Pepsi has just gained a NEW, VERY POWERFUL shareholder who leaves nothing to chance: Elliott Management.
And when I say Elliott Management… I don't mean just any institutional investor. I am talking about the definition of an "activist investor." An investor who, when they buy in… they do it to change EVERYTHING.
And that’s exactly what makes this case so fascinating. Because I am talking about one of the largest companies in the world, with presence in dozens of countries, strong brands, and decades of history — yet one that seems to have somewhat lost its way in recent years.
PEPSICO IN CRISIS
Let’s start with the basics. Pepsi is facing significant problems lately.
Specifically, over the past 12 months, its stock has fallen 14%, while Coca-Cola has lost only 4%.
At the same time, Pepsi has lost market share, both in beverages and in snacks. And that’s something investors find hard to swallow.
In fact, for the first time in decades, Pepsi dropped to 4th place in U.S. sales — behind Coca-Cola, Dr. Pepper, and Sprite. A huge blow for a company that historically was always in the top-2.
Add to this the internal strategic mistakes, the poor efficiency of its bottling operations, and the confusion caused by dozens of new brands and SKUs… and it becomes clear the picture isn’t good at all. We’re talking about "strategic fatigue" lasting more than a decade.
WHO IS ELLIOTT MANAGEMENT?
Elliott Management is one of the largest hedge funds in the world, with assets under management of over $75 billion. Founded by Paul Singer in 1977, it has earned a global reputation for its activist interventions.
It has built its reputation by investing in underperforming companies… and then PRESSING for change. Often aggressively. Always decisively. In other words, it doesn’t just invest… it intervenes.
In Pepsi’s case, Elliott bought shares worth $4 billion. This is the largest equity position it has EVER taken in its history. And that alone says a lot.
With this position, it becomes one of the 5 largest active shareholders of Pepsi, giving it REAL power at the decision-making table. This isn’t "noise from the sidelines" — it’s a central presence.
THE DEMANDS
So what does it want from Pepsi?
A lot. And important ones.
First of all, to seriously consider "outsourcing" its demanding bottling operations. In other words, to transfer the difficult and costly bottling work to other players. This is something already applied in other countries with positive results.
Next, to sell off non-core or weak brands. Not only to free up resources, but also to regain strategic focus.
To review the chaotic number of SKUs, cut costs in Frito-Lay (which has been hit by lower sales volumes), and reinvest the savings into strategic growth areas like energy drinks, where it has already built partnerships with Celsius and Rockstar.
And above all, to set a CLEAR GOAL and ACCOUNTABILITY for the company’s performance — both financially and operationally. Something that, as it seems, Elliott believes is missing today.
Analysts, meanwhile, view Elliott’s entry positively. TD Cowen, for example, says Elliott’s presence could push Pepsi management into faster action. Not necessarily out of fear, but because they know someone is watching closely.
And this, because unlike other activists, Elliott seems willing to collaborate rather than fight head-on. The goal is to create value, not destroy relationships.
For now, Pepsi says it is "reviewing Elliott’s presentation in the context of enhancing shareholder value." A very diplomatic… but NOT AT ALL NEGATIVE message. If anything, it leaves room for open discussion.
If Elliott has the know-how, persistence, and influence to turn Pepsi’s course for the better… then the stock right now might be an opportunity.
Posted Using INLEO