Activist investment firm Elliott Investment Management has bought a stake in PepsiCo worth about $4 billion. It is now demanding that the beverage and snack giant make significant changes to increase the value of its shares. According to Elliott, the proposed steps could increase the company’s value by more than 50%. This is reported by the WSJ.
The move is a response to long-standing problems at PepsiCo. The company is losing market share, and its flagship drink, Pepsi-Cola, has fallen to fourth place in sales in the US, losing not only to Coca-Cola, but also Dr Pepper and Sprite. The food business, which used to be a growth engine, is also showing a slowdown.
As a result, PepsiCo’s market value has fallen by about 25% from a peak of $270 billion in May 2023 to about $200 billion.
In his letter to PepsiCo’s board, Elliott made three key proposals:
- Sell its own beverage bottling plants to local and independent partners. It is noted that rival Coca-Cola successfully implemented a similar initiative in 2017, which positively impacted its capitalization.
- Conduct an audit of the beverage and food assortment and abandon brands that are not selling well.
- Provide investors with a more detailed and transparent plan for enhancing financial performance.
PepsiCo shares rose about 5% in pre-market trading on the news of the emergence of a new active investor.
The company itself said that it would consider Elliott’s proposals and valued the dialogue with shareholders, but remained confident in its current strategy.