PepsiCo’s efforts to revive its North American food and beverage performance is producing a tale of two businesses: Its much-anticipated reset in snacks is starting to deliver – albeit not as much as anticipated – while its beverage division is struggling to keep pace with changing consumer preferences and intensifying competition.
The contrast was stark on PepsiCo’s third-quarter earnings call Thursday, when CEO Ramon Laguarta said he was “happy with the turnaround” in North American snack volumes following its pricing reset and a series of product launches, but he expressed unequivocal dissatisfaction with the beverage performance.
“We do not feel good about the beverage business,” Laguarta told investment analysts bluntly on Oct. 8.
While he acknowledged that PepsiCo is competing well in some platforms, including hydration and energy, he stressed it is not delivering in soft drinks. As such, he added: “We are putting all the urgency of the business and the focus in improving our performance in soft drinks.”
The effort will include a combination of cost-cuts, double-digit investments in advertising and marketing, “focused innovation” and elevated execution, according to Laguarta. He added the company is “open to revisiting every option” to improve performance long term.
PepsiCo must also adapt its strategy to “the realities of the marketplace,” Laguarta said, including the delayed impact of inflation as hedges roll off and input costs rise, alongside “consumer realities” such as pressure on discretionary spending and shifting preferences.
As PepsiCo tries to rebalance these factors, it likely will grapple with whether or not the four-part playbook that is reviving its North American snack business could help repair its beverage performance – or are the challenges facing soft drinks fundamentally different?
What is behind the beverage business’ struggles?
While PepsiCo’s North American beverage business delivered 5% net revenue growth, the gains were primarily benefits from acquisitions made in 2025 and not from volume, which fell 2% in the third quarter and 3% for the year-to-date period.
The weakness was concentrated in soft drinks, which face a more difficult competitive environment as consumers show interest in options offering different health, wellness and functional benefits.
In response, the company is focused on growth areas, like hydration, and brands that offer benefits consumers want.
“One important priority for us this year was to accelerate the hydration business. That business has accelerated in volume and in net revenue. The overall category is very important to us. The hydration category has tailwinds given some of the eating habits and drinking habits of the population,” said Laguarta.
He explained that PepsiCo reinforced this segment through innovations in Gatorade and Propel.
It also is investing in energy, which Laguarta described as “a good one for us,” noting the success of Alani and Celsius.
While soft drinks have not performed as well, PepsiCo is not abandoning the category. Rather, executives said, it is investing more strategically in the space.
“There are two things we are trying to do,” explained Laguarta. “One is increase the investment behind the brands. So, invest more behind Poppi, Pepsi, Mountain Dew and some of the other brands we have in soft drinks.”
The second priority is to improve the execution, he said.
“There are opportunities for us to raise the bar on execution in our beverage business, and the team is fully focused” and working with bottling partners to make the company more competitive, he said.
“To help support these investment priorities, structural cost reduction actions that reduce redundancies and curtail discretionary expenditures are being identified,” he said in a prepared statement. “Examples include reductions in corporate costs and other initiatives not directly tied to growth. These incremental actions will complement our existing enterprise-wide productivity initiatives and being to take effect in the coming months.”
Could the snack business offer a blueprint for success?
As PepsiCo struggles with its North American beverage business, its efforts to turnaround its also sluggish snack business show promise – and could offer a roadmap for the drinks side.
Last year, PepsiCo’s snack business volume was falling low single digits, but this year its volume is growing low single digits – signifying a “a major turnaround,” according to Laguarta.
First strategic play: Restore the value equation
He attributed the gains primarily to pricing changes, including reductions, lower entry points and alternate formats, which helped its iconic snacks feel more affordable to consumers and ultimately helped boost volumes. But, he added, innovation also played a role.
“There are two elements or two big vectors of growth in the US foods business. One is making sure that you provide the right value. So, affordability, price points, entry points to the different categories, sub-segments, making sure that we’re competitive in that space with a consumer that is clearly challenged. We don’t expect the consumer to suddenly become in a much better place in the next 12, 18 months. So value, affordability, price points, giving the people the right format” will continue to be important, he explained.
He noted the company is pleased with how pricing investments have worked in the food business, and as volumes rebound the company has more flexibility to absorb the “new wave of inflation that is coming to every country, not only the US.
Second strategic play: Evolve the portfolio
The second element in PepsiCo’s playbook for improving its snack business is “evolving the portfolio to satisfy the various demand moments of that business,” said Laguarta.
He explained the company has “been investing in multiple platforms that position us very well for the future,” including adding fiber, protein and other functional ingredients to its products and offering them in portion-controlled packaging.
PepsiCo is also building out beverage platforms that align with some of these consumer needs, including hydration, energy and prebiotic soda brand Poppi. Whether those investments can translate into stronger performance across its broader soft-drink portfolio remains an open question.
Third strategic play: Redirect investment toward growth
Overlaying the first two strategic plays is additional investment in the “right advertising, right emotional connection with the consumer,” he added.
This third component may be especially important for executing this play in beverage where input costs, including aluminum and diesel, are rising – potentially compromising price cuts as an option. While it needs to balance pricing with competitiveness, enhancing consumers’ value perception of the brands likely will be pivotal.
This is also important within snacks going forward as many of the company’s efforts to hedge against inflation are beginning to “roll off and essentially our input costs are starting to ramp,” Laguarta said.
“In spite of that,” he added, “we are going to be investing in growth across the company. I think it is important to mention not just internationally, but we want to make sure we build momentum in the North American business.”
Fourth strategic play: Improve commercial execution
The last prong of PepsiCo’s snack business turnaround was enhancing execution.
PepsiCo also sees room to improve how it takes beverages to market, including by working more closely with bottling partners. Laguarta said the company is considering a range of structural options in different geographies, including refranchising where it makes strategic sense, but he did not describe a specific plan to refranchise its North American beverage business.
“These are important decisions that we’ll be making with a sense of urgency and with the strategic midterm, long-term vision that we always run the company with,” he added.
Can PepsiCo lift and shift its snack playbook to its beverage business?
Whether PepsiCo’s snack playbook can be applied to the beverage business remains to be seen, but its success in food is promising, especially around restored valued, the portfolio evolution and increased investments in growth and execution.
Still, soft drinks may test whether that formula can overcome deeper challenges related to consumer relevance, competition and the way PepsiCo takes its brands to market.
The stakes are clear in PepsiCo’s more cautious outlook for the year. The company lowered its forecast for 2026 core earnings-per-share growth to 2.5%–3.5%, down from its previous expectation of growth at the low end of a 5%–7% range. As the company looks toward 2027, the question is whether its efforts to sharpen its value proposition, refresh its portfolio and improve execution can translate into a more durable recovery, particularly in North American beverages.
