Elliott Takes $4 Billion Stake in Pepsi, Urges Bottling Refranchise and Product Cuts

Elliott Investment Management has acquired roughly a $4 billion stake in PepsiCo and is pressing the company to refranchise its bottling network and trim underperforming products, according to a note seen by The Wall Street Journal and people familiar with the matter. The hedge fund said the moves could boost profits and the stock price, citing Coca‑Cola’s 2017 refranchising as a template.

PepsiCo has lost ground in the U.S. carbonated soft‑drink market, falling to fourth place behind Coca‑Cola, Dr Pepper and Sprite, according to Beverage Digest. The company’s market value has declined about 25 percent — roughly $70 billion — since its peak in May 2023, a slump Elliott and others have tied to a mix of retailer and consumer behavior changes and industry headwinds including tariffs and weaker shopper spending.

Elliott, which manages about $76 billion in assets, has a record of forceful activism. Last year it bought a roughly $2 billion stake in Southwest Airlines and pressed for leadership changes, cost cuts and new fees. It also took a large stake in Starbucks and was influential in the replacement of that company’s chief executive in what became a broader turnaround effort. Elliott told Pepsi’s board it wants to give local and independent bottlers ownership of the company’s bottling operations — a move Coca‑Cola implemented beginning in 2017 that Elliott says helped lift its profit margins and shares.

Beyond refranchising, Elliott is pushing for a comprehensive review of PepsiCo’s product portfolio, the note said. The company’s food and beverage lineup includes long‑standing brands such as Mountain Dew, Gatorade, Lay’s, Doritos and Quaker Oats, and newer acquisitions including Siete Foods and the probiotic soda Poppi. Elliott indicated that any product that is not selling well could be on the chopping block as part of efforts to improve returns.

PepsiCo has been investing to win back consumers. The company revived the Pepsi Challenge, staging blind taste tests in U.S. cities pitting Pepsi Zero Sugar against Coca‑Cola’s Zero Sugar, and has run marketing initiatives and in‑store placement campaigns. Still, PepsiCo’s North American food and beverage business has reported quarterly sales declines since late 2022, according to analysts.

Wells Fargo analyst Chris Carey wrote in June that a large strategic rethink could yield about $800 million in savings. Some Wall Street observers who spoke with the Journal said Pepsi’s beverage business might perform better as a standalone company; the activist investment firm Trian Fund Management reportedly attempted to pursue a spin‑out around a decade ago.

PepsiCo said it would review Elliott’s suggestions and values input from its shareholders. The company told the Journal it is confident in its current strategy, which includes targeted investments, portfolio changes and productivity initiatives. Chief Executive Ramon Laguarta said he is focused on finding value for customers and boosting product placements in retail stores.

Elliott framed the proposal to copy Coca‑Cola’s 2017 refranchising move as a way to unlock shareholder value, saying it could raise the stock price and profits by more than 50 percent. Coca‑Cola’s share price has risen since that program, and the company’s market value sits near $300 billion.

PepsiCo has continued to buy brands in the healthy‑and‑snack categories. The company agreed last year to acquire Siete Foods, a Mexican‑style grocery and snack maker backed by actor and entrepreneur Eva Longoria, for about $1.2 billion; Siete products are sold in major U.S. retailers including Target and Whole Foods.

Pepsi’s response to Elliott’s approach will be watched closely by investors and industry analysts. Activist campaigns can lead to rapid management and structural changes, but companies and boards must weigh those proposals against long‑term strategic plans for marketing, product development and distribution. PepsiCo said it would study shareholder input while continuing the initiatives it has announced to stabilize and grow sales.