-
The company’s plan to pare its brand catalog should be a catalyst for the stock.
-
The decision to ditch some lagging labels shows PepsiCo is listening to an activist investor.
-
A renewed emphasis on customer and shareholder value could also result in share price gains.
Sometimes, less is more, and addition is realized by subtraction. PepsiCo (NASDAQ: PEP) is coming to terms with those facts.
Among other initiatives aimed at creating shareholder value, the beverage giant announced Tuesday that it will eliminate nearly 20% of the products in its portfolio by early 2026. That’s not necessarily a bad thing because it’s not a stretch to say that the portfolio has gotten a bit too sprawling.
That news has resulted in an endorsement from a sell-side analyst: J.P. Morgan‘s Andrea Teixeira upgraded her take on the consumer staples stock to overweight from neutral, and boosted her price target on it from $151 to $164, implying upside of 10.2% from its closing price last Wednesday. Analyst upgrades can act as nice short-term sparks, but the good news for PepsiCo shareholders is that the stock could be a catalyst-rich idea for 2026.
While PepsiCo didn’t explicitly say that it’s reducing its brand lineup at the behest of activist investor Elliott Investment Management, the move shows the company is willing to listen and engage in constructive dialogue. Elliott applauded the effort and Pepsi’s broader plans, noting that improved innovation and a greater focus on costs could be a catalyst for profit and sales growth.
The point is that some companies clash with activist firms, engaging in lengthy, unproductive battles with them that result in little share price appreciation. At the moment, the relationship between Elliott and Pepsi appears more congenial, and that’s worth acknowledging heading into 2026 because it shows the soft drink maker is open to the firm’s ideas. It previously pitched the idea of Pepsi jettisoning its North American bottling operations. Maybe that will happen. If it does, it would provide a clear tailwind for the stock. Perhaps it won’t happen, but the point is that Pepsi is listening.
As for the brands the Ruffles maker is considering eliminating, it didn’t elaborate, but it has 60 main brands to choose from, and a target of 20% suggests that 12 are headed out the door. That reshuffling could be valuable in terms of trimming operating expenses while boosting operating margins. Other benefits of clearing out lagging brands include paving the way for Pepsi to launch compelling new products while innovating more with the labels that consumers are responding to.
