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PepsiCo Inc PEP

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Morningstar’s Analysis

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The Beyond Meat-Pepsi Joint Venture Has Strategic Merit, but the Stock Reaction Is Likely Overdone

Analyst Note

| Rebecca Scheuneman, CFA |

No-moat Beyond Meat and wide-moat PepsiCo have announced the formation of a joint venture called The Planet Partnership to develop snacks and beverages made from plant-based protein. This is Beyond’s first expansion outside of plant-based meats, indicating that its total addressable market is likely larger than investors initially envisioned. The shares are responding accordingly, surging 20%, pushing the stock into 2-star territory. We maintain our $146 fair value estimate until we hear more details from the firms, including the timing and nature of product launches, so we can gauge the potential market opportunity.

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Company Profile

Business Description

PepsiCo is one of the largest food and beverage companies globally. It makes, markets, and sells a slew of brands across the beverage and snack categories, including Pepsi, Mountain Dew, Gatorade, Doritos, Lays, and Ruffles. The firm uses a largely integrated go-to-market model, though it does leverage third-party bottlers, contract manufacturers, and distributors in certain markets. In addition to company-owned trademarks, Pepsi manufactures and distributes other brands through partnerships and joint ventures with companies such as Starbucks. The firm segments its operations into four primary geographies, with North America (comprising Frito-Lay North America, Quaker Foods North America, and North America beverages) constituting over 60% of consolidated revenue.

700 Anderson Hill Road
Purchase, NY, 10577
T +1 914 253-2000
Sector Consumer Defensive
Industry Beverages - Non-Alcoholic
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 29, 2020
Stock Type High Yield
Employees 267,000