PepsiCo’s Snacks Business Starts to Rebound After Price Cuts

0:00Scarlet Fu:For years, the conversation around Bitcoin was the same. Is it real? And does it belong in a portfolio? While others debated, CoinShares got to work. In 2015, they launched the world's first Bitcoin EDP, regulated, listed, and built for institutional investors. Long before the U.S. market caught up. Today, they manage over$6 billion in assets and have remained profitable through every market cycle, including the 2022 downturn. What sets them apart? They're not a crypto exchange chasing trading fees, not a company betting its balance sheet on Bitcoin, not a mining operation. CoinShares is an asset manager with recurring fees, a fixed cost base, and a business model you can actually model.

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0:57Scarlet Fu:The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg This Weekend. I'm Christina Ruffini. We'll bring you the latest headlines, in-depth analysis, and big interviews. All the stories that hit home on your days off. And I'm Lisa Mateo. Watch and listen to Bloomberg This Weekend for thoughtful, enlightening conversations about business, lifestyle, people, and culture. On Saturday mornings, we put the past week's events into context, examining what happened in the markets and the world.

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2:06Scarlet Fu:Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right, let's keep to the earnings flow here. We got Pepsi reported earnings here. Ken Shea joins us here, senior consumer products analyst for Bloomberg Intelligence. She's based down in Princeton. And again, Scarlett, you probably know my feeling here. I am a Coca-Cola person. I identify as a Coca-Cola person.

2:42But you put a Pepsi in front of me, I'm just as happy. I really don't care. My brand loyalty is pretty low. They're both good. Hey, Ken, talk to us about Pepsi. What do we see in the earnings report? Hi, Paul.

2:53Scarlet Fu:So the PepsiCo report was pretty encouraging if you're bullish on the story here. The first quarter showed good progress, top line volumes. International business was particularly strong. I guess the key takeaway here for investors, why they're looking at it positively today, is because their efforts to have a better balance between volume and pricing really came through in the quarter. Critics of the company over the last couple of years have been saying, look, all your sales gains are coming, well, not all, but most of your sales gains is driven by price increases. And so they made a real effort.

3:29Scarlet Fu:They've reduced prices in most of their snack lines. They're also adding a lot of innovation. And Frito-Lay, North America, combined with Quaker, put up a 1 % volume gain. And that doesn't sound like a huge deal, but relative to declines, It was a positive sign. So all in all, it was it was a positive sign. And I think it showed or signaled that they're going to hit their targets for the year, at least so far. So when you talk about PepsiCo making its products more affordable, cutting costs, that was something that Elliott Investment, the activist investor, had been pushing PepsiCo to do. We know that Elliott built a stake in Pepsi last year.

4:10Scarlet Fu:Things are now moving in the direction that Elliott wants to see. What other changes do you anticipate PepsiCo making? Well, that's a good question, Scarlett. I mean, it's really what the focus was from Elliott was improve the margins, particularly at the food area, the food. And so far, you know, it seems to be making progress. Now, it's still unfolding will be the benefits of all this innovation and productivity that they're targeting. Now, keep in mind that it's happening not in a vacuum. It's happening with oil rising, aluminum prices going up. And so that was a big focus of the call also, where analysts said, look, you have your plan.

4:54Scarlet Fu:It seems to be moving well, but is the monkey – I'll be throwing a monkey wrench into the works here with oil prices and so on spiking up. And they said, look, we hedge a good six to nine months. We've probably covered their supply chain's in good shape. there might be hinted at possibly raising price at the end of the year if they have to. But I think right now, if you're an activist, you have to be pretty pleased with the balance of the growth. And like I said, it's the international, it's the beverage, it's the food all perform well in the quarter. And Ken, with a lot of your companies, I always I look at the dividend yield, I look at the dividend growth, because that's such a big part of the investment story for some of the some of your names so for pepsi i got a dividend yield of 3.6 percent they've been growing their their dividend what is their dividend policy uh they're committed to growing their dividend um and and they have it pretty much you know a mid single digit rate they selectly buy shares back uh the reinvesting and they really do have a balanced capital allocation strategy and i would i would suspect that's going to continue You know, a lot of the shareholders like those total returns.

