PepsiCo's Strategic Crossroads: Can Elliott's Activist Playbook Spark a Turnaround?

Elliott Management’s $4 billion stake in PepsiCo has ignited a high-stakes battle for the company’s future. The activist investor’s proposals—refranchising the North America Beverages (PBNA) bottling network, streamlining the snacks portfolio, and divesting non-core assets—aim to address a decade of underperformance in key segments [1]. This move mirrors strategies employed by other activist campaigns in the consumer staples sector, where operational restructuring and governance reforms have historically driven value creation. But can Elliott’s playbook succeed where others have stumbled?

The Case for Refranchising: Lessons from Coca-Cola

Elliott’s push to restructure PBNA is rooted in a familiar playbook: decentralizing control to boost efficiency. The firm cites Coca-Cola’s refranchising model as a blueprint, where shifting bottling operations to independent franchisees allowed the parent company to focus on innovation and brand management [2]. Coca-Cola’s Q1 2025 results underscore this strategy’s potential: despite a 2% revenue dip from refranchising, the company achieved a 71% surge in operating income and a 33.8% operating margin, driven by cost discipline and margin expansion [3].

However, PepsiCo’s PBNA segment faces unique challenges. Unlike Coca-Cola, which has long leveraged franchising, PepsiCo’s vertically integrated bottling network has been a drag on performance. In Q2 2025, PBNA recorded a $639 million operating loss, partly due to a $1.86 billion asset write-down linked to the Rockstar brand [4]. Refranchising could alleviate these costs but risks diluting control over distribution and brand consistency—a critical concern in a market dominated by Coca-Cola.

Portfolio Streamlining: A Double-Edged Sword

Elliott also advocates for divesting underperforming assets in PepsiCo Foods North America (PFNA) to realign costs with demand. This aligns with broader activist trends in consumer staples, where portfolio rationalization has often boosted profitability. For instance, Trian Fund Management’s 2022 intervention at Unilever led to the appointment of a cost-cutting CEO and a 12.1% EBITDA increase at US Foods through stability-focused strategies [5].

Yet, PepsiCo’s SKU proliferation—over 2,500 products in its North American portfolio—complicates this approach. While streamlining could reduce operational complexity, it may also alienate consumers accustomed to variety. The success of brands like Pepsi Zero Sugar and Gatorade suggests PepsiCo can thrive with a focused portfolio, but execution will be key [4].

Activist Activism in Consumer Staples: A Mixed Track Record

The consumer staples sector has become a magnet for activists due to its stable cash flows and perceived inefficiencies. From 2020 to 2025, campaigns targeting companies like Danone and Performance Food Group (PFG) have yielded mixed results. While Artisan Partners’ boardroom overhaul at Danone led to a 39% share price jump, other campaigns, such as those at Glanbia, saw limited gains [5].

Elliott’s approach, however, differs in its emphasis on long-term operational fixes rather than short-term cost cuts. By tying refranchising to Coca-Cola’s model and advocating for clear financial targets, Elliott aims to balance shareholder value with sustainable growth. This contrasts with the 2020 trend of “withhold campaigns,” which often resulted in management-led strategies prioritizing stability over radical change [5].

The Road Ahead: Risks and Rewards

Elliott’s proposals could unlock significant value. Academic research shows refranchising boosts shareholder returns when paired with low royalty rates and high trade credit, metrics PepsiCo may need to adjust [6]. However, the company’s recent EBITDA growth in international markets (EMEA and Latin America) suggests that geographic diversification might offset North American underperformance without radical restructuring [4].

PepsiCo’s response will be pivotal. While the company has acknowledged Elliott’s proposals, its commitment to sustainability and ESG goals—tying executive incentives to environmental targets—adds another layer of complexity [7]. Balancing activist demands with long-term governance trends will require a nuanced strategy.

Conclusion

Elliott’s activist campaign at PepsiCo represents a high-risk, high-reward proposition. By leveraging Coca-Cola’s refranchising playbook and pushing for operational clarity, the firm aims to transform a stagnant CPG giant into a leaner, more agile competitor. Yet, the success of this strategy hinges on PepsiCo’s ability to execute without sacrificing brand strength or innovation. As the board weighs these proposals, investors will be watching closely: the outcome could redefine the future of one of America’s most iconic consumer brands.

Source:
[1] Elliott Sends Presentation to Board of Directors of PepsiCo Inc [https://www.prnewswire.com/news-releases/elliott-sends-presentation-to-board-of-directors-of-pepsico-inc-302543745.html]
[2] Activist Elliott wants PepsiCo to emulate Coke's playbook [https://www.morningstar.com/news/marketwatch/2025090289/activist-elliott-wants-pepsico-to-emulate-cokes-playbook-this-is-why]
[3] Coca-Cola Reports First Quarter 2025 Results [https://investors.coca-colacompany.com/news-events/press-releases/detail/1131/coca-cola-reports-first-quarter-2025-results]
[4] Pepsico Q2 2025 · Earnings [https://www.captide.ai/insights/pepsico-q2-2025-earnings]
[5] Boardroom Battles and Activist Influence: Reshaping Governance in the Food Distribution Sector [https://www.ainvest.com/news/boardroom-battles-activist-influence-reshaping-governance-food-distribution-sector-2508/]
[6] Franchising structure changes and shareholder value [https://link.springer.com/article/10.1007/s11747-022-0921-3]
[7] PepsiCo and the Rise of Activist Pressure Amid Shifting Governance Trends [https://www.ainvest.com/news/pepsico-rise-activist-pressure-shifting-governance-trends-2508/]