PepsiCo's Strategic Restructuring: Evaluating Shareholder Value Creation in a Post-Elliott Landscape

In the ever-evolving landscape of corporate governance, activist investors have emerged as pivotal forces reshaping corporate strategies. PepsiCo's recent engagement with Elliott Investment Management-a $4 billion stakeholder-has catalyzed a strategic overhaul aimed at restoring shareholder value. This article examines the interplay between Elliott's activist agenda, PepsiCo's operational efficiency initiatives, and the resulting financial metrics to assess whether the restructuring is delivering on its promise of value creation.

Elliott's Activist Campaign: A Catalyst for Change

Elliott Management's $4 billion investment in PepsiCo in 2023 marked a turning point for the consumer staples giant. The firm criticized PepsiCo's stagnant growth, slipping margins, and underperformance relative to peers, demanding a strategic reset. Key proposals included refranchising bottling operations, divesting underperforming food assets, and implementing aggressive cost-cutting measures. These demands were framed as necessary to address what Elliott described as a "dramatic underperformance" in both stock price and operational execution.

PepsiCo responded by entering into a collaborative dialogue with Elliott, culminating in a restructuring agreement that prioritized cost reductions. The company acknowledged the need for "a sense of urgency" to align its cost structure with evolving market demands. This alignment has since driven a series of operational and strategic shifts, including the elimination of 35% of SKUs, workforce reductions in Frito-Lay, and automation of supply chain processes.

Operational Efficiency: Metrics and Progress

PepsiCo's restructuring efforts have yielded measurable improvements in operational efficiency. By 2024, the company's gross profit margin had risen to 54.55%, up from 53.03% in 2022. Operating margin also improved to 14.03% in 2024, reflecting enhanced cost management. These gains were achieved through SKU rationalization (reducing over 35% of products), plant consolidations, and labor restructuring, including a 7% reduction in Frito-Lay's workforce.

However, challenges persist. In Q3 2025, operating margin dipped to 14.9%, down from 16.6% in the same period the previous year. This decline underscores the difficulty of sustaining margin expansion amid inflationary pressures and shifting consumer preferences. PepsiCo has pledged to continue productivity initiatives, including further SKU cuts and automation, to offset these headwinds.

Shareholder Value: Dividends, Earnings, and Stock Performance

Despite operational strides, PepsiCo's shareholder value metrics remain mixed. The company maintained a robust dividend policy in 2025, with an annual payout of $5.62 per share (a 5% increase YoY) and a yield of 3.88%. However, the dividend payout ratio of 106.7%-well above the Consumer Defensive sector average of 61.3%-raises concerns about long-term sustainability. This high payout, coupled with a stock price that fell over 25% from 2023 highs by August 2025, suggests a disconnect between operational improvements and market sentiment.

PepsiCo's stock has shown a 13% rebound in the last quarter, but it remains below the consensus price target of $153.05. This underperformance contrasts with Elliott's push for a turnaround, highlighting the gap between restructuring efforts and investor confidence.

Comparative Financial Metrics: Benchmarking Against Peers

To evaluate PepsiCo's restructuring effectiveness, it is instructive to compare its financial metrics with industry peers like Coca-Cola and Nestlé.

• P/E Ratio: PepsiCo's P/E ratio of 27.94 as of late 2025 exceeds the beverage industry average of 18.2x and is higher than Coca-Cola's 23.18. This premium valuation suggests investors are demanding higher growth expectations, which PepsiCo must meet to justify its price.
• EBITDA and ROE: Coca-Cola's EBITDA margin of 39% in 2024 (vs. PepsiCo's 15.3%) and ROE of 47% (vs. PepsiCo's 38.9%) underscore its superior profitability. Nestlé's EBITDA growth from $16.6B in 2022 to $21.5B in 2024 further highlights the competitive pressure PepsiCo faces.
• Dividend Sustainability: While PepsiCo's payout ratio is unsustainable, Coca-Cola's 68% payout ratio and Nestlé's 65% align more closely with sector norms. This disparity could erode PepsiCo's appeal to income-focused investors.

### Conclusion: A Work in Progress
PepsiCo's restructuring under Elliott's influence has yielded tangible operational improvements, including margin expansion and cost discipline. However, the company's high dividend payout ratio, stock underperformance, and weaker financial metrics relative to peers indicate that the path to sustainable shareholder value creation remains incomplete. The success of this transformation will hinge on PepsiCo's ability to balance cost-cutting with innovation, stabilize margins, and align its valuation with its strategic reset. For investors, the key question is whether these efforts will translate into durable growth or merely delay an inevitable reckoning.