PepsiCo Q1 Earnings Call Highlights

Key Points

• Guidance reaffirmed: PepsiCo said Q1 results keep it on track with 2026 guidance (organic revenue growth 2%–4%) as core EPS rose ~9% and core operating margin edged up about 10 basis points, while management continues to invest behind growth and productivity.
• Supply chain resilient but inflation monitored: Executives reported no major supply disruptions from the Iran conflict, rely on ~6–12 month hedges, and outlined a three-part inflation plan—grow through it, push productivity, and use price/pack actions if needed.
• Business-level momentum: North America Foods drove ~2% volume growth with shelf resets, innovation and +300 million occasions added, while North America Beverages faced a case-pack water transition drag but showed underlying strength from acquisitions (e.g., poppi, energy) and share gains for Gatorade/Propel.

PepsiCo NASDAQ: PEP executives said the company’s first-quarter performance left it on track with its outlook, while management monitors potential inflation and volatility stemming from the Iran conflict. On the company’s 2026 first-quarter earnings Q&A call, leaders repeatedly pointed to supply chain resilience, productivity initiatives, and continued investment behind growth—particularly in North America snacks and international markets.

Iran conflict: supply chain steady, inflation risk watched

Responding to a question on the Iran conflict and what it could mean for costs and guidance, CFO Steve Schmitt said PepsiCo had seen “no major issues from a supply chain standpoint” and emphasized continuity in service levels. He credited the company’s scale and the work of procurement and supply chain teams for helping PepsiCo navigate disruption risks.

Schmitt said PepsiCo has “systematic hedging programs” that typically cover roughly “6- to 12-month hedges,” providing near-term visibility. However, he added that the company assumes “inflation will come,” while the “order of magnitude” remains uncertain.

To manage inflation over time, Schmitt outlined a three-part approach:

• “Grow your way through it” by leveraging infrastructure,
• “Push harder on productivity,” and
• Use “price pack architecture” options if needed.

He said PepsiCo’s guidance reflects assumptions that the company can mitigate inflationary pressures in 2026, while noting the company has started scenario work for 2027 but has nothing further to share yet.

CEO Ramon Laguarta echoed the resilience theme, saying PepsiCo built “a lot of redundancy” after COVID, including multiple sourcing options for key materials, and said the company’s leaders “on the ground” provide agility in complex situations.

International demand: no impact seen, World Cup cited as catalyst

Laguarta said PepsiCo had not seen a demand impact internationally since the conflict began and described the international business as “very solid” and “continues to accelerate.” He added that in some markets PepsiCo is seeing a benefit because it has a “better supply chain than some of our competitors, especially in the food business.”

The CEO also highlighted the World Cup as a major summer execution driver, describing planned activations that include flavors “from around the world,” retail partnerships, and efforts to link Lay’s to sports-watching occasions through the “No Lay’s, No Game” campaign. Laguarta said the company expects the event to help develop occasions and frequency, particularly in markets with lower per-capita consumption, and noted PepsiCo is already seeing acceleration in some international markets tied to the activation.

North America Foods: volume growth, more occasions, and shelf reset underway

Much of the discussion centered on PepsiCo’s North America Foods business (PFNA). Laguarta said the company’s strategy, set in spring of last year, is focused on growth paired with “very strong productivity to fund the growth,” and he said execution has driven sequential improvement from Q4 into Q1.

In PFNA, Laguarta described a “holistic commercial study” that included added consumer value, more space at retail, brand restaging for key brands such as Lay’s and Tostitos, increased innovation in “permissible and functional,” and a reallocation of resources toward Away From Home.

He attributed PFNA’s “2% volume growth” to a mix of actions rather than a single lever, and said the business is still in the midst of shelf resets and innovation launches, which he expects to be “almost completed” by the end of Q2. As an early indicator of progress, Laguarta said PepsiCo added “300 million occasions” in the quarter versus the prior year in the food business, while the Away From Home business is growing “three times the average of the company.”

