December 11, 2025
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Will Pepsi’s Product Pivot, Price Cuts, and SKU Slashing Improve its Momentum?
While PepsiCo appears to be making all of the right moves as of late, according to a Dec. 11 Zacks analysis highlighting its stock price growth — largely attributed to health net revenue growth, momentum in domestic and international markets, and operational improvements — the CPG giant has formed a plan to double down on its recent efforts.
According to a recent report from Modern Retail’s Gabriela Barkho, Pepsi is slated to slash prices across its assortment, and cut down about 20% of its existing SKUs, as part of an agreement reached with activist investor Elliott Investment Management.
“Today, we are announcing our plans and initiatives that aim to accelerate organic revenue growth, deliver record productivity savings and improve core operating margin – starting in 2026,” said Ramon Laguarta, chairman and CEO of PepsiCo, in a statement.
“PepsiCo Foods North America will play a critical role towards achieving these targets and we feel encouraged about the actions and initiatives we are implementing with urgency to improve both marketplace and financial performance,” Laguarta added.
Pepsi Outlines the Three Pillars of its Strategic Plan for 2026 and Beyond
Among the notable line items zeroed in on by the press release:
- The implementation of sharper everyday value via a renewed focus on targeted price tiers across brands and channels. This strategy hopes to ignite growth and improve the purchase frequency of Pepsi’s most popular brands.
- Pushing its innovation agenda, with particular focus on the provision of simpler ingredients, the removal of artificial flavors and colors, and an improved inventory of products hinging around increased protein, fiber, and whole grains. The restaging of Lays and Tostitos, the introduction of Simply NKD Cheetos and Doritos, and the upcoming launch of Doritos Protein were all cited as examples.
- Improving operational excellence and aggressively reducing operating costs, using the savings to reinvest in advertising, marketing, and consumer value. The press release noted the shuttering of three manufacturing plants, the closure of several manufacturing lines, and the ongoing process of slashing total U.S. SKUs by 20% by early 2026.
“These moves signal that the weeks-long discussions between PepsiCo and Elliott will likely come to an end soon. Elliott disclosed in September that it had taken a $4 billion stake in PepsiCo, and it pushed for the CPG giant to make a number of changes, citing ‘strained focus and execution,’” Barkho detailed, also noting that several analysts had told Modern Retail that “they expect more food and beverage companies to revisit pricing and undergo strategic resets in 2026 and beyond.”
Barkho then cited Amber Brooner, CRO at revenue management platform XTEL, which works with companies — including Danone, Kraft Heinz, and Nestle — on pricing strategy.
Brooner referred to PepsiCo’s plan as more of a broad strategic reset as opposed to a basic rollback of its past increases, underscoring the fact that today’s shoppers’ elasticity and retailers’ pushback had become more apparent following years of significant inflation-driven pricing.
“Companies are revisiting price investment now because sustained price increases have begun to erode unit volumes,” she said, especially given the now-obvious trend of shoppers trading down to private-label and value-oriented offerings.
BrainTrust
Peter Charness
Retail Strategy - UST Global
Bhargav Trivedi
Mohamed Amer, PhD
CEO & Strategic Board Advisor, Strategy Doctor
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Discussion Questions
Is Pepsi on the right track with its recently stated three-pillar agenda? What’s missing from the plan?
How important is it for Pepsi, and other CPG companies, to embrace more natural ingredients? Is this a here-to-stay move, or a consumer trend?
Poll
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Yes — I believe Pepsi’s three-pillar agenda (sharpening focus on core brands, driving pricing and mix improvements, and accelerating innovation) is directionally on the right track. In a highly competitive CPG landscape where consumers value both value and relevance, Pepsi needs a clear compass that prioritizes what the brand does best while evolving where consumer expectations are shifting. The key focus, from my perspective, should be on strengthening the emotional and functional connection with the consumer, not just tweaking short-term volume or promotional tactics.
What I see missing from many CPG plans — including this one — is a deeper lived commitment to consumer insight and meaningful product evolution that aligns with long-term shifts in behavior. High-level pillars are a start, but the execution must be anchored in disciplined test-and-learn cycles: identifying what innovation truly resonates, what value drivers actually move share, and how brand equity grows when you invest in authenticity rather than just extension. That’s how you ensure that “innovation” becomes a growth engine rather than a list of new SKUs.
