PepsiCo (PEP) reported third quarter results that topped analyst estimates on both the top and bottom lines. The food and beverage company also raised its full-year earnings outlook. There has been a lot of concern about how the popularity of weight loss drugs such as Ozempic could hurt companies like PepsiCo. PepsiCo CFO Hugh Johnston tells Yahoo Finance Live the company "can't detect any impact on our numbers right now. We just don't see any impact at all," though he cautions "this is early days in terms of these drugs," pointing to questions such as rate of adoption. Johnston also points to how the company has been trying to stay ahead of the consumer and developing products with zero sugar and smaller portion sizes, for example.

When it comes to the outlook, Johnston says "we plan the consumer conservatively... and more often than not the consumer surprises us on the upside. So, we put ourselves in a good position to meet or beat our guidance." On pricing, Johnston says he thinks inflation will remain "a little elevated" compared to pre-pandemic levels and that the company has been pricing "in-line with inflation." Given where inflation is, pricing could be "a little bit elevated relative to history," Johnston says.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

BRAD SMITH: You know, first and foremost, a lot of investors, a lot of viewers here as well might be looking through some of the commentary that was provided during this quarter afterwards and they saw this note about normalization, saying that there are coming years with category growth and normalizing. Is there an analogous period that they can think back to to know what that growth and normalization of it may look like?

HUGH JOHNSTON: Yeah, good morning. Happy to be with you guys again. Well, I think the best way to think about what we meant by that comment was, post this sort of very high inflation period, as inflation comes down, now, it's not going to be all the way back to pre-pandemic levels of 2% or 3% in our business, so a little bit elevated versus that, but certainly reduced from what it was in the past. The indication we were giving was a lead into the guide that we've provided for '24, which is the upper end of our long term guidance on revenue, so that would be 5% to 6% revenue growth.

Our long term guide is 4% to 6%, and then the upper end of our EPS guide, which would be 8% to 9% at the upper end. So that was really the intention of that normalization comment was to talk about the fact that revenue growth numbers, which have been in the double digits for now several years, are likely to come back into that mid to high single digit range.

BRIAN SOZZI: Yeah, always good to speak with you. Since we last talked to you-- it's Brian here, by the way. There's been this proliferation of just concern about weight loss drugs and impacts to the food industry. Two part question. First, are you seeing any impact on your business from this? We've seen a lot of research lately that more people are taking these drugs and pulling back a little bit on snacks. And then secondarily, and I think you talked about this on the earnings call, or if it was Ramon your CFO or CEO, have you had to redesign or remake the products that you sell to fit this-- fit these new consumers?

HUGH JOHNSTON: Sure. So let me start with the first question that you asked. We can't detect any impact in our numbers right now. We just don't see any impact at all. That said, let's keep in mind, this is early days in terms of these drugs. There's lots of questions in terms of what the rate of adoption is going to be, both from the perspective that do people want to inject themselves, and in addition to that, the payer question in terms of the drugs being quite expensive. So our assumption is the adoption on these is going to be slow over time.

That said, as a company, we've always been about trying to stay in front of the consumer and where the consumer is trying to go anyway, and our portfolio transformation efforts have very much led us in that regard. So if you think of what we've done with zero sugar over the last 10 or 15 years, that's been a reflection of where the consumer was going to.

Same thing with our foods products. So reduced portion sizes, putting in more whole grains, reduced fat, reduced salt. All of these things have been a product of where the consumer is going. So to the degree that people change their eating behaviors as a result of some of these products, we're very much in a position where we think we can adapt to them very easily without having any material disruption.

BRIAN SOZZI: And I made a point of that, Hugh, in my initial take on earnings. It's on our website right now. I think just knowing you for all these years, I think, is it fair to say that if you would have seen a longer term or if you think there would be a longer term impact from this, you would have not come out with the guidance you did for 2024, suggesting revenue and earnings would be at the upper end of your longer term targets. Is that correct?