Laguarta also said PFNA has recently seen positive share performance, noting the company uses IRI data internally and has been gaining value share in “the last three weeks,” with volume share gains spanning “three or four periods.”

Asked specifically about Lay’s trends, Laguarta said the brand is being restaged globally and is “performing very well globally,” while also stating Lay’s grew volume in the quarter in the U.S. He pointed to household penetration gains across core brands and said permissible brands such as SunChips, Smartfood, and Siete are growing in some cases at double-digit rates.

North America Beverages: transition drag noted; growth platforms highlighted

On PepsiCo’s North America beverages business (PBNA), Laguarta said volume comparisons were affected by a “case pack water transition to a third party,” which remains in Q1 results and is expected to fully lap in Q4. Excluding that transition, he said volume was “almost flat,” and he expects “positive volume growth ex case pack water in the coming quarters.”

Laguarta described PBNA’s total business growth as “9%,” consisting of “2%” organic revenue growth plus “7 points of additional platforms” now in the distribution system. He cited acquired and expanded platforms including poppi and a broader energy portfolio. He also said PepsiCo is seeing gains in functional hydration, with Gatorade and Propel gaining share, and noted continued participation in energy through the company’s Celsius investment and distribution arrangement.

He added that the company still has work to do to “accelerat[e] the coffee business and accelerat[e] the tea business,” pointing to Starbucks portfolio innovation as part of that effort. In carbonated soft drinks, Laguarta cited growth in “modern soda” and said innovation in Mountain Dew—including “Dirty Mountain Dew” and new Baja and Cabo flavors—is “starting to grow the brand.” He also said no-sugar Pepsi is growing ahead of competitors, while the company optimizes pricing and sizing for the summer period.

Guidance, margins, and productivity: flexibility and cost actions

Management said it reaffirmed guidance. Schmitt told analysts the company still expects organic revenue growth of “2%-4%” and maintained its view that performance would be “balanced between the first half and second half.” Laguarta said nothing had changed to warrant a different view of how the business should evolve through year-end.

In response to a margin question, CFO Jamie Caulfield said total company core operating margin increased about “10 basis points,” and noted a prior-year PFNA property sale gain created a headwind to that comparison. Caulfield also cited “organic revenue increase 2.6%” and “core EPS increased 9%” for the quarter, adding that PepsiCo intends to keep “playing offense” with investments in value, innovation, and advertising and marketing while managing margins at the total-company level.

On productivity, Schmitt said PepsiCo is benefiting from actions taken last year, including “reduced headcount, plant closures, [and] reduction in SKU count.” He cited improving supply-chain metrics such as “cases per hour” and said the company remains focused on customer service while reducing expenses. Laguarta added that PepsiCo continues to execute on global shared services and deploy technology and AI across supply chain and transportation, as well as shifting to digital ordering systems in some markets. He also said the company is optimizing advertising and marketing ROI and is testing greater supply chain integration in Texas with plans to expand tests to other states.

On SNAP restrictions, Schmitt said eight states began restrictions in the first quarter—mainly affecting beverages and candy—and that it is “too early” to draw definitive conclusions on the impact.

About PepsiCo NASDAQ: PEP

PepsiCo, Inc NASDAQ: PEP is a multinational food and beverage company headquartered in Purchase, New York. The company develops, manufactures, markets and sells a broad portfolio of branded food and beverage products, including carbonated and noncarbonated soft drinks, bottled water, sports drinks, juices, ready-to-drink teas and coffees, salty snacks, cereals, and other convenient foods. Its leading consumer brands include Pepsi, Mountain Dew, Gatorade, Tropicana, Quaker, Lay's, Doritos and Cheetos, among others.

Formed through the 1965 merger of Pepsi-Cola and Frito-Lay, PepsiCo has grown into a global business with integrated manufacturing, distribution and marketing operations.

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