PepsiCo Embarks on Major Strategic Overhaul

PepsiCo is implementing a sweeping strategic shift. The beverage and snack conglomerate, responding to pressure from activist investor Elliott Investment Management—which holds a $4 billion stake—is eliminating nearly one-fifth of its product variations in the United States. This decisive move follows a period of disappointing growth relative to arch-rival Coca-Cola, with the company aiming to salvage margins and dramatically reduce internal complexity through a rigorous streamlining initiative.

The urgency for change is underscored by a significant performance gap. For the third quarter of 2025, PepsiCo reported a modest organic sales growth of just 1.3%. In stark contrast, Coca-Cola achieved a robust 6% organic growth during the same period. High inflation has driven many cost-conscious consumers toward cheaper private-label alternatives, putting pressure on PepsiCo's sales volumes.

In response, the company is not only cutting costs but also planning targeted product innovations for 2026. These include the launch of "Bubly Mocktails" to capitalize on the "Dry January" trend and a new line of protein-rich Doritos snacks.

Activist Investor Drives Portfolio Simplification

The catalyst for this extensive restructuring is the substantial influence of Elliott Investment Management. Following the hedge fund's investment, PepsiCo confirmed plans to remove approximately 20% of its U.S. stock-keeping units (SKUs) by early 2026. The primary objectives are to streamline supply chains and sharpen focus on higher-margin offerings.

Should investors sell immediately? Or is it worth buying Pepsi?

The real-world impact of these measures is already being felt. The company has permanently shuttered its Frito-Lay facility in Orlando, resulting in the loss of more than 450 jobs. Concurrently, management is striving to win back inflation-weary customers by emphasizing simpler ingredients and improving everyday value, a strategy it calls "Sharper Everyday Value."

Analysts Affirm the Strategic Direction

Despite near-term operational headwinds, financial institutions are endorsing the efficiency drive. Analysts at JPMorgan recently upgraded PepsiCo shares to an "Overweight" rating, raising their price target from $151 to $164. Based on a recent share price of $143.78, this implies an upside potential of roughly 10%. The broader market consensus, standing at approximately $160.20, also remains significantly above the current trading level.

For the 2026 fiscal year, PepsiCo's leadership is targeting organic revenue growth between 2% and 4%. It also forecasts a currency-adjusted increase in earnings per share of 4% to 6%. Income-focused investors can expect the next quarterly dividend of $1.4225 per share to be paid on January 6, 2026.

The critical factor for the stock's future trajectory will be whether this aggressive portfolio pruning can successfully reignite organic volume growth. JPMorgan's analysis suggests that the enhanced operational efficiency could help close the valuation gap with competitors by 2026.