6:03Scarlet Fu:Yeah, they certainly do. I mean, that's why you go into consumer staples, right, before that steady payout. Ken, before we let you go, I got to ask you about what happens when it comes to pricing. Obviously, these companies, these consumer package companies are facing higher expenses with fuel costs going up. Logistics becomes a lot more expensive as well. What did PepsiCo say about pricing, about inflation, and how it sees prices moving forward? Well, they were candid. I mean, they said, look, you know, inflation is likely to pick up at the end of the year. And while we would certainly like to target more productivity gains to offset a lot of that, the hedging programs I mentioned before, and the price mix is improving, some of the acquisitions they've made recently are really going to move that up higher.

6:52Scarlet Fu:But they said, look, you know, in between the lines anyway, you know, pricing is not off the table just because we took it, you know, early this year as part of this plan. So I think it's kind of a wait and see, as most companies are taking right now. I mean, no company is really immune to some of these inflationary pressures out there. And this is no exception. All right, Ken. Great stuff as always. Ken Shea, senior consumer products analyst for Bloomberg Intelligence down there in Princeton, New Jersey. we've been talking a lot about substituting private label for brands as a way to say you don't do that for soda no because soda has a very specific taste and people are so beholden to their favorite brand i would just thought of that today thought just came to me i'm not doing it for soda i was doing for seltzer but not for soda yes good point good point so uh you're right maybe that's a lifetime of brand building yeah thank you mad men yes exactly exactly so there you go stay with us more from boomerick intelligence coming up after this For years, the conversation around Bitcoin was the same.

7:54Scarlet Fu:Is it real? And does it belong in a portfolio? While others debated, CoinShares got to work. In 2015, they launched the world's first Bitcoin EDP, regulated, listed, and built for institutional investors. Long before the U.S. market caught up. Today, they manage over$6 billion in assets and have remained profitable through every market cycle, including the 2022 downturn. What sets them apart? They're not a crypto exchange chasing trading fees, not a company betting its balance sheet on Bitcoin, not a mining operation. CoinShares is an asset manager with recurring fees, a fixed cost base, and a business model you can actually model.

8:30Scarlet Fu:Now listed on NASDAQ under ticker CSHR. Learn more at coinsharesipo.com.

8:47Scarlet Fu:This is Tom Keen inviting you to join us for the Bloomberg Surveillance Podcast. It's about making you smarter every business day. I'm Paul Sweeney. We bring you complete coverage of the U.S. market open. We cover stocks, bonds, commodities, even crypto, all the information you need to excel. And I'm Alexis Christophorus. Bloomberg Surveillance also brings you the analysis behind the headlines. We do that through conversations with the smartest names in economics, finance, investment, and international relations. We do all this live each and every weekday that bring you the best analysis in our daily podcast.

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9:48Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Spirit Airlines. Have you ever flown Spirit? I have not. Because you are based out of Newark. So I'm captive to United. That's why I'm a million miler is what they call it. I know. You're proud of this distinction. I got the medallion. I got the little thing, little laminate. The pilot comes out to visit him every time he steps foot in a United Jet. Yep. Bottled champagne, which I gave to my seatmate since I don't drink champagne.

10:24Scarlet Fu:Well, the reason I ask about Spirit is because it now looks like it's headed ever closer to liquidation. Sid Phillip is our global correspondent for aviation. He talks about all the airlines. Sid, Spirit is already in bankruptcy protection. It's still operating. What does it mean if it's at risk of being liquidated? So Spirit's in its second bankruptcy in just about a year. And so what it means is that the assets of the airline, that sort of the few assets that are remaining, those sort of go away and the airline ceases to operate. Essentially, their current plan was to shrink down to about 75, 80 planes and sort of operate only the profitable routes.

11:09But then with jet fuel prices soaring, it no longer is even viable to do that. Is there any scenario? Remind us, there was an M &A scenario involving Spirit Airlines. What was that? So there was an M &A that was scuttled. So Spirit Airlines was set to be acquired by JetBlue. And that was scuttled by the Biden administration back in 2024. Which we all said at the time, you got to let these guys merge. Otherwise, this thing is going to be gone. And then you can have all these markets with no coverage. Absolutely. And the low-cost carriers have been hit harder, particularly, because United and Delta have been able to cash in on the premium travel demand.

