Activist investor Elliott Investment Management has acquired a significant stake in PepsiCo, signaling its intent to press for strategic and operational changes at the global beverage and snack giant. This move could reshape PepsiCo’s future direction and investor perception.

Activist investor Elliott Investment Management has acquired a substantial $4 billion stake in PepsiCo (NASDAQ: PEP), representing approximately 2% of the company's market capitalization. This significant investment, disclosed on September 2, 2025, signals Elliott's intent to press for strategic and operational changes at the global beverage and snack giant. The acquisition positions Elliott as one of PepsiCo’s largest active investors. While Elliott’s involvement suggests dissatisfaction with current performance, activist investor campaigns often spark optimism among investors regarding potential improvements and value creation. The market reacted positively to the news, with PepsiCo shares advancing as much as 5% in morning trading following the disclosure.

The Event in Detail

Elliott Investment Management’s stake is detailed in a comprehensive 75-page presentation titled “Elliott’s perspectives on PepsiCo.” The firm asserts that PepsiCo is “deeply undervalued,” citing a forward (12-month) price/earnings (P/E) ratio of 18, which has declined from 20 in 2024 and remains below its 10-year average of 22. This valuation also represents a 4.1-point discount relative to the staples sub-index of the S&P 500, whereas historically, PepsiCo has traded at a modest premium.

Elliott’s analysis highlights specific areas of concern within PepsiCo’s North American operations, which were identified as an “Achilles’ heel” in 2024. The firm criticized PepsiCo Foods North America (PFNA) for market share loss and margin compression, attributing these issues to heavy capital spending and a failure to achieve anticipated sales growth. For PFNA, Elliott recommends resetting the cost base to align with current demand, divesting non-core assets, and focusing investments on iconic brands and high-potential adjacencies. PFNA’s EBIT margins, for instance, have reportedly dropped to 24% from 30% in 2019.

The PepsiCo Beverages North America (PBNA) division is also targeted for “chronic share loss,” lagging margins, and a “bloated portfolio.” Elliott suggests a comprehensive review and streamlining of PBNA’s brand and stock-keeping unit (SKU) portfolio, an assessment of its bottling and distribution structure, and a renewed focus on growth through innovation, increased marketing, and disciplined capital allocation. Elliott specifically notes that PBNA has “profoundly underperformed the Coca-Cola system and Keurig Dr Pepper (KDP) on both growth and margins” since acquiring its bottlers in 2009-2010. In 2024, Frito-Lay North America generated 43% of the company’s division operating profit, while PBNA contributed only 15%, leading to the observation that “snacks pay the rent, soda eats the margins.”

Despite these criticisms, PepsiCo’s net revenue in 2024 was $91.85 billion, a 0.4% increase year-over-year, with operating profit growing 7.5% to $12.89 billion and net income increasing 5.3% to $9.58 billion. However, every North American business segment, including Frito-Lay, Quaker Foods, and PepsiCo Beverages, experienced sales losses in 2024. In contrast, the European segment’s sales significantly increased. PepsiCo’s stock closed at $150.28 on September 2, 2025, after reaching an intraday high of $157.80. The stock had neared $200 a share in April 2023 but dipped to $130 in June 2025, reflecting approximately a 13% decline over the past year.

Analysis of Market Reaction

The immediate positive market reaction to Elliott’s disclosure, with PepsiCo shares rising significantly, reflects investor optimism that activist involvement can serve as a catalyst for value creation. This sentiment is rooted in the belief that external pressure can prompt necessary strategic realignments and operational efficiencies within large, established corporations. The involvement of Elliott, a firm with a history of successful activist campaigns, is often perceived as a signal for potential unlocking of shareholder value, with Elliott projecting a potential 50% increase in PepsiCo’s stock price if its proposed reforms are implemented.

Broader Context and Implications

Elliott’s intervention comes at a time when the broader branded packaged food industry faces headwinds such as sluggish sales and elevated commodity costs. The activist stake underscores a broader market desire for major companies to re-evaluate their business strategies and unlock shareholder value. Elliott’s demands for refranchising PepsiCo’s bottling network and divesting non-core assets echo strategies successfully implemented by peers, such as Coca-Cola, which refranchised its bottling operations. Historical data suggests that a substantial portion of activist returns, around 74.8%, are derived from operational improvements.

This activist campaign aligns with a maturing trend in shareholder activism, shifting from aggressive, short-term tactics to a more playbook-driven approach focused on long-term value creation through structured reforms. Instead of disruptive takeovers, the emphasis is now on operational efficiency and sustainable governance. PepsiCo has made some recent strategic moves, including acquiring prebiotic soda-maker Poppi for $1.95 billion and increasing its ownership in Celsius Holdings, while handing over its Rockstar Energy brand to Celsius and taking over distribution of Alani Nu. Elliott’s engagement signals investor demand for clear financial targets and stronger board oversight, which could catalyze long-overdue governance and strategic changes at PepsiCo.

Expert Commentary and Outlook

PepsiCo’s management has responded to Elliott’s proposals by stating:

"PepsiCo maintains an active and productive dialogue with our shareholders and values constructive input on delivering long-term shareholder value. We note Elliott Investment Management’s disclosure of its presentation and will review its perspectives within the context of our strategy to drive sustainable growth."

This measured approach reflects the growing preference for collaborative activism over confrontational campaigns, where companies are increasingly prioritizing sustainable governance and long-term financial policies. The unfolding situation at PepsiCo could lead to a strategic review, potential asset sales, operational efficiency improvements, or changes in leadership, which could significantly impact the company’s competitive position and profitability. Key factors to monitor in the coming days and weeks include any further communications from PepsiCo regarding its strategic response, upcoming economic reports that could influence consumer behavior, and the broader performance of the consumer packaged goods sector. The resolution of this case may well set a new standard for how activism is practiced in mega-cap portfolios in the current decade and beyond.