Stock Analysis & Valuation PepsiCo, Inc. (PEP.DE)

• Previous Close: €126.44
• Sector Valuation Confidence Level: Low

Valuation method	Value, €	Upside, %
Artificial intelligence (AI)	116.20	-8
Intrinsic value (DCF)	59.21	-53
Graham-Dodd Method		n/a
Graham Formula	51.40	-59

Strategic Investment Analysis

Company Overview

PepsiCo, Inc. (PEP.DE) is a global leader in the non-alcoholic beverage and convenient foods industry, operating across seven key segments including Frito-Lay North America, Quaker Foods North America, and PepsiCo Beverages North America, among others. Headquartered in Purchase, New York, PepsiCo boasts a diverse product portfolio that includes iconic brands like Pepsi, Lay's, Quaker Oats, and Gatorade. The company serves a broad customer base through a robust distribution network encompassing direct-store-delivery, customer warehouses, and e-commerce platforms. With a market capitalization exceeding €155 billion, PepsiCo is a dominant player in the consumer defensive sector, known for its strong brand equity, extensive global reach, and consistent dividend payouts. The company's strategic focus on innovation, sustainability, and digital transformation positions it well for long-term growth in the competitive beverages and snacks market.

Investment Summary

PepsiCo presents a compelling investment case due to its strong brand portfolio, global diversification, and consistent financial performance. With a revenue of €91.85 billion and net income of €9.58 billion in the latest fiscal year, the company demonstrates robust profitability. Its low beta of 0.481 suggests lower volatility compared to the broader market, making it an attractive option for risk-averse investors. PepsiCo's dividend yield, supported by a dividend per share of €5.26, adds to its appeal for income-focused portfolios. However, investors should be mindful of the company's substantial total debt of €44.95 billion and the competitive pressures in the non-alcoholic beverage and snack food industries. The company's ability to innovate and adapt to changing consumer preferences will be critical in maintaining its market leadership.

Competitive Analysis

PepsiCo's competitive advantage lies in its extensive brand portfolio, global distribution network, and strong R&D capabilities. The company's diversified product mix, spanning beverages and snacks, provides resilience against market fluctuations. PepsiCo's direct-store-delivery system ensures efficient product placement and shelf visibility, giving it an edge over competitors. The company's focus on health and wellness trends, evidenced by its expansion into healthier snack options and low-sugar beverages, aligns with evolving consumer preferences. However, PepsiCo faces intense competition from The Coca-Cola Company, particularly in the beverage segment, where Coca-Cola's stronger international presence and brand loyalty pose challenges. In the snack segment, competitors like Mondelez International and Kellogg's offer stiff competition. PepsiCo's ability to leverage its scale, invest in innovation, and maintain cost efficiencies will be crucial in sustaining its competitive positioning.

Major Competitors

• The Coca-Cola Company (KO): The Coca-Cola Company is PepsiCo's primary competitor in the beverage segment, with a stronger global presence and higher brand loyalty. Coca-Cola's extensive portfolio includes iconic brands like Coca-Cola, Sprite, and Fanta. The company's focus on sparkling beverages gives it an edge in certain markets, but it lacks PepsiCo's diversified snack business. Coca-Cola's robust marketing and distribution network are key strengths, though its reliance on carbonated drinks exposes it to shifting consumer preferences towards healthier options.
• Mondelez International, Inc. (MDLZ): Mondelez International is a major player in the snack food industry, competing with PepsiCo's Frito-Lay segment. The company's strong portfolio includes brands like Oreo, Cadbury, and Toblerone. Mondelez's focus on premium and international markets differentiates it from PepsiCo, but its lack of a significant beverage business limits its diversification. Mondelez's innovation in snack categories and strong presence in emerging markets are strengths, though it faces challenges in matching PepsiCo's scale and distribution efficiency.
• Kellogg's Company (K): Kellogg's competes with PepsiCo in the breakfast and snack categories, with brands like Pringles, Cheez-It, and Pop-Tarts. The company's strong foothold in the cereal market is a key advantage, but its recent spin-off of its snack business (Kellanova) has reduced its competitive overlap with PepsiCo. Kellogg's focus on health-oriented products aligns with consumer trends, though its smaller scale compared to PepsiCo limits its market reach and bargaining power.
• Nestlé S.A. (NSRGY): Nestlé is a global food and beverage giant with a diverse portfolio that includes bottled water, coffee, and snacks. The company's strong presence in emerging markets and premium product offerings differentiate it from PepsiCo. Nestlé's focus on health and nutrition, with brands like Nescafé and Gerber, gives it an edge in certain segments. However, its lack of a strong carbonated beverage portfolio limits direct competition with PepsiCo in the soft drink market.