Operator: Our next question comes from Robert Moskow with TD Cowen. Your line is open.
Robert Moskow: Hi. Thank you for the question. In your prepared remarks, you said that you expect less commodity inflation, but some agricultural inputs might be higher. Can you be more specific? And I was hoping you could focus a little on Frito, because there’s a very big potato crop this past year. Vegetable oil costs are coming down. Do you see any relief on the horizon for Frito in that regard?
Jamie Caulfield: Hey, Rob, it’s Jamie. Yes, that is a practice we comment on the basket of inputs. We don’t comment on specific commodity movement, but you’re absolutely correct that we do expect commodity inflation to moderate from what we had in ‘23.
Operator: [Operator Instructions] Our next question comes from Andrea Teixeira with JPMorgan. Your line is open.
Andrea Teixeira: Thank you, operator. Good morning to you all and great having you back, Jamie, on the investor facing mode. I have one question and then a clarification. First for Ramon, I was hoping to see if you can elaborate a little bit more on how you’re going to be lapping and if you have a red lap, the mixed drags and the shift from away-from-home and where your market share is not probably as strong as in snacks as you have in at-home channels? And given your strong gross margin delivery in your experience negotiating with large box retailers, especially in Europe. Are retailers asking you to invest back in promo rollbacks given your gross margin delivery and productivity gains, in particular North American and Europe. And my clarification for Jamie is in terms of like your organic sales growth and EPS cadence for the year, anything we should be considering on your guide as far as cadence. Thank you.
Jamie Caulfield: Yes, so on the organic sales growth, first of all, Andrea, it’s great to hear your voice again and look forward to interacting as we go forward. Organic sales growth cadence, I’d say back half, stronger than the first-half as we talked about before. We’ve got the impact of the Quaker recall is going to be front half loaded. The laps get easier as we get into the back half of the year. And then some of these consumer pressures that have existed with elimination of stimulus benefits, resumption of student loan payments. We’ll lap those as we get into the year.
Ramon Laguarta: Yes, and listen, with regards to the customer, I think we’re all trying to build win-win plans in the sense that we grow the business and we create profit growth for both our customers and ourselves. We normally — we have always the consumer at the center, so it will be a combination of we generate growth through, as I said, innovation, and we have a few big innovations and brand relaunches this year. We’ll put a lot of investment there together with our customers. We’ll continue to try to expand our SKUs with the customers and there will be investments there. And there will be some investments in trying to give more value to consumers in a very holistic way, right? Through back priced, through promotions, through consumer events that eventually will drive preference for our brands.
But that’s the way we’re thinking about creating this joint business planning with our large customers that create growth for the category, growth for our customers, and growth for us. With regards to away-from-home, sorry I forgot Andrea. The away-from-home we see it as an and, not as an or, we see it as an opportunity for us to continue to be in consumers’ lives always everywhere. And as consumers pivot away-from-home, we’ll try to be there for them. It’s been an area of investment for us, both in distribution and specific solutions for away-from-home for quite some time. And we’re seeing our businesses in the large markets growing above the market in away-from-home. So clearly, this will be an opportunity for us for many years to come.
And I think we’re getting better at mixology. We’re getting better at more food experiences, walking tacos, Doritos loaded. We’re testing food trucks. We’re testing many things that will make our brands available to consumers in the beyond what is a package bag or a can or a bottle. Now I think consumers are expecting from us away-from-home a much more holistic experience and that’s what we’re working on and I think we’re making good progress.
Operator: Thank you. [Operator Instructions] Our next question comes from Robert Ottenstein with Evercore. Your line is open.
Robert Ottenstein: Great, thank you very much. A little bit more of a detailed question on PBNA and just want to talk about Gatorade and CELSIUS. So in terms of Gatorade, could you just remind us in terms of the timing of the move to DSD? And how that impacted your income statement? And then in terms of CELSIUS, obviously the brand has done phenomenally well. It’s getting pretty big now. Can you talk about how CELSIUS impacts the income statement in the U.S.? And then how your relationship with the company has evolved? You talked about taking Rockstar internationally. CELSIUS is going international now. Are you part of that plan as well? Thank you.
