Pepsi 4Q14 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Social and digital marketing

“We expanded our engagement in social and digital marketing. For example, Doritos CrashTheSuperBowl received nearly 5,000 consumer submissions from 29 countries around the world. And our Lays Do Us A Flavor campaign garnered more than 14 million submissions. Programs like these drive phenomenal consumer engagement, are highly complementary to our broader marketing efforts and are extremely financially efficient. Our investments are translating to tangible results with solid improvement in brand equity scores and market share performance in our priority markets for our global brands.”

Higher inflation in non-market traded commodities

“In terms of headwinds, we anticipate commodity cost inflation in the low single digits. Keep in mind that because of our forward buying strategies, our commodity cost changes will lag what you see in the spot market. I believe our expected inflation rate is a bit higher than what a number of you have modeled and this is because we are seeing more pronounced inflation in our non-market traded commodities, including certain packaging and agricultural raw materials. In addition, we will see an inflation impact from transaction ForEx in many of the markets whose currencies have weakened against the dollar. And foreign exchange translation will be a significant drag on our U.S. dollar earnings.”

Pepsi and Frito-Lay merged in 1965

“this year marks the 50th anniversary of the coming together of PepsiCo and Frito-Lay in 1965. We set the foundation for what is today one of the world’s most iconic and successful companies. ‘”

Only 79 of the Fortune 500 in 1965 still remain

“It was a phenomenal vision of Don Kendall and Herman Lay, the architects of this combination, which set the stage to grow from $510 million in revenue in 1965 to almost $67 billion today. Of the companies in the Fortune 500 in 1965 just 79 remain today, and over this time frame, we’ve generated extraordinary shareholder returns.”

Juice business is very different in Europe than it is in the states

“the Tropicana line-up we sell in France and the UK is a very different line-up than we sell here in the U.S. because the juice business evolved very, very differently there.”

It takes time for lower gas prices to make their way back

“In terms of the impact of gas prices, I think what we see happening is consistent with what we’ve seen in the past which is — it takes a number of months before the consumer fully spends back the so called benefit from lower gas prices. I think you’re going to see that over the course of six months to eight months rather than an immediate change in consumer behavior. It just sort of assimilates over time.”