Beer Marketer's Insights - Reporting Soft Q1, PepsiCo Eases Off on Earnings Outlook; In Early Discussions on Whether to Onboard Celsius' Newly Acquired Alani Nu Energizer; No Firm Commitment on Food Dyes

PepsiCo enjoyed slight uptick in revenue in its Q1 but volume in its North American Beverages segment declined 3% and co cut its earnings guidance as it navigates tumultuous environment in which tariff onslaught might be pushing economy into recession. On investor q&a this morning, chmn/CEO Ramon Laguarta indicated that it hasn't been settled yet whether Alani Nu brand acquired by PEP's energy partner Celsius Holdings will move into Pepsi system. "We're having conversations with Celsius after they acquired new brands and are in early discussions on finding ways to participate or not," he reported. But "it's still too early to make any public comment." In first period of year net revenue sagged 1.8% to $17.9 bil but was up 1.2% on organic basis excluding currency impacts. Gross margin widened nearly a point to 55.8% from 54.9%. Operating income fell 4.9% to $2.6 bil. PepsiCo Beverage North America rose 1% on organic basis to $5.9 bil in sales, tho volume was off 3%. Its operating profit was off 10% to $460 mil on nominal basis but up 14% on adjusted basis. PEP claimed "strong, sustainable levels of productivity savings and improvements in marketplace performance" while sharpening focus on growth segments like zero-sugar, functional hydration and sports nutrition, making fewer but larger-scale bets, as with rollout of Mountain Dew Baja Blast last year and new "Food goes better with Pepsi" push this year. International bevs biz performed better, delivering 11% organic revenue growth, driven by China, India, Egypt, Turkey, Mexico, Brazil, UK and Australia.Looking out at rest of year, PEP is maintaining its expectation that revenue will grow by low‐single‐digits but now expects constant-currency earnings per share to come in about even with last year's, not up by mid‐single‐digits as it previously anticipated. Asked about adjustment, CFO Jamie Caulfield cited tariffs, consumer confidence that latest survey shows to have "really nosedived" and Frito-Lay's continued "subdued performance" as turnaround plan is implemented.Asked about Poppi acquisition, Laguarta reserved comment until regulatory approval is in hand and deal actually closes.Color Offered on Artificial Dyes Announcement on Tues by Dept of Health & Human Services on its plans to phase out artificial food dyes seems to have created more confusion than clarity, with actual food/bev marketers nowhere to be seen. Question put Laguarta on the spot this morning, asking about Pepsi's own plans. CEO started by noting that 60% of co's biz today doesn't use any artificial colors. On snack side, both Lay's and Tostito's will have phased them out by year-end. No mention of brands like Cheetos and Gatorade that seem to rely heavily on the artificial dyes. And CEO certainly wasn't making any sweeping commitments on issue, saying industry was seeking a "pragmatic" progress "without unnecessary panic or chaos." Within next coupla years PEP "will have migrated our portfolio into natural colors, or at least we&#39;ll provide natural-color options." Like other food execs, he wasn't ready to acknowledge that sentiment for banning the dyes reflects anything more than consumer preference. "We stand by the science, our products are very safe," he said.Aiming to Make Up Lost Ground in Protein Thru its acquisition of Muscle Milk, PepsiCo was early into protein game but it's lost considerable ground since then as endemic brands like Premier Protein have ignited and rival Coca-Cola has played adept hand with Fairlife platform and its Core Power RTDs, even as advent of GLP-1 drugs have thrust nutrient into spotlight. Laguarta acknowledged co is playing a bit of catchup on this segment. "We're a bit less well positioned in protein and our team is working on innovation on both the beverage and food business," he informed investors this morning, with results to be seen by late this year or early next year. As for GLPs' effect on Pepsi's core brands, the evidence seems to show that GLP users "are keeping our brands in their repertoire but in smaller amounts." Pepsi's portion-control packs help maintain those brands' roles in GLP users' repertoire, he said. No question, GLP is a real factor now. "Every food company is thinking about it, and we're thinking about it and reacting," he said.

Reporting Soft Q1, PepsiCo Eases Off on Earnings Outlook; In Early Discussions on Whether to Onboard Celsius' Newly Acquired Alani Nu Energizer; No Firm Commitment on Food Dyes

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