So this doesn't sound good for PepsiCo.

Hi, Scarlett.

Well, today's results, uh, as you mentioned, um, I mean, there's goods and bad.

I think it was good and bad.

You know, o- on a positive note, and why the shares are probably up today, is that they beat on the top line and bottom line by a little bit.

The concern, though, uh, is that it was very skewed toward...

The success was skewed very much towards international.

Why are people not as into salty snacks?

The stock's up 6% to a 52-week high today.

Yeah, hi, Paul.

They certainly were good.

You know, we're talking about a mature consumer products company.

We're not talking about tech stock here now, Paul.

So, you know, 7% sales growth beat the 5% estimates, you know, comparable EPS up 11.

These are good numbers.

What is the fastest growing part of that beverage portfolio, Ken?

So, Ken, talk to us about what we saw from Philip Morris today.

Yeah, hi, Paul.

Philip Morris' numbers today were really good.

The headline numbers, top line 10% beat 5% expectations.

EPS up 15%.

Expectations were for 7%.

You know, initially...

Philip Morris is basically the international business, right? I mean, Altria is the domestic business and Philip Morris, I believe, sells Marlboro cigarettes outside the U.S.

Bloomberg Intelligence senior analyst Ken Shea says the report was widely expected.

Their game plan that they set out earlier this year are, is, is still in place, even though it hit a speed bump in the second quarter.

And that speed bump is higher gas prices.

No shocker there.

People kind of knew, you know, it was gonna be a tough quarter for them to make, uh, you know, really good progress.

But what are you seeing with that and how does that translate to margins?

Yeah, hi, Jess.

Well, yeah, I agree.

You know, earlier in the year, and actually, let me take a step back.

Since the pandemic, PepsiCo and many other big consumer companies had, because of supply chain disruptions and cost inflation in general and so on, had been pretty aggressive on the price increases.

Unit pricing was up really, really sharply over the last few years.

So earlier this year, with the help of an activist, They said, look, we need a better balance between volume and unit pricing.

Ken, what does Pepsi say about its portfolio of brands? Are they comfortable where they are? Are they looking to add brands? Are looking to pair back on some of their brands? How are they fixed?

We get more with Ken Shea of Bloomberg Intelligence.

You know, PepsiCo's, their game plan e- earlier in the year was to drive growth and improve margins at their big Pepsi Foods division.

A third of their sales, 40% of their operating profits, big division.

The problem was, uh, higher, uh, gas prices, uh, dissuaded consumers to go to the gas pump, go to the grocery shopping.

You know, traffic at, uh, at, at the places where it sells a lot of these goods just kind of fell off.

So the game plan hasn't changed, it's just that the way they're gonna get there at the end of the year, they rearave- re- reiterated guidance, is gonna require a little more in, in terms of price cuts and sustained strong performance by, stronger than expected performance by its international divisions.

We get more with Ken Shea of Bloomberg Intelligence.

You know, PepsiCo, their game plan earlier in the year was to drive growth and improve margins at their big Pepsi Foods division.

A third of their sales, 40 percent of their operating profits.

Big division.

The problem was higher gas prices dissuaded consumers to go to the gas pump, go to grocery shopping.

Traffic at the places where it sells a lot of these goods just kind of fell off.

So the game plan hasn't changed.

But overall, is Constellation Brands suffering from, I think what a lot of these alcohol companies are suffering from, is just a change in consumer behavior, especially younger folks just not drinking as much as we've seen other generations do.

Yeah, I think you're right, Alexis.

That's certainly a big piece of it.

It's hard to quantify how much of it is, but I think the companies are slowly conceding that demographic changes are occurring in this country.

You know, Gen Z is not drinking as much as their parents.

Illegal cannabis is now easily available in most places around the country.

You know, Ozempic and the GLP-1 drug users have cut back.

Ken, what about tariffs? Are they a story for Constellation Brands?

Ken, what's driving Philip Morris businesses these days?

Well, Philip Morris today allayed any fears that some competitive activity with their oral nicotine products in the US is gonna derail them hitting their numbers.

They didn't, they beat their numbers handily.

Top line up 9%, EPS up 16, helped a bit by currency, but the underlying business is healthy.

Cigarettes unexpectedly, or I should say as expected, volumes were down as the long-term secular decline continues.

But pricing was up 8% over year over year.

Smoke-free products, top line was up strong.