11:51And that's sort of really given them a buffer that Spirit and others haven't really been able to sort of tap into. where they aren't able to sort of get those yields that United and Delta have. And that's really been something that's been a really big pain point for the alliance.

12:07Scarlet Fu:So the government prevented JetBlue and Spirit from getting together. But then I remember that we reported that Frontier and Spirit re-held discussions to merge. What happened to that one? And does Frontier need to team up with someone to get through this period? So Frontier is in a slightly better financial position than Spirit. And so they were not as desperate for a deal as Spirit was. And those stocks fell apart. And they sort of revived those stocks back in 2025. And they sort of walked away without a deal. And so now we're looking at Spirit Airlines, second bankruptcy, and still got big piles of debt, unable to unlock cash from creditors.

12:49And this could be the end for the airline. All right. So what is this? What's this the general update about? We know that the premium, like lots of this economy, the premium consumers spend premium money on premium stuff. OK, now the other part of the K, that's where some of these regional airlines cater to. What are we seeing there? Is that I mean, are they seeing a pullback in travel? So we haven't really heard much about the impact of the war and the rising prices and then consequent rise in ticket prices on demand yet. because as the airlines sort of talk through their earnings and talk about how demand is looking as they get, I mean, we've seen jet fuel prices double, more than double in March.

13:34And so that was really a big trigger for a lot of airlines where you have to charge more for a seat, but then you don't want to charge too much more because people will not book. And that's really the tricky balancing curve for the airlines.

13:46Scarlet Fu:If Spur goes away, who benefits? The rest of the industry does because there's one less player to compete against. There's one less ultra, because I mean, the low cost carriers compete with each other to offer the lowest fares because those customers aren't really typically sticky. They're not sort of looking at, they're not million milers. And so they're looking to sort of try and sort of find the best deal, the best fare that they can get. And that's really the tricky part for the ultra low cost carriers because you need to get those customers with low fares every time. And sometimes those low fares come with high costs for the airlines.

14:21All right, Sid, thanks so much. Appreciate it. Sid Phillip covers all the aviation stuff for Bloomberg News. And we kind of knew it at the time.

14:27Scarlet Fu:Yeah, it felt like it was - Just let this deal go through. Let it be JetBlue's problem, you know, and let them figure it out. And JetBlue itself is kind of looking for some kind of partner right now, right? I mean, there were reports that JetBlue was looking to, you know, again, look for some kind of M &A partner to kind of get through this difficult period because unlike Delta or United, it's not a premium player. It's trying to move in that direction, but it'll take a while. And jet fuel doubling, I don't know how you deal with that. I mean, that is just... No one hedges anymore against the rising oil prices.

14:54No, they don't. And if you don't own a refinery like Delta, right? Stay with us. More from Bloomberg Intelligence coming up after this.

15:04Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Bank earnings. We had the Big Money Center Banks report earlier this week, and now we're starting to hear from some of the regional banks. Today, we had U.S. Bank Corp. They came in. They topped estimates with revenue climbing nearly 5 percent. The stock's trading off about 1.8 percent today. It's up. That was Tesla up there. That stock's trading off. Let's check out with Herman Chan, senior analyst for U.S.

15:42Banks for Bloomberg Intelligence. Talk to us about U.S. Bank Corp. What did you hear today and how representative do you think it's going to be for some of the other regional banks? Yeah, U.S. Bank Corp, despite the stock being down today, really showed strong results and reverberated what we've heard from the largest banks that reported early in the week. I would say universally, the regionals and the largest banks have talked about strong loan growth. And it's been more broad based, right? So last year, a lot of the growth was from areas like private credit and other non-bank financial institutions.

16:14For this year to start out, at least in the first quarter, broad-based activity, U.S. Bank talked about growth in areas like energy customers, food and beverage, and customers really using those new borrowings to fuel CapEx and M &A activities. So those are actually all really positive and demonstrates that the economy is on really firm footing.