HUGH JOHNSTON: That is correct, Brian. I think where we sit right now is we've got good visibility into '24, both from the cost side of our P&L as well as our customer plans on the revenue side. And we plan the consumer conservatively, that's typically been our practice, and more often than not, the consumer surprises us on the upside. So we put ourselves in a good position to meet or beat our guidance.

SEANA SMITH: Hugh, it's Seana. It's good to see you here. Let's talk a little bit more about pricing, because we know that has certainly been a focal point for consumers as well as investors, and you at PepsiCo have been able to pass along some of the higher prices to consumers, and we've seen that demand remain pretty sticky. What are your future plans here for pricing? And also, what are you seeing or what are you expecting to see on the volume front, both here in the US and also globally?

HUGH JOHNSTON: Yeah. It's a great question. It's a little bit early to be talking about what the volume growth rate is going to be in 2024. We'll unpack our guide a little bit more in February, as we typically do. What I would tell you is this. We do think inflation will be a little bit elevated to-- relative to the pre-pandemic levels, as I mentioned earlier.

And we've basically been pricing in line with inflation. That's kind of been the practice over the course of the last couple of years. So if inflation is up 10%, our pricing has been up about 10%. Something in that range. I think next year, given we're going to be a little bit elevated, you'll see our pricing be a little bit elevated relative to history as well, but not to the-- not to the degree that it was over the last couple of years, when inflation was especially high.

BRAD SMITH: Hugh, PepsiCo is a company with a long-standing international presence as well here. When you think about some of the larger conflict that has emerged recently and then the conflict that continues to persist, geopolitically, it's extremely murky to figure out how some of both US and some other international businesses around the world continue to navigate this without pricing pressures that cascade down to consumers. How are you approaching this at Pepsi?

HUGH JOHNSTON: Well, thankfully for us, our international portfolio is quite large. We're in almost every country around the world. And the reality of it is, unfortunately, historically, there has always been disruption somewhere in the world of one type or another, whether it's conflict or weather or other natural events.

As a result of that, we typically, with our portfolio, can manage through those types of things pretty successfully. And as we've sort of thought about our guide for next year, we incorporated all that we knew right now, anticipating-- I'm sure there'll be another disruption or two somewhere in the world, and we should be able to manage through it despite all of those things.

BRIAN SOZZI: Hugh, apologies in advance. I hope I have this right. So the SodaStream operations, that was the business you bought in 2018, are they still based in Israel? Have you heard from that team? What does their safety look like? And then, bigger picture, is this the type of situation, this conflict between Israel and Hamas, where you remove those SodaStream operations out of Israel? How do you think about this?

HUGH JOHNSTON: Yeah. This is all happening so quickly and so real time. 100% of our management team's focus right now is on the safety of our colleagues and their families in SodaStream. So you're right, we do have some operations there. It's way too early to speculate on anything else that may happen there, but right now we are focused on the safety of our employees and their families.

SEANA SMITH: Yeah, obviously the most important factor at this point. Hugh, before we let you go, I want to quickly ask you about one of your recent investments, and that was Instacart. It was a topic that came up on the earnings call earlier this morning. I'm curious, from your perspective, just how your investment in Instacart fits in with Pepsi's broader vision or longer term vision just in terms of your digital strategy, and what you think this partnership is going to add to your business?

HUGH JOHNSTON: Well, I think there are two components to it. One for us is really just learning. You know, by virtue of having a partnership with the folks at Instacart, I think it presents us with the opportunity to learn how the business model works, to learn what's happening with consumers and how things evolving over time.

The second piece is we are putting together a commercial relationship as well, where we may be able to do some connects with our DSD system and some connects operationally to benefit both companies. So we think it's a terrific company, we think they're off to a great start in the public markets, and we're excited about the commercial relationship. I think we're going to be able to do something that will make us both better.

SEANA SMITH: Well, Hugh, always great to speak with you. Thanks so much for taking the time. Congratulations on the strong quarter. Hugh Johnston, PepsiCo chief financial officer. And, of course, our thanks to Brian Sozzi as well.