Why would Philip Morris want to do that?

let's keep to the earnings uh flow here we got uh pepsi reported earnings here ken shea joins us here senior consumer products analyst for bloomberg intelligence she's based down in princeton and again scarlett you probably know my feeling here i am a coca-cola person i identify as a coca-cola person but you put a pepsi in front of me i'm just as happy i really don't care my brand loyalty is pretty low they're both good hey ken talk to us about pepsi what do we see in the earnings report

hi paul so the pepsico report was uh pretty encouraging if you're bullish on the story here um The first quarter showed good progress.

Top line, volumes, international business was particularly strong.

I guess the key takeaway here for investors, why they're looking at it positively today, is because their efforts to have a better balance between volume and pricing really came through in the quarter.

Critics of the company over the last couple of years have been saying, look, all your sales gains are coming, well, not all, but most of your sales gains is driven by price increases.

And so they made a real effort.

They've reduced prices in most of their stack lines.

What other changes do you anticipate PepsiCo making?

We first asked Ken to tell us what's concerning investors about Coca-Cola.

I think what may be concerning the market a little bit about Coke is that the mix was not as favorable as it had been.

Also, the company over the past couple of years had been relying heavily on price mix to boost the top line.

It was a considerable slowing in the quarter.

Having said that, always some noise in the fourth quarter it's hard to draw too many conclusions from the fourth quarter but i think the market is also being spooked a little bit by the guidance for next year which came in a bit a little bit light the company's long-term algorithm is that to generate about four to six percent organic revenue and from that it can generate high comparable eps growth and it did that in 2025.

In 2026, though, they're saying 4% to 5% top line and 4% to 5% EPS growth.

And so that's EPS growth.

where you'll be.

So what's the story from Coca-Cola, Ken? What did they tell us?

Yeah.

Hi, Scarlett.

Well, Coke, uh, in the fourth quarter, you know, revenues, revenues were up to EPS was up 6%, pretty much in line with expectations.

Um, but I think what, what may be, um, concerning the market a little bit about Coke is that the, uh, The mix was not as favorable as it had been.

Also, the company over the past couple of years had been relying heavily on price mix to boost the top line.

It was a considerable slowing in the quarter.

where you'll be.

Will other snack makers feel the pressure to also reduce prices, even if they've gone up quite a bit since the pandemic?

That's possible, Scarlett.

In the case of Frito-Lay, though, they have such a dominant market share.

They have like 60% of the market in the measured channels.

And when you have that much of a share, you deserve a premium, particularly with PepsiCo's direct store delivery system.

What that means is that they help their retailers much more than a lot of their competitors.

And that is they actually go to the store.

How much of an impact are they having?

Tell us about Philip Morris' quarter and what's their business outlook, Ken?

Yeah, hi, Paul.

Philip Morris had some good numbers today.

Its fourth quarter pretty much came in line.

sales up about seven percent EPS about ten those are pretty good numbers for a consumer stable company- they hit their numbers stock.

Is- performing well probably as a result of that.

But there's two other big takeaways I think beyond that today that's maybe- helping- investor enthusiasm here.

Where is the growth the fastest and how much spending, how much investment is needed for us to see that return that investors want?

Will other snack makers feel the pressure to also reduce prices, even if they've gone up quite a bit since the pandemic?

That's possible, Scarlett.

In the case of Frito-Lay, though, they have such a dominant market share.

They have like 60% of the market in the measure channels.

And when you have that much of a share, you deserve a premium, particularly with PepsiCo's direct store delivery system.

What that means is that they help their retailers much more than a lot of their competitors.

And that is They actually go to the store and quickly respond to out of stocks.

How much of an impact are they having?

so if the hispanic population is important for them how are they dealing with it is there any marketing they can do is it just that seems like almost out of their control

To some degree it is, Paul.

Having said that, the company deserves credit for doing all it can do.

It's coming out with a no-alcoholic version of Corona for those seeking that.

What's the point? consumers in another pressure John is that.

There's alcohol moderation going on scarlet alluded that a minute ago- that hasn't changed.

Alcohol moderation is not only you know the young demographic out there- chooses other forms of.

this the kind of narrative that consultation brands wants to be pushing to investors to to get them excited or to kind of signal that this is where they see- opportunities.

What did you hear from them?

Sure.

Hi, Paul.

So Coca-Cola today, they reported numbers that were slightly better than expected.

The organic growth, probably the biggest metric of all, was up about 6%.

Operating margins widened better than expected.

EPS came in a little better.

Stock trading down a little bit here today.

We first asked Ken Moore about why Constellation Brands had been struggling this year.

It's definitely a slow beer market.

Tariffs are playing a role.

And also some of the crackdown that ICE has had in inner communities hurting the Hispanic community and their socialization trends.