16:39Scarlet Fu:The fact that the Federal Reserve has not cut interest rates like a lot of people had wanted and had anticipated, how is that affecting the profitability of loan making right now for these banks? Yeah, that's a great question. Heading into this year, a lot of the banks were expecting two rate cuts, and that was baked into their 2026 guidance. Now the market's saying no rate cuts. So for banks that are maybe like a bit more sensitive to interest rates, you know, that's probably on the margin positive for the net interest income trajectory, the top line trajectory. But those rate cuts that were previously contemplated were sort of towards the back end of the year.

17:20So not it's a marginal benefits, but not a gangbusters hit one way or the other. One of my favorite regional banks has always been Keycorp. I know they had some numbers here. How did that look? Yeah, Keycorp was really strong. They posted for them their highest first quarter investment banking revenue period. And so that's really driven by some of the buildup that they've done in the investment banking platform over the years. They also mentioned really strong lending activity. I mentioned U.S. Bank of the Court talked about broad-based commercial growth. Key Corp's seeing the same. And there was some really positive commentary on that lending driving improved net interest income.

18:11So that's flowing through, gave better guidance for the full year given the lending activity. And the stocks had a nice jump today, up 1.2 % thus far in the trading session.

18:23Scarlet Fu:Okay, so KeyCorp reported, U.S. Bank Corp recorded, Citizens also reported as well that stock marginally lower. Are any of these names obvious acquirers or targets in the expected consolidation that we are looking for among these regional banks? That's right. Expected consolidation is a good way to put it. U.S. Bank Corp probably is the one that we think is well positioned for that. They recently, a couple years back, bought a California bank called Union Bank that was previously owned by MUFG, the Japanese conglomerate. That's continuing to work out well for them. They highlighted California as a strong area of growth.

19:07We expect potential for them to really bolster that over time, even though they're really focused on organic in the near term. Key Corp has mentioned that there was some Bloomberg News reporting a couple quarters ago that they were looking to potential to do a deal in the Pacific Northwest. But Key Corp's management team has sort of poo-pooed that over the past few quarters. So we'll see. But I would say that they probably don't have the currency to do a deal without it being super dilutive at this point. So it really is dependent on your valuation. And U.S. Bancorp does have that premium valuation to do a deal.

19:49Scarlet Fu:Herman, a couple of years ago, we saw Silicon Valley Bank collapse. We saw First Republic also get pushed under as well. There was this mismatch of assets and liabilities where a lot of these banks held super long dated treasuries on their books, thinking that they were safe, but then got caught off sides when rates began rising. Is that period over? I mean, are they all in good standing at this point? Yeah. So that happened when interest rates were near zero. A lot of those securities are maturing quarter after quarter. So a lot of that has burned down off the balance sheets. And really, there were two issues, right?

20:26You had those unrealized losses. But then what exacerbated it was the deposit outflow, the deposit flight from banks like SVB when luminaries like Peter Thiel told everybody in the Silicon Valley community to take their deposits out of SVB. So that really was the impetus of the demise for that particular institution. So we are way out of the woods in terms of deposit volatility. That's nothing. We're not seeing that and haven't seen that for over a year. and then the unrealized losses continue to burn down. So banks are in a really good standing on that front. We think that risk is over at this point.

21:14All right, Herman, thanks so much. Appreciate it. As always, Herman Chan, senior analyst, covers all the U.S. banks. I'm going to get you another associate, dude. I make a couple of phone calls. He covers like a million different banks and gets like half an associate.

21:25Scarlet Fu:Just add another sector to his beat. Exactly, exactly. So I'll make a few phone calls. I know a guy. So there we go. We got some, the bank's reporting some pretty decent numbers. I was just going to KeyCorp, you know, on a trailing 12-month basis up about 50%. So the stock's had a nice run. And I see similar type returns for some other, I mean, citizens on a trailing 12-month basis. That stock's up 80%. So some pretty nice performance coming out of the financials here. So that's good to see. Stay with us. More from Bloomberg Intelligence coming up after this.

21:58Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right, let's check out what's happening with Madison Air. Matthew Griffin, Bloomberg News, joins us here. Matthew, talk to us about Madison Air and this IPO. Big, big number. Yes. Well, Paul, I know you said this isn't an AI IPO, and that is true, but there is an AI connection. I'm sure there is. Of course. So this is a company in the industrial sector.