Surprisingly high Growth rates in a mature industry Strengths and WeaknessesĮvery company has strengths, and weaknesses, and it’s important to be aware of them before we consider investing in it: Strengths: Overall though, nothing really jumps out as particularly concerning, which is great. I usually try to aim for above 20%, but that’s something that we will need to see in greater detail when we are valuing the company. The pre-tax margins are quite low, at around 12.5%. The Current assets and current liabilities are more or less even, so we don’t have to worry about them going bust any time soon. The high amount of Indefinite-Lived Intangible Assets (which includes goodwill) is concerning. While their payout ratio right now is quite high at 70%, it’s still lower than some of their competitors like Coca-Cola. In total, over the last year they have returned $7.5 Billion in cash to shareholders, delivering an 11.7% increase in total shareholder return. In addition to paying these dividends they also conduct regular share buybacks, which too return capital to shareholders. This is an amazing track record, and it shows very clearly that management is clearly prioritizing Shareholder value as one of their goals. PepsiCo is a Dividend Aristocrat with a whopping 49 consecutive dividend increases. Eventually they will be able to leverage these investments into higher margins, if all goes well. In addition to this, PepsiCo is embracing direct-to-consumer via the internet, with investments in and, and so on. So far, they have been doing that successfully with many new products, both local products intended for the cultural sensitivities of a specific market, as well as other less localized options that create new markets entirely. It’s important for PepsiCo to continue innovating in their product offerings, as well as the methods through which they reach clients, lest their brand become “old and dated”. Ultimately consumer staples is a competitive industry, but also one where branding has a significant impact. Of course this mix and match of Beverage and Food businesses is simplistic and doesn’t accurately outline PepsiCos business strategy and future steps. The multiple divisions when it comes to their North American operations are very necessary, since that’s where most of their revenue and operating profit is actually coming from: Latin America (LatAm), which includes all beverage, food and snack businesses in Latin America Įurope, which includes all beverage, food and snack businesses in Europe Īfrica, Middle East and South Asia (AMESA), which includes all beverage, food and snack businesses in Africa, the Middle East and South Asia andĪsia Pacific, Australia and New Zealand and China Region (APAC), which includes all beverage, food and snack businesses in Asia Pacific, Australia and New Zealand, and China region. PepsiCo Beverages North America (PBNA), which includes beverage businesses in the United States and Canada Quaker Foods North America (QFNA), which includes cereal, rice, pasta and other branded food businesses in the United States and Canada PepsiCo is organized into seven reportable segments (also referred to as divisions), as follows:įrito-Lay North America (FLNA), which includes branded food and snack businesses in the United States and Canada Their products are, for the most part, good quality, desirable and have a good (or premium) brand image. Pepsi, Lays, Doritos and other brands owned by PepsiCo all make products that I personally enjoy, and which are sold all over the world. I know that I eat some of their snack products on a regular basis, and I have done so since i was a child. This really isn’t hard to understand for most people, and indeed I would say that the vast majority of investors has purchased some good that was produced by PepsiCo. They simply make food and drinks that everyday people consume. Out of all the companies we’ve talked about so far, I think that PepsiCo has the simplest to understand business model. Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of convenient beverages, foods and snacks, serving customers and consumers in more than 200 countries and territories. We are a leading global food and beverage company with a complementary portfolio of brands, including Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. We were incorporated in Delaware in 1919 and reincorporated in North Carolina in 1986. As per their latest annual report, PepsiCo is:
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