All these things have been a factor for the last couple quarters.

The company said that...

Their beer volumes were not quite as poor as a lot of street animals expected.

Ken, is that something that a lot of your companies are

Ken, tell us what you heard from our good friends at Pepsi.

Yeah.

Hi, Paul.

Well, PepsiCo reported a number today, numbers today that were pretty much in line, maybe a little bit above expectations.

But I think they also masked persistent weak market conditions in the U.S. across its broad food, snack and beverage businesses.

The company pretty much hit their numbers, as I said, but it didn't do much to relieve the pressure it's getting from an activist who's asking the company to do more.

Basically, flat performance is just not good enough for something that's perceived or a company that's perceived as a growth company.

So I guess the question is, is this enough for Elliott, the activist investor, which took about a $4 billion stake in PepsiCo and called for a strategic review, a streamlining of the snack portfolio in particular?

What's weighing on the stock? What's the company doing about it?

Yeah, hi, Paul and Scarlett.

Well, you mentioned two of the factors right there.

It's definitely a slow beer market.

Tariffs are playing a role.

And also some of the crackdown the ISIS had in inner communities hurting the Hispanic community and their socialization trends.

All these things have been a factor for the last couple of quarters.

Ken, is that something that a lot of your companies are calling out?

We first asked Ken what the future looks like for PepsiCo and whether the company could eventually break up.

I wrote a report over Bloomberg Intelligence saying that given the weakness of the stock, it's really just a matter of time where these talks are going to be revived.

Recall back in 2014, Tryon, an activist, actually advocated that, breaking the company up between beverages and foods.

The company decided not to do it.

It made the case that it was getting good synergies between the two.

Fast forward, Elliott isn't quite going that far.

In Elliott's letter, it said, it believes that value can be created by simply having the beverage side, roughly 40% of the business, just re-franchise their bottling operations.

What does Coca-Cola give up by doing that? I mean, there had to be a reason why Pepsi chose to keep it in-house up until now.

What do you think?

Yeah, hi, Paul.

Actually, it's only a few weeks ago I wrote a report over Bloomberg Intelligence saying that given the weakness of the stock, it's really just a matter of time where these talks are going to be revived.

Recall back in 2014, Tryon, an activist, actually advocated that, breaking the company up between beverages and foods.

The company decided not to do it.

It made the case that it was getting good synergies between the two.

Fast forward to today, Elliott isn't quite going that far.

What does Coca-Cola give up by doing that? I mean, there had to be a reason why Pepsi chose to keep it in-house up until now.

So what's the health of that side of the business?

Oh, it's doing very well, Alexis.

The cold beverage side is doing really well, whether it's Coke or Pepsi or Cure Dr. Pepper, particularly those three companies, because distribution is everything.

These three companies have national footprints, so they can reach all the outlets, you know, whether it's fountain drinks or traditional supermarkets, you know, vending, whatever.

They can reach it, and they all have powerful brands.

As you said, Dr. Pepper has really been coming on strong over the last couple of years, and they have other powerful brands.

Unfortunately, their somewhat mini conglomerate business structure is being dragged down by Keurig, the coffee business.

I mean, what's going on with that? Talk to us about coffee and just the cost of the beans and all that kind of stuff.

So how, what's the health of that side of the business?

Oh, it's doing very well, Alexis.

The cold beverage side is doing really well, whether it's Coke or Pepsi or Cure Dr. Pepper, particularly those three companies because distribution is everything.

These three companies have national footprints So they can reach all the outlets, you know, whether it's fountain drinks or traditional supermarkets, you know, vending, whatever.

They can reach it, and they all have powerful brands.

As you said, Dr. Pepper has really been coming on strong over the last couple of years, and they have other powerful brands.

And unfortunately, their somewhat mini-conglomerate business structure is being dragged down by, you know, Keurig, the coffee business.

I mean, what's going on with that? Talk to us about coffee and just the cost of the beans and all that kind of stuff.

Can you just kind of contextualize here for our listeners what has created this lag?

Yeah, sure.

So the market really had turned negative for the last couple of years, actually, with a lack of progress made on federal reform of this industry.

You know, many states have taken it upon themselves to legalize either at the medical or adult use level.

I mean, some 40 states now, a vast majority of states have now legal cannabis in some form.

So a lot of the industry players and the market thought it's just a matter of time that the federal government would retire these really old treaties that require cannabis to be a schedule one drug.

And that really puts the handcuffs on this industry to do a lot of good things in terms of business.

So, Ken, if the majority of states have legalized cannabis, what's the problem with the federal government coming around and doing the same?