By Kevin Curran
In 1959, former PepsiCo (PEP) CEO Alfred Steele ran the company under the motto "Beat Coke." Over the past 60 years, this mantra has remained consistent and is poised to heat up outside North America under newly named Pepsi CEO Ramon Laguarta.
International markets are a ray of hope for the company that has been consistently No. 2 on its home turf. While Pepsi's performance in its North American Beverages operation bounced back in the most recent quarter, over the past year it has lagged Coca-Cola (KO) .
Outgoing Pepsi CEO Indra Nooyi -- who announced her retirement Monday -- called the results "worrisome" after the first quarter, citing Coca-Cola's increased advertising and media campaigns as a reason for the loss of market share. The campaigns included a revamp of Diet Coke and increased sales in Coke Zero and sparkling waters domestically, which have led the company to outpace Pepsi on the continent.
Wells Fargo Senior Analyst Bonnie Herzog said Coca-Cola remained well-positioned to grow in North America and further cement its status as top dog in the neighborhood, as underlying trends in North America remained "solid" with organic price growth outpacing its peers.
However, with the ascension of Laguarta, some analysts are confident that important battles between the companies are set to take place outside of North America, where competition for market share is more fierce.
Andrea Teixiera, Head of U.S. Beverages, Household, and Personal Care Equity Research at JP Morgan is one such analyst. She reiterated her "Overweight" recommendation on PEP in a note released Monday after PepsiCo's announcement of Laguarta's appointment as CEO. Teixiera stated that after a recent meeting with Laguarta, she "came away confident that international momentum will continue, which is broadly different from what we are hearing from a number of CPG companies within our coverage."
Susquehanna Group was likewise open in its expectations that the company will "further expand its global footprint," according to a separate research note Monday. The paper, published by lead analyst Pablo Zuanic, noted that 96% of the world's population lives outside of the America in more-competitive markets. As populations continue to balloon, the battles between the two industry titans will become more and more heated.
However, the initiative to increase international footprint won't begin with Laguarta. Instead, he'll inherit a deliberate push to diversify Pepsi's revenue centers across geographies. Non-U.S. operations already accounted for 42% of the company's 2017 net revenue, according to PEP's latest annual report.
Nooyi had outlined such an international shift as a part of an ongoing priority. "International results are in part a reflection of our efforts to increasingly lift and shift successful initiatives from one market to many and innovating on our big global brands in locally relevant ways," she said.
PepsiCo shares rose 0.9% on Monday to close at $117.38, while Coca-Cola inched up 0.6% to $46.65.
(This column has been updated with additional details.)