Why Ray Dalio’s Bridgewater Associates opened a position in Pepsi
Bridgewater Associates and PepsiCo
PepsiCo Inc (PEP) is a global food and beverage company and it’s a 0.19% new position in Bridgewater’s ~$12 billion long portfolio.
The company’s shares fell 3% recently, after PepsiCo reported earnings that beat estimates but missed on revenue. Excluding charges and other items, earnings were $1.05 a share—more than the $1 a share analysts expected. Revenue rose 1%, to $20.12 billion. For the full year, the company reported revenue up 1%, to $66.4 billion. In 4Q 2013, Pepsi’s snacks division saw 3% growth in volume and generated $7.9 billion in revenue. Beverages increased 1%, adding $12.2 billion to the company’s overall revenue.
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Trian said in a presentation last year:
- “We believe PepsiCo is at a strategic crossroads as secular forces ranging from changing consumer tastes to the increased importance of emerging markets have changed the outlook of PepsiCo’s key businesses. Management’s plans (increased advertising and marketing spend, the hope of “disruptive” carbonated soft drinks (CSD) innovation, and productivity initiatives that have not hit the bottom-line) are unlikely to be game-changers long-term.”
But Pepsico rejected the proposal and reiterated that it plans to retain its beverage unit, and expects to introduce naturally sweetened, lower-calorie beverages that might revive sales of soft drinks. The company said on the earnings call that following an “exhaustive analysis and review,” it believes North American beverage unit “creates value and is optimized within PepsiCo’s structure today.”
The company initiated a new five-year $5 billion productivity program (2015–2019) by accelerating investment in manufacturing automation, further optimizing the company’s global manufacturing footprint, including closing certain manufacturing facilities, re-engineering go-to-market systems in developed markets, expanding shared services, and implementing simplified organization structures to drive efficiency.