Moody’s Assigns A1 to PepsiCo’s New Euro Unsecured Notes
Moody’s Ratings today assigned an A1 rating to PepsiCo, Inc.’s new Euro dollar-denominated senior unsecured notes. All other ratings for the company including the A1 senior unsecured and Prime-1 commercial paper ratings remain unchanged with outlook remains stable.
In the rating note, Moody’s said the proceeds from the notes are intended for general corporate purposes, including the repayment of commercial paper.
The offering is credit positive because it will improve liquidity by reducing commercial paper and extend maturities without materially affecting cash interest costs.
The company is looking to issue both fixed rate and variable rate notes, providing it with more flexibility in a declining interest rate environment. As of December 27, 2025, PepsiCo had $2.6 billion of commercial paper outstanding.
The notes are senior unsecured obligations of PepsiCo, Inc., are not guaranteed by operating subsidiaries and rank pari passu with PepsiCo’s other unsecured senior debt.
Over the next 12-18 months, we expect annual revenue to increase modestly by approximately 2% and the EBITA margin to improve by 50-100 basis points to around 16%.
In December 2025, PepsiCo outlined efforts to improve operating performance, centered on accelerating productivity initiatives, enhancing affordability, and strengthening its innovation pipeline.
The company is prioritizing cost containment and structural efficiency, including supply-chain optimization and simplification efforts within its North American operations, particularly in snacking.
Moody’s stated that savings generated through these actions are expected to be redeployed toward investments and targeted innovation with a disciplined approach to capital allocation to support free cash flow generation.
It said PepsiCo does not have a publicly-stated leverage target but is committed to maintaining a financial profile that supports a Prime-1 rating.
“We expect debt-to-EBITDA leverage will remain moderate at roughly 3.0x and that the company will continue to pursue a disciplined share repurchase policy such that leverage is managed at or around 3.0x.
“Our assumptions do not account for any specific acquisitions that could temporarily increase leverage if debt-financed, though some acquisitions are likely”.
PepsiCo’s A1 senior unsecured ratings are supported by its leading positions in savory snack foods and solid positions in its beverage franchises. The company has good business and product diversification with solid innovation pipelines.
The credit profile is also supported by the company’s efficient operations and an extensive multifaceted distribution network, which has underpinned solid financial performance. The company’s global presence also positions it well in the growing food and beverage sector internationally.
PepsiCo faces challenges to grow its volume in carbonated soft drinks (CSD) in mature markets, though this is partially offset by its strong innovation program and productivity initiatives, including its plans to continue to eliminate costs through 2030.
Further, the company has good growth prospects in the snack food and beverage categories internationally, as well as in its Frito-Lay North American snacks segment.
PepsiCo’s strong operating cash flow supports a high dividend payout and share repurchases that nevertheless limit free cash flow and the company’s ability to fund acquisitions through internal sources.
Acquisition activity has picked up over the past year with PepsiCo purchasing Siete Foods for $1.2 billion in January 2025 and poppi for $1.95 billion in May 2025.
Moody’s said these acquisitions raised debt, which along with lower earnings leaves leverage elevated for the rating. The acquisitions continue the company’s investments in growth segments of the food and beverage markets.
Ratings analysts added that PepsiCo is successfully navigating operating challenges related to weaker snacking volumes and changing consumer habits with innovation, good pricing power and cost management driving modest earnings growth from lower cost.
The stable outlook reflects our expectation that PepsiCo’s operating profit will improve in 2026 and support future growth initiatives such as modest acquisitions, and stepped up investments in marketing, advertising and capital spending.
This will help to translate to improved earnings, free cash flow, and credit metrics in the years ahead. The outlook also reflects our expectation that management will maintain a prudent financial strategy and remain disciplined as the company manages financial leverage to levels appropriate for the ratings.
