PepsiCo plans layoffs as it looks to wrap up Elliott talks

Companies have frequently requested staff to work from home in recent years ahead of layoffs

PepsiCo announced a series of operational changes backed by activist investor Elliott Investment Management on Monday (Dec 8), including a review of its supply chain and slashing its overall number of products. The company is also planning layoffs in North America, according to an internal memo.

The moves, which include the removal of nearly 20 per cent of its US product lineup, will “accelerate organic revenue growth, deliver record productivity savings and improve core operating margin – starting in 2026”, chief executive officer Ramon Laguarta said in a statement.

Marc Steinberg, a partner at Elliott, said the plan, which includes investing in more affordable products, “will drive greater revenue and profit growth”, according to the statement.

PepsiCo said that it expects organic revenue growth, which excludes items such as acquisitions and currency volatility, to be 2 to 4 per cent in fiscal 2026, compared to an average analyst estimate of nearly 2.7 per cent.

Separately, PepsiCo instructed employees in a number of North American offices, including its headquarters in Purchase, New York as well as Chicago and Plano, Texas, to work remotely this week. Companies have frequently requested staff to work from home in recent years ahead of layoffs.

“We will be making structural changes to our business that will affect some roles in the company,” chief people officer Jennifer Wells said in a message to workers on Sunday that was viewed by Bloomberg News.

Elliott, which announced a roughly US$4 billion stake in PepsiCo in September, has pushed for changes, citing an overly complex portfolio of brands and a declining share of the beverage business.

PepsiCo’s Laguarta has said that the company is taking actions to reduce costs, improve productivity and update its manufacturing system so that it can invest in other aspects of the business. PepsiCo executives had already talked about “right-sizing the workforce”, a frequent corporate euphemism for layoffs, prior to Elliott’s engagement with the company.

In November, PepsiCo shut down two Frito-lay facilities in Orlando, Florida, laying off more than 450 people. At the time, the company said the layoffs were “driven by business needs”.

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Shares in PepsiCo have fallen roughly 5 per cent this year through last week’s close, giving the company a market value approaching US$200 billion.

Elliott pressed PepsiCo to simplify its drinks portfolio by selling some brands, potentially including sparkling water maker SodaStream and Starry, a lemon-lime soda.

PepsiCo utilises a network of independent bottlers, but also operates many company-owned bottling businesses, which some investors would like to see it shed.

Elliott also urged PepsiCo to streamline its snacks portfolio and focus on its best-selling salty snacks. Elliott flagged some cereals, including Life and Cap’n Crunch, as well as Quaker Oats and Rice-A-Roni, as brands PepsiCo might want to divest.

In the months since Elliott’s stake was announced, Laguarta has said the company was moving quickly to update its portfolio and cut costs. It overhauled Lay’s potato chips, including reformulating its barbecue flavours to swap out artificial dyes for natural ones.

The company also unveiled a new line of Doritos and Cheetos that strip out all synthetic dyes and said that it would be expanding its options with more protein and fibre. BLOOMBERG

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