On the question of natural ingredients: this is absolutely a trend that’s here to stay, not a fad. For years now, consumers—especially younger cohorts—have made purchase decisions around health, transparency and perceived wellness. Demand for products with simpler, recognizable ingredients isn’t going away; it’s expanding. CPG leaders who ignore this risk being outflanked by brands that own the intersection of taste, trust and transparency. Embracing natural ingredients isn’t merely adding a call-out on the label — it’s about rethinking the product pipeline to deliver meaningful benefits consumers care about, without compromising on brand identity. When that balance is struck, Pepsi and its peers can win both in the marketplace and in consumer relevance.
This is an exceptional analysis. I particularly agree that the true strategic lever here isn’t the pillars themselves, but the discipline of execution and the commitment to a ‘test-and-learn’ cycle. That is the only way to ensure innovation truly resonates.
I would add that the 20% SKU rationalization is critical because it directly funds the growth engine. It’s not just about cost reduction, but resource reallocation: removing low-margin, high-complexity SKUs frees up capital and factory line time, which must then be precisely invested in the simplification and natural ingredients trend you correctly identify as permanent.
Pepsi’s three-pillar plan is more tactical than strategic. Taking price cuts admits Pepsi’s lost its pricing power exercised during peak inflation, with shopper elasticity and retailer pushback now forcing the correction; simpler ingredients is a catch-up to health trends from five years ago; and plant closings and SKU slashing funds both. Pepsi is fighting a cost war on a terrain where private label dominates, and what’s missing here is any plan to build differentiated brand equity that justifies premium pricing. Elliott Investment’s $4B activist stake forced this reset, but it’s not a transformation; it’s operational moves spruced up as a strategy.
WWJD? (That’s “What Would Joan Do?”..for those who get the joke) Like it or not Pepsi basically sells a commodity – it’s called “soda” ( tho cola afficianado’s are free to argue the merits of various brands) – so a two-pronged approach of (1) playing up whatever small differences (with other brands) that exist, and (2) cutting prices to attract those who aren’t buying it – in any meaning of the word – makes complete sense. The third prong is operational…so customers don’t need to get involved with that
I dunno – since when did driving lower pricing accompanied with Sku Rationalization/Operational Efficiency, and Product Innovation become a Strategic Initiatives, and not part of culture and everyday focus.
The biggest problem for all CPG firms is that volumes are flat to slightly negative because consumers are pulling back due to inflation. Reducing prices may help to rebuild some volume, but the cuts will need to be pretty deep to offset the cost of living crisis. And in some categories, such as core soda, it’s not just about price – it’s about a consumer shift to healthier beverages.
PepsiCo is directionally on the right track, especially with the operational excellence pillar. SKU rationalization and sharper everyday value are overdue moves in a world where retailers are pushing back hard and shoppers are clearly signaling price fatigue. Cutting 20% of SKUs should help simplify supply chains, improve in-stock performance and free up capital if the execution is disciplined and data-driven.
What feels missing is a clearer articulation of how Pepsi will modernize its operational backbone. Many large CPGs accumulate massive technical debt over decades with legacy planning systems, fragmented demand forecasting, and siloed revenue management tools. Without investing in modern, connected technology (AI-driven demand sensing, dynamic pricing, and smarter trade spend optimization), cost cuts alone risk becoming short-term margin fixes rather than sustainable advantages.
The real opportunity for Pepsi (and other CPGs) is tying all three pillars together: using operational savings and tech modernization to fund value pricing and faster relevant innovation.
That is a fantastic breakdown of the tactical moves, but I believe the real strategic thinking for PepsiCo in 2026 must look beyond price and SKUs. The missing pillar is Agentic Commerce and Hyper-Personalization. Pepsi needs to shift its focus from selling SKUs to becoming a Personalized Nutrition Partner. This means using AI and first-party data to dynamically tailor product recommendations, pricing, and offers to individual consumer needs in real-time. Winning the next decade in CPG means designing an integrated wellness ecosystem—like the Doritos Protein launch suggests—that uses technology to make personalized health easier for the consumer, not just tweaking the existing grocery shelf.
