PepsiCo to Critics: We're Doing Just Fine, Thank You

Despite persistent criticism, PepsiCo has no plans to do anything drastic. After all, a long history of diversified products, great brands, and wise management allowed PepsiCo to make its shareholders rich.

Jun 1, 2014 at 2:00PM

Consumer-products giant PepsiCo (NYSE:PEP) may seem like a boring company, but its history of enriching shareholders is anything but boring. PepsiCo has made its investors boatloads of money over a long period of time, thanks to its effective management, world-class brands, and products that are bought every day across the world in a good economy or bad.

That's the formula that has allowed PepsiCo to provide such impressive returns to investors over the course of its history. The company recently increased its dividend for the 42nd consecutive year. Its track record is evidence of the powerful business PepsiCo operates. For that reason, PepsiCo should keep generating strong returns for a long time to come.

Pepsi Brands


PepsiCo: Not in a hurry to shake things up
If you think there isn't much fizz in the soda industry, you'd be right, and that's just how PepsiCo likes it. The company is under pressure from analysts and investors to shake things up, but management has long resisted calls to change strategy just for the sake of doing something.

PepsiCo's major adversary in the soda wars, Coca-Cola (NYSE:KO), announced a partnership with Keurig Green Mountain (NASDAQ:GMCR). Coca-Cola invested $1.2 billion in Keurig for a 10% stake in the company. Together, they will develop an at-home cold beverage system, utilizing Keurig's existing coffee-brewing technology.

At the time, this partnership seemed like the next big hit. But to a certain extent, it seems like Coca-Cola might be afraid of shifting consumer preferences. Consumers are slowly demonstrating a distaste for the sparkling beverages that make up the bulk of Coca-Cola's business because of the high calories and sugar. Even diet drinks, like Coca-Cola's flagship Diet Coke, are facing scrutiny for their chemicals.

The reason why PepsiCo hasn't pursued a similar partnership is that it holds a much more diversified business than Coca-Cola. PepsiCo's revenue mix is evenly split between food and beverages. PepsiCo holds a slew of brands that aren't under as much pressure as soda right now. These include Gatorade, Quaker, and Frito-Lay. Besides which, the likelihood of an at-home cold-soda-beverage platform becoming a smash hit is far from guaranteed.

SodaStream has had such a product on the market for several years now, and it's by no means a widespread phenomenon. The investment represented a drop in the bucket for Coca-Cola from a financial perspective, so it doesn't have much to lose. But it's clear that PepsiCo is in no rush to pursue a similar deal. Nor should it be.

PepsiCo keeping it all in the family
In addition, one of its biggest investors, Nelson Peltz of Trian Fund Management, recently pressured PepsiCo's board of directors to spin off its North American beverage business. Trian, which owns about 1% of PepsiCo, believes that the company could create substantial value for shareholders by pursuing a spinoff by basically separating the wheat from the chaff. PepsiCo's foods business is growing faster than its beverage unit, so Peltz feels the sum of the parts is worth more than the whole.

But PepsiCo's board won't spin off the beverage unit, and rightly so. There's really no reason to. The beverage business isn't growing rapidly, but it's still massively profitable and represents a core brand connection with consumers.

PepsiCo's performance speaks for itself
PepsiCo hasn't bowed to complaints from analysts and investors that its growth isn't impressive enough and that it should do something big to shake things up. The truth is that the company simply doesn't need to spend a lot of money on something that may or may not pan out. It produced 10% earnings growth last quarter and announced a 15% dividend increase in May. Plainly stated, PepsiCo is doing just fine.

PepsiCo has returned more than $60 billion to shareholders over the past decade through dividend payments and share repurchases. This year, it expects to return $8.7 billion to investors, which would represent a 35% increase from last year. It's plain to see that PepsiCo is right on track and doesn't have anything to prove.

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour (That's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

Bob Ciura owns shares of PepsiCo. The Motley Fool recommends Coca-Cola, Keurig Green Mountain, and PepsiCo. The Motley Fool owns shares of PepsiCo and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers