PepsiCo is losing the soda wars to Coca-Cola. That’s nothing new. But after it fell into third place behind Dr Pepper, a heavyweight activist investor said Tuesday that the company needs a drastic shakeup.

Elliott Management said it built a massive $4 billion stake in PepsiCo and wanted to work with the company to turn around its business.

“PepsiCo finds itself at a critical inflection point,” Elliott Investment Management said in a letter to PepsiCo’s board of directors. “The company has an opportunity – and an obligation – to improve financial performance and regain its position as an industry leader.”

PepsiCo, which owns Lay’s, Doritos, Cheetos, Gatorade, Pepsi, Mountain Dew, Quaker and other brands, has slumped in recent years. The company’s weakness has made it a target of investor scrutiny — PepsiCo’s stock has dipped 15% over the last year.

PepsiCo said it was open to the activist’s involvement.

“PepsiCo maintains an active and productive dialogue with our shareholders and values constructive input on delivering long-term shareholder value,” the company said in a statement.

The activist fight at PepsiCo, one of the most recognizable American brands, comes at a moment of turmoil in the food industry. Companies are grappling with inflation-weary buyers cutting back spending or switching to generic labels and the rise of GLP-1 drugs. There is also pressure from US Department of Health and Human Services Secretary Robert F. Kennedy Jr. to remove artificial flavors and other additives

Dr Pepper overtook Pepsi as the second largest soda brand in 2024. Dr Pepper has invested heavily in marketing during college football games and come up with novel flavors like strawberries and cream to entice soda drinkers.

Elliott said that PepsiCo’s soda losses were “self-inflicted” and it has too many different brands.

Frito-Lay was long a growth driver for PepsiCo, but the company’s snack division has also stumbled. Consumers, strained by rising prices, have been buying fewer chips and crackers at stores.

Elliott recommended a series of changes such as refranchising PepsiCo’s network of independent bottlers that purchase the company’s brands and syrups, as Coca-Cola has done. It also said PepsiCo should sell off some of its drink and food brands.

The activist is known for taking long-term stakes in companies, not “flash in the pan campaigns,” said Lawrence Elbaum, a partner at Sullivan & Cromwell and co-head of its shareholder activism defense practice.

Activist investors are setting their sights on food and household product conglomerates that have slumped as consumer tastes shift.

“Consumer facing companies like Pepsi are increasingly getting targeted because they’re facing a lot of challenges,” Elbaum said.

Companies are responding with a wave of mergers, acquisitions and spinoffs.

On Tuesday, Kraft Heinz announced it was splitting into two companies. It comes on the heels of other big deals.

Nutella maker Ferrero Group bought cereal giant WK Kellogg Co, the owner of Froot Loops and Frosted Flakes, in July in a $3.1 billion deal. And Mars announced a nearly $30 billion deal for Kellanova last year. (CNN)

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