Pepsi Cuts Deal With Activist: Plans Product Overhaul And Layoffs
PepsiCo reached a deal with activist investor Elliott Investment Management that will trim its U.S. product lineup by 20%, prioritize affordability for working-poor consumers, and move forward with a workforce restructuring as part of a broader cost-cutting push.
Billionaire Paul Singer's Elliott built a $4 billion stake in Pepsi earlier this year, aiming to overhaul a junk-food giant that has been steadily losing ground to rivals in both soda and snacks.
Elliott's view: Pepsi's sprawling brand portfolio had become unmanageable, while its beverage business needed a serious turnaround to stop the slide in market share and correct the bear market in stock price.
That's precisely what a Pepsi press release stated: the company reached a "constructive engagement" with Elliott and was fully embraced by shareholders.
Here are the incoming changes to engineer a turnaround:
Push affordability by expanding lower-price everyday value across brands and channels.
Launch "clean-label" innovation (more protein, fiber, whole grains; no artificial colors or flavors), including "Simply NKD" snacks and Doritos Protein in 2026.
Cut costs aggressively: three plant closures, multiple line shutdowns, and nearly a 20% SKU reduction in the U.S. by early 2026.
Shift savings into marketing and consumer value, with plans for greater in-store presence next year.
"We appreciate our collaborative engagement with PepsiCo's management team and the urgency they have demonstrated," said Marc Steinberg, Partner at Elliott.
Steinberg said, "We believe the plan announced today to invest in affordability, accelerate innovation and aggressively reduce costs will drive greater revenue and profit growth. In addition, we welcome the comprehensive review of PepsiCo's North America supply chain and go-to-market systems, as well as PepsiCo's commitment to Board refreshment. We are confident that PepsiCo will create substantial value for shareholders as it executes on this plan, and we look forward to continued engagement with the Company."
Pepsi also offered an update to its outlook, forecasting organic revenue growth of 2% to 4% in fiscal 2026, versus the Wall Street estimate of about 2.7%:
Organic revenue growth: 2–4% (aiming toward high end in 2H 2026).
Net revenue growth (including FX and M&A): 4–6%.
Productivity: record savings driven by automation, digitalization, and simplification.
Margin: at least 100 bps of core operating margin expansion over three years.
Core EPS growth: ~5–7% (or 7–9% ex global minimum tax effects).
Separately, Bloomberg News reports that employees at its headquarters in Purchase, New York, as well as in Chicago and Plano, Texas, have been asked to work remotely this week - an ominous sign that layoffs could be announced imminently.
"We will be making structural changes to our business that will affect some roles in the company," Jennifer Wells, chief people officer in North America, wrote in a message to workers at the start of the week that the media outlet viewed.
In markets, Pepsi shares remain locked in a bear market, down about 25% from their 2023 peak, though that's an improvement from the roughly 35% drawdown seen this past summer.
Commenting on the changes, Goldman analyst Bonnie Herzog, who rates the stock "Buy," believes the series of detailed multi-year plan focused on accelerating growth, improving margins, simplifying the product lineup, and creating everyday value for consumers in North America positions the company for 2026.
Herzog noted, "Although many of these initiatives are not necessarily new—and some have been underway for a while now (i.e. sharper value, accelerated innovation pipeline, etc.)—we're encouraged by mgmt's transparency and the clear set of steps that mgmt can take to accelerate growth going forward. As such, we continue to think PEP is set to enter '26 from a stronger position—and therefore we continue believe PEP has one of the most positive risk-reward profiles within broader staples heading into '26, especially given its attractive valuation, particularly relative to KO & PG."
Herzog's full note on Pepsi is available in the usual place for ZeroHedge Pro readers.