Jamie Caulfield: Yes. So, on Gatorade, we’re 90% through on the transition. Obviously, that move is positive to the financial results overall. That’s what we did is to enhance performance and we’re happy with the margins we have on that business. On CELSIUS, the way that works is we’re sharing the system revenue with CELSIUS.
Ramon Laguarta: Yes, listen, we’re happy with the collaboration with CELSIUS and that continues to be a part of our growth strategy. You know, there is an opportunity for us to collaborate in the international expansion as well. At this point it’s not, I would say, a scaled opportunity. It’s a market-by-market opportunity and very particular market. So yes, we are contemplating that as an option and we are having conversations with CELSIUS how we can leverage the PepsiCo system for a bigger expansion. Nothing short-term I would say at this point.
Operator: Thank you. [Operator Instructions] Our next question comes from Chris Carey with Wells Fargo. Your line is open.
Chris Carey: Hi. Good morning, everyone. So I just wanted to ask about SG&A over the past four years. We’ve talked about this before in this forum, but with the annual disclosure is now out. I thought it would be a good time to revisit the topic. Specifically, Ramon, can you help contextualize the increase that we’ve seen in SG&A over the past four years, specifically in distribution costs? I’m really curious about maybe how much of this is underlying inflation as opposed to discretionary investments that PepsiCo is making and not really looking for a specific number per se, I realize that’s probably difficult, but distributions up 40% over the past four years, and I’m just wondering how much of this is within your control, maybe some of the capabilities that you’ve been able to build over this timeframe and maybe get a sense of how this line item should be trending going forward? So thanks.
Ramon Laguarta: Yes, so as you point out, selling and distribution is the biggest part of that. The A part is less so. And it’s going to be a reflection of what you see is: one, you’ve got market mixed or sector mixed components in there. We’ve driven a lot of productivity in our OpEx, but at the same time, we’re investing in OpEx to drive distribution and growth in the business.
Jamie Caulfield: One other thing, Chris, that you should be mindful of is, you know, we do have a big direct store delivery business, so we’ve had inflation in various things like labor and so forth, and that’s what’s gone up. A&M has gone up as well, which is also kind of all part of that SG&A bucket. We’ve made numerous capability investments in there as well. So it’s all of the above. I wouldn’t hone in just on the distribution costs, which I know you focus on from the 10-K. There’s a lot of buckets that go in that are far deeper that we can’t get into for competitive reasons.
Operator: Thank you. [Operator Instructions] Our next question comes from Filippo Falorni with Citi. Your line is open.
Filippo Falorni: Hey, good morning everyone. So Ramon and Jamie, you both mentioned the organic sales growth guidance is going to be more second-half weighted? And I know you don’t provide breakdown and guidance on volumes, but given the importance of volume trends, can you give us a sense of how you see volumes evolving? Is there a possibility in your guidance where you see positive volumes in the second-half of the year? And then on the pricing front, maybe you can give us a sense of what are you assuming in terms of pricing? I assume in the U.S. or developed markets its limited and there’s more pricing in emerging market, but any color on pricing will be also helpful. Thank you.
Ramon Laguarta: Yes, I think you should be thinking about we want to grow units next year. We will see profitable volume growth next year. And you’ll see a more balance between pricing and volume that you have seen in previous years, obviously we had to cover a huge commodity increase and OpEx increase. As commodities kind of normalize and OpEx inflation normalizes, that lever will be less necessary outside of what has been a normal pricing levels of our category in the 2% to 3%. So you should be thinking about profitable volume growth and more of a normalized pricing, compared to what it was in the ‘18, ‘19 timeframes.
Operator: Thank you. [Operator Instructions] Our next question comes from Callum Elliott with Bernstein. Your line is open.