PepsiCo’s reset can work, but only if it’s executed like a tight CPG playbook: cut the right SKUs, price the right items, get retailers on board, and visibly reinvest savings into value and marketing — otherwise shoppers will trade down and shelf space will shrink.
PepsiCo’s moves — ~20% U.S. SKU reduction, targeted price tiers, plant and line closures, and reinvesting productivity savings into advertising and consumer value — are the classic levers CPG teams use to restore volume and protect margins, but the outcome hinges on four practical execution points: cut smart, price with precision, partner with retailers, and make savings visible.
Cut smart means removing low‑velocity, redundant SKUs while preserving hero SKUs that drive trips and basket add‑ons so you don’t accidentally eliminate the items that bring shoppers into the aisle; price with precision means piloting targeted price tiers on high‑frequency SKUs and measuring trip frequency and unit elasticity before broad rollouts so lower prices actually lift volume rather than just erode margin; partner with retailersmeans negotiating trade economics and short‑term promotional funding so price cuts don’t simply transfer margin to grocers or lose shelf prominence; and make savings visible means using packaging, in‑store signage, and marketing to ensure consumers notice the value and the product improvements (cleaner ingredients, protein/fiber innovations) rather than assuming they’ll find the change on their own.
If PepsiCo nails those four steps, the plan creates a virtuous loop: productivity savings → lower everyday prices + smarter marketing → higher trips and unit sales → stabilized or improved margins. If it stumbles — poor SKU choices, blunt across‑the‑board price cuts, or weak retailer alignment — the likely result is lost share to private label and value brands and a weaker shelf presence. Watch early signals like core operating margin, organic revenue growth, SKU availability, and retailer promotional support to judge whether the reset is working in practice
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Yes — I believe Pepsi’s three-pillar agenda (sharpening focus on core brands, driving pricing and mix improvements, and accelerating innovation) is directionally on the right track. In a highly competitive CPG landscape where consumers value both value and relevance, Pepsi needs a clear compass that prioritizes what the brand does best while evolving where consumer expectations are shifting. The key focus, from my perspective, should be on strengthening the emotional and functional connection with the consumer, not just tweaking short-term volume or promotional tactics.
What I see missing from many CPG plans — including this one — is a deeper lived commitment to consumer insight and meaningful product evolution that aligns with long-term shifts in behavior. High-level pillars are a start, but the execution must be anchored in disciplined test-and-learn cycles: identifying what innovation truly resonates, what value drivers actually move share, and how brand equity grows when you invest in authenticity rather than just extension. That’s how you ensure that “innovation” becomes a growth engine rather than a list of new SKUs.
On the question of natural ingredients: this is absolutely a trend that’s here to stay, not a fad. For years now, consumers—especially younger cohorts—have made purchase decisions around health, transparency and perceived wellness. Demand for products with simpler, recognizable ingredients isn’t going away; it’s expanding. CPG leaders who ignore this risk being outflanked by brands that own the intersection of taste, trust and transparency. Embracing natural ingredients isn’t merely adding a call-out on the label — it’s about rethinking the product pipeline to deliver meaningful benefits consumers care about, without compromising on brand identity. When that balance is struck, Pepsi and its peers can win both in the marketplace and in consumer relevance.
This is an exceptional analysis. I particularly agree that the true strategic lever here isn’t the pillars themselves, but the discipline of execution and the commitment to a ‘test-and-learn’ cycle. That is the only way to ensure innovation truly resonates.
I would add that the 20% SKU rationalization is critical because it directly funds the growth engine. It’s not just about cost reduction, but resource reallocation: removing low-margin, high-complexity SKUs frees up capital and factory line time, which must then be precisely invested in the simplification and natural ingredients trend you correctly identify as permanent.
Pepsi’s three-pillar plan is more tactical than strategic. Taking price cuts admits Pepsi’s lost its pricing power exercised during peak inflation, with shopper elasticity and retailer pushback now forcing the correction; simpler ingredients is a catch-up to health trends from five years ago; and plant closings and SKU slashing funds both. Pepsi is fighting a cost war on a terrain where private label dominates, and what’s missing here is any plan to build differentiated brand equity that justifies premium pricing. Elliott Investment’s $4B activist stake forced this reset, but it’s not a transformation; it’s operational moves spruced up as a strategy.
