PepsiCo (NASDAQ:PEP) executives reaffirmed the company’s full-year outlook during its 2026 second-quarter earnings question-and-answer session, pointing to strong international momentum and improving global volumes while acknowledging that North America, particularly impulse channels tied to gasoline purchases, performed below expectations in the quarter.
Chairman and CEO Ramon Laguarta said PepsiCo’s first-half results showed “almost 7% revenue growth,” with global volumes up 3% in foods and 2% in beverages, which he described as the company’s fastest volume growth since 2022. CFO Steve Schmitt said reported EPS grew 6% in the first half, while constant-currency EPS rose 3%.
North America Focuses on Affordability, Portfolio Changes
A key topic on the call was PepsiCo Foods North America, where volume was flat in the quarter despite stepped-up affordability initiatives and innovation. Laguarta said the company had two main goals for its U.S. foods business: get the salty-snacks category back to volume growth and regain volume share. He said PepsiCo has made progress on both.
“A category that was negative in volume now is positive in volume,” Laguarta said. “We were losing share in volume. We’re gaining share in volume.”
Management said the turnaround is being driven by two pillars: price and affordability investments, and growth in “permissible” products and portion-control offerings. Laguarta said the permissible foods portfolio is already a $3 billion business and is growing “almost double digit.” He also pointed to portion-control formats and opening price points in multipacks and variety packs as areas that are working well.
At the same time, Laguarta said PepsiCo needs to improve the return on some of its pricing investments in the second half. He described the work as customer-by-customer and channel-by-channel, with different approaches needed for high-low retailers versus everyday-low-price retailers.
“It’s trying to get more volume from the investments,” Laguarta said in response to a question about what optimizing return on investment means.
Gas Prices Weigh on Convenience and Impulse Channels
Executives said higher gasoline prices following the Iran war had a meaningful impact on consumers, not just in the U.S. but globally. Laguarta said the U.S. effect has been most visible in impulse channels such as convenience stores and independent outlets, where PepsiCo is seeing slower conversion of store traffic into food and beverage purchases.
To address the issue, PepsiCo is working with retail partners on offers such as bundles, meal-linked promotions and combined food-and-beverage solutions. Laguarta said the company sees benefits when it has “good offers and bundles” in the channel.
He also said PepsiCo is not trying to raise prices in single-serve products to pay for investments in take-home formats.
“That’s not what we’re trying to do,” Laguarta said.
Asked about test-market work that supported the company’s affordability strategy, Laguarta said the consumer is “worse than what we had anticipated,” largely because of gasoline prices, and that some price investments at certain customers experienced execution delays for commercial reasons. He said those issues have been addressed and should support acceleration in the second half.
Guidance Reaffirmed, Tariff Refunds to Offset Cost Pressure
Schmitt said PepsiCo reaffirmed its full-year guidance, though he noted results may trend toward the low end of the EPS range the company had previously provided. He said management expects international net revenue to remain strong, North America to gradually improve and commodity pressures to increase.
PepsiCo also expects refund claims for tariffs paid last year to provide about 1 full point of EPS growth for the year. Schmitt said those refunds will help offset commodity pressure and allow the company to continue investing in the business.
“We’re not making decisions that hurt the top line in our assessment,” Schmitt said. He added that North America advertising and marketing expense is projected to increase in the second half compared with the prior year.
Schmitt said third-quarter results are expected to benefit from international strength and approximately 1 point of EPS benefit from tariff refund claims, but also face a higher year-over-year tax rate and timing of certain costs and investments. He said PepsiCo expects more productivity in the fourth quarter than in the third quarter.
International Business Remains a Growth Driver
Management emphasized the strength of PepsiCo’s international business throughout the call. Laguarta said the international business is expected to cross $40 billion this year and has become a major contributor to company volume, revenue and profit. He said international beverage volumes represent about two-thirds of PepsiCo’s total company beverage volume, while international foods volumes represent more than half.
Laguarta said markets in Asia and the Middle East remained resilient despite concerns about elevated gasoline prices. He also cited strong performance in Europe, where World Cup sponsorship activity in the food business is helping activate the category, and said Latin America was growing somewhat less than the rest of the business but remained positive.
Schmitt said international operating margin increased by a full point in the second quarter, showing not only top-line growth but improved flow-through on the profit and loss statement. He noted that PepsiCo expects some commodity inflation in the second half, particularly in EMEA, but said teams have been proactive in mitigation efforts.
PBNA Margins, M&A and U.S. Productivity Initiatives
In PepsiCo Beverages North America, Schmitt said operating margin declined about 90 basis points in the quarter, driven by gross profit rate. He attributed about half of the gross profit rate decline to the company’s Alani commercial arrangement, with additional pressure from softness in convenience and gas channels and product mix.
Laguarta said PepsiCo continues to see momentum in no-sugar beverages, functional hydration and energy, as well as innovation expected to scale in the second half.
On recent acquisitions, Laguarta said both Siete and poppi are “doing well.” He said poppi experienced some transition impact as it moved from its prior distributor system into PepsiCo’s system, but that issue is “pretty much solved.” Siete had ingredient-related issues in April and May, which he said have also been resolved. He also cited partnerships such as Celsius and Alani Nu as ways PepsiCo is expanding consumer offerings.
Executives also discussed productivity initiatives in the U.S., including automation, digitalization and efforts to combine scale across the company’s North American food and beverage businesses. Laguarta said PepsiCo is testing combined mixing centers, combined delivery and combined fleet concepts in Texoma, with more detail expected later this year or early next year.
Laguarta said the objective is to fund U.S. transformation without reducing investment in international markets, which he described as PepsiCo’s largest long-term growth opportunity.
About PepsiCo (NASDAQ:PEP)
PepsiCo, Inc (NASDAQ: PEP) is a multinational food and beverage company headquartered in Purchase, New York. The company develops, manufactures, markets and sells a broad portfolio of branded food and beverage products, including carbonated and noncarbonated soft drinks, bottled water, sports drinks, juices, ready-to-drink teas and coffees, salty snacks, cereals, and other convenient foods. Its leading consumer brands include Pepsi, Mountain Dew, Gatorade, Tropicana, Quaker, Lay’s, Doritos and Cheetos, among others.
Formed through the 1965 merger of Pepsi-Cola and Frito-Lay, PepsiCo has grown into a global business with integrated manufacturing, distribution and marketing operations.
