6 Things I Learned From the PepsiCo’s Q4 2022 Earnings Call

PepsiCo is a household name for producing some of the world’s most beloved snacks and beverages. However, for investors and industry insiders, it’s much more than just a favourite brand to enjoy during movie night. Its quarterly earnings calls are highly anticipated events where executives share valuable insights into the business and its future direction.

The Q4 2022 earnings call was no exception, offering a glimpse into the company’s strategic focus and innovation efforts. From potential market impact to sustainability initiatives, here are 6 things we learned from PepsiCo’s Q4 2022 earnings call.


  • Net Revenues Grew 10.9% for the Quarter and 8.7% for the Full Year; Organic Revenues (Non-GAAP)   Grew 14.6% for the Quarter and 14.4% for the Full Year
  • Operating Income Grew 24% for the Quarter and 6% for the Full Year; Comparable Currency Neutral Operating Income (Non-GAAP) Grew 21% for the Quarter and 19% for the Full Year
  • Fourth Quarter EPS Declined 61% to $0.37, and Core EPS (Non-GAAP) Was $1.67; Full-Year EPS Improved 17% to $6.42, and Core EPS (Non-GAAP) Grew 11% to $6.79
  • Cash Flow from Operations Was $10.81 Billion for the Full Year, Down 6.9%
  • The company expects to deliver organic revenue (non-GAAP) growth of 6% for FY 2023 and an 8% increase in core constant currency EPS

Pepsi Zero Sugar initiative

The Zero Sugar segment of the beverage category is growing much faster than full sugar worldwide. Pepsi Zero, or Pepsi Max, has been a strategic product for the company in Europe and other parts of the world. In the U.S., the company was investing in other parts of the Pepsi brand, but now Zero Sugar will be the centre of the strategy for the Pepsi brand going forward.

Management believes that the Zero Sugar segment will continue to grow very fast in the U.S. since the zero-sugar choices are as good as full-sugar choices or even better from a taste point of view. Management claims the company is asking consumers to make zero sacrifices to pivot to the zero-sugar version.

Management thinks that eventually, Zero Sugar will be a large part of the brand not only in the U.S. but all over the world.

China Reopening

Management has expressed optimism about the opportunity to reassess the demand for PepsiCo’s products in China as consumers become more active and willing to spend. Management believed this could increase demand for PepsiCo’s snack and beverage businesses in China.

However, management also noted that even though China was an important market, it would not be a major driver of PepsiCo’s growth. Currently, China represents only 3% of PepsiCo’s sales, so any impact on the company’s financial results is likely minor in the near term. Despite this, management acknowledged the strategic importance of China due to its size and potential.

Question and Answer

Dara Mohsenian with Morgan Stanley asked about the 2023 top-line growth outlook for their business after a strong Q4. Mohsenian expressed concerns about macros in the consumer market and whether there are any signs of incremental consumer weakness.

PepsiCo’s CEO Ramon Laguarta responded by stating they feel positive about the consumer market based on employment data and wage growth worldwide. This suggests that consumers have more money to spend, which can lead to increased demand for their products. However, Laguarta also mentioned that they expect elasticities to get worse going into the year’s second half based on multiple scenarios. Laguarta suggested that there may be more pushback from consumers in the second half of the year, which could impact their pricing strategy. Organic sales growth outlook will depend on factors, including price mix and carryover pricing from 2022.

Despite the potential challenges, Laguarta is confident in the company’s ability to weather any storms. He stated that they will continue investing in the quality of their products, the strength of their brands, and making their go-to-market systems stronger, regardless of what happens with the consumer.

Bryan Spillane with Bank of America asked about the company’s cash flow and capital allocation. He noted that free cash flow declined compared to last year and asked for more information on what’s happening with cash from operations and how the company is thinking about capital allocation

PepsiCo’s CFO Hugh Johnston explained that the company’s capital allocation principles remain the same, focusing on investing in the business, paying dividends, tuck-in acquisitions, and share repurchase. However, given the current environment, they prioritized investing in the business and growing the dividend, with the 10% dividend growth being a priority. Johnston also explained that the working capital decrease was a timing issue related to IT implementations and should bounce back by the end of 2023.

Lauren Lieberman with Barclays asked about impairments and brand exits mentioned in the fourth quarter release and how some businesses have fared in terms of adding capability or portfolio-wise or where they have fallen short, notwithstanding the pandemic dynamics.

PepsiCo’s CFO Hugh Johnston explained that pre-pandemic interest rates were low, and prices were high for many assets. However, post-pandemic, they have taken a hard look at cash flows and discounted them at a different rate given the higher interest rates. As a result, they have written down a piece of SodaStream business, which behaves more like a consumer discretionary purchase.

PepsiCo’s CEO Ramon Laguarta emphasised that SodaStream remains central to the transformation of the beverage category as it enables consumers to personalise their drinks and consume without plastics conveniently. However, they reassessed the asset’s value due to the European situation with inventories and discretionary consumption.

Loved this? Spread the word