WWJD? (That’s “What Would Joan Do?”..for those who get the joke) Like it or not Pepsi basically sells a commodity – it’s called “soda” ( tho cola afficianado’s are free to argue the merits of various brands) – so a two-pronged approach of (1) playing up whatever small differences (with other brands) that exist, and (2) cutting prices to attract those who aren’t buying it – in any meaning of the word – makes complete sense. The third prong is operational…so customers don’t need to get involved with that
I dunno – since when did driving lower pricing accompanied with Sku Rationalization/Operational Efficiency, and Product Innovation become a Strategic Initiatives, and not part of culture and everyday focus.
The biggest problem for all CPG firms is that volumes are flat to slightly negative because consumers are pulling back due to inflation. Reducing prices may help to rebuild some volume, but the cuts will need to be pretty deep to offset the cost of living crisis. And in some categories, such as core soda, it’s not just about price – it’s about a consumer shift to healthier beverages.
PepsiCo is directionally on the right track, especially with the operational excellence pillar. SKU rationalization and sharper everyday value are overdue moves in a world where retailers are pushing back hard and shoppers are clearly signaling price fatigue. Cutting 20% of SKUs should help simplify supply chains, improve in-stock performance and free up capital if the execution is disciplined and data-driven.
What feels missing is a clearer articulation of how Pepsi will modernize its operational backbone. Many large CPGs accumulate massive technical debt over decades with legacy planning systems, fragmented demand forecasting, and siloed revenue management tools. Without investing in modern, connected technology (AI-driven demand sensing, dynamic pricing, and smarter trade spend optimization), cost cuts alone risk becoming short-term margin fixes rather than sustainable advantages.
The real opportunity for Pepsi (and other CPGs) is tying all three pillars together: using operational savings and tech modernization to fund value pricing and faster relevant innovation.
That is a fantastic breakdown of the tactical moves, but I believe the real strategic thinking for PepsiCo in 2026 must look beyond price and SKUs. The missing pillar is Agentic Commerce and Hyper-Personalization. Pepsi needs to shift its focus from selling SKUs to becoming a Personalized Nutrition Partner. This means using AI and first-party data to dynamically tailor product recommendations, pricing, and offers to individual consumer needs in real-time. Winning the next decade in CPG means designing an integrated wellness ecosystem—like the Doritos Protein launch suggests—that uses technology to make personalized health easier for the consumer, not just tweaking the existing grocery shelf.
PepsiCo’s reset can work, but only if it’s executed like a tight CPG playbook: cut the right SKUs, price the right items, get retailers on board, and visibly reinvest savings into value and marketing — otherwise shoppers will trade down and shelf space will shrink.
PepsiCo’s moves — ~20% U.S. SKU reduction, targeted price tiers, plant and line closures, and reinvesting productivity savings into advertising and consumer value — are the classic levers CPG teams use to restore volume and protect margins, but the outcome hinges on four practical execution points: cut smart, price with precision, partner with retailers, and make savings visible.
Cut smart means removing low‑velocity, redundant SKUs while preserving hero SKUs that drive trips and basket add‑ons so you don’t accidentally eliminate the items that bring shoppers into the aisle; price with precision means piloting targeted price tiers on high‑frequency SKUs and measuring trip frequency and unit elasticity before broad rollouts so lower prices actually lift volume rather than just erode margin; partner with retailersmeans negotiating trade economics and short‑term promotional funding so price cuts don’t simply transfer margin to grocers or lose shelf prominence; and make savings visible means using packaging, in‑store signage, and marketing to ensure consumers notice the value and the product improvements (cleaner ingredients, protein/fiber innovations) rather than assuming they’ll find the change on their own.
If PepsiCo nails those four steps, the plan creates a virtuous loop: productivity savings → lower everyday prices + smarter marketing → higher trips and unit sales → stabilized or improved margins. If it stumbles — poor SKU choices, blunt across‑the‑board price cuts, or weak retailer alignment — the likely result is lost share to private label and value brands and a weaker shelf presence. Watch early signals like core operating margin, organic revenue growth, SKU availability, and retailer promotional support to judge whether the reset is working in practice