DAVOS, SWITZERLAND — PepsiCo (PEP) CEO Ramon Laguarta wants to change the minds of food industry critics inside the new Trump administration.
“It’s not a worry. I think we’ve been leading the transformation of the food industry for many years,” Laguarta said on Yahoo Finance at the World Economic Forum in Davos, Switzerland.
Continued Laguarta, “We’ve been leaders in sodium reduction, we’ve been leaders in sugar reduction. We’ve been leaders in eliminating fat from products. We’ve been leading in artificial colors.”
Sentiment around packaged foods stocks has soured in part due to the new administration. Trump’s pick to run Health & Human Services (HHS), Robert Kennedy Jr., is a noted longtime critic of the packaged foods industry.
Meanwhile, the outgoing surgeon general warned this month alcohol should come with cancer risk labels. And the US Food and Drug Administration (FDA) has banned the use of red dye No. 3 in food, drinks, and ingested drugs. Laguarta said Pepsi doesn’t have the dye in its US portfolio.
The barrage of health news has investors worried packaged food players may have to reformulate products at a significant cost. The bad press isn’t exactly great for business, either.
Shares of PepsiCo are down about 14% in the past three months, underperforming the S&P 500’s (^GSPC) 5% gain. The stock price of rival Coca-Cola (KO) is down 9% over the same stretch, while Spam maker Hormel’s (HRL) shares are off by 3%.
“In the US, I would like for us to be also working with the new administration on how do we move forward eliminating artificial colors from food in the US. And I think it should be science-based. It should be very pragmatic,” Laguarta said of PepsiCo’s aim to be part of the solution.
“We as an industry should aspire to, in three or four years, no artificial colors in food. It is ambitious. I think it is doable, and it should be a private, private-public cooperation that drives that outcome.”
For PepsiCo investors, the pressured stock price also reflects its recent performance in its snacks and beverages businesses. Both have slowed amid more cautious spending by lower-income households. A rising US dollar — which weighs on international sales — hasn’t helped.
Third quarter sales and earnings fell 0.6% and 5% year over year, respectively.
The Street is bracing for mixed results and an accompanying 2025 outlook when the company reports on Feb. 4.
“After a tumultuous year in 2024, which began with PepsiCo guiding towards the top end of their long-term algorithm and eventually finished with organic sales below algorithm after three downward revisions on the top line, we believe PepsiCo management understands the reality of the situation and need for improvement. We would expect a below algorithm guide on the top and bottom lines,” warned RBC analyst Nik Modi.
