade ago. Asked about structural moves this morning, tho, Laguarta made it clear as he has in past that any such tinkering would be at modest scale. Co is working to "construct a scaled model that takes into consideration the nuances of every part of the US including potential small refranchising models in parts of the country if we can see that's a solution," he said. But these will be "very small parts," he stressed. PEP also has been experimenting in Texas with delivery of foods and bevs on same trucks. Initial findings have been "positive," Ramon said, but he doesn't expect to have anything definitive to say until late in the year.

PepsiCo Grows Q4 Topline 5.6% as Raft of Innovation & Revamps Head to Market; Any Refranchising Will Be Modest in Scale, CEO Advises

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