Elliott calls for turnaround at PepsiCo with $4 billion stake

(Reuters) - Elliott Management on Tuesday disclosed a $4 billion stake in PepsiCo and urged the beverage maker to revive its soda business, boost its share price and close the gap with competitors.

PepsiCo's stock has lagged its biggest rival Coca-Cola over the past five years, as the Quaker Oats maker tackles choppy demand for its snacks business and pursues a shift to healthier drinks and sodas.

The stake represents about 2% of PepsiCo's market value as of the stock's Friday close, making it one of Elliott's biggest holdings.

The investment firm singled out Pepsico's North America beverages unit as an underperformer, saying growth and margins were lagging peers due to strategic missteps, share losses in soda and the introduction of new brands and products that has "strained focus and execution".

The company should also evaluate a potential re-franchising of its bottling network along the lines of Coca-Cola's, Elliott said.
PepsiCo told Reuters in a statement it would review Elliott's letter "within the context of its strategy" that includes targeted investments in innovation and portfolio transformation.

"For years, the disappointing performance of PepsiCo's beverage business was more than offset by its resilient and high-performing foods business, PepsiCo Foods North America(PFNA). More recently, however, PFNA has begun to falter," Elliott wrote in its letter.

PepsiCo's North America beverages and foods units each contribute 30% of its annual revenue, according to a company filing.

Deepening a push to revive the energy drinks portfolio, the company built a 5% stake in energy drink maker Celsius Holding last week, months after buying prebiotic soda brand Poppi for nearly $2 billion.