Climate change, future of work, and geopolitics are among the key topics at the World Economic Forum in Davos, Switzerland. PepsiCo (PEP) is no stranger to sustainability as the company launched PepsiCo Positive, with the goal of reaching net zero carbon emissions by 2040.

In an exclusive interview, PepsiCo CEO Ramon Laguarta joins Yahoo Finance Executive Editor Brian Sozzi from the World Economic Forum in Davos, Switzerland to discuss climate change, sustainability, and more.

It's all part of Yahoo Finance's exclusive coverage from the World Economic Forum in Davos, Switzerland, where our team will speak to top decision-makers as well as preeminent leaders in business, finance, and politics about the world’s most pressing issues and priorities for the coming year.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

BRIAN SOZZI: PepsiCo is the drink of choice here at the World Economic Forum in 2024. And lucky for us here at "Yahoo Finance," we are joined by PepsiCo chairman and CEO, Ramon Laguarta. Ramon, good to get some time with you. And yes, it is a top product here, I've been drinking it all week.

RAMON LAGUARTA: Yeah, that's good. That's why you have so much energy.

BRIAN SOZZI: Yeah, it's a good point. So talk to us about some of the priorities for you here on the ground at the World Economic Forum.

RAMON LAGUARTA: This is a very important week for us. It's an important week in terms of learning, especially, it's a unique opportunity for me to see people from different industries, get a cross-industry understanding of what's going on around the world, geopolitics, forecasting for economy.

But then, from the PepsiCo out, our focus is food systems transformation. We want to-- we've been working on food system transformation for a long time. As you know, we're a large food company. You mentioned Pepsi, but we have Lay's, we have Doritos, we have Quaker, we have many other brands. So food is a large part of our business.

We think that the food system needs to be transformed to make it sustainable, to make it profitable for the farmer. And that's something we've been working on for a long time. The transformation will happen one farmer at a time. And a lot of our efforts is convening an ecosystem of players that can help transforming that farmer-- one at a time, technical understanding, financial knowledge, cultural disruption for them in how they adopt new practices that will make them more sustainable long term will protect the soil and will make agriculture more sustainable. And that's our focus for this week.

BRIAN SOZZI: I think-- I think most sane people could agree, climate change is a thing. As that continues, and in some cases, get worse over the next 10, 20, 30, 40 years, is there a way to protect the PepsiCo business?

RAMON LAGUARTA: Well, that's why we're so intentional about the agriculture and the food system. At the end-- we will be successful 20 years from now if we have resilient agriculture everywhere we play. So that's one of the elements. Of course, then, we need to evolve our portfolio to make it sustainable for people and make sure that it's great tasting and nutritious and everything else.

There is, obviously, waste management and everything else, those are areas where we're very focused as well. And we want to create the right momentum politically and financially to build recycling infrastructure, which in many countries around the world isn't existing, including the US, where we have great opportunities to build a consumer understanding, but most importantly, the infrastructure to take waste back into companies like ours. That we're willing to recycle, we're willing to-- our bottles to be 100% rPET versus 30% or 20% that we have today in some parts of the portfolio.

BRIAN SOZZI: We were talking to the CEO of NASDAQ, Adena Friedman, on the ground here at the World Economic Forum. And she was talking about the remake of her company, a lot of focus on technology. And it made me think about what you have done under your leadership at PepsiCo, a series of big acquisitions. I think back to rock stars, the brand that I know, taking a stake in Celsius, another product that I consume around the clock virtually. Why are you making some of these deals? And what is triggering them, ultimately?

RAMON LAGUARTA: Well, in our strategy of transformation of the portfolio or new capabilities that we need to be, as we were saying, successful 20 years from now, there's a lot of things we can do ourselves. There's a lot of things that make more sense to go and acquire. For example, one that I'm very proud of-- and I think it's going to pay for us long term is SodaStream.

SodaStream is a platform that will allow us to transform our beverage business. And I believe that long term, we'll be able to empower consumers to create their own drinks and to combine it in ways that they like. And we will eliminate plastic. We'll eliminate a lot of unnecessary, logistic costs, and things that create pollution.

And those are-- it is very difficult for us to create a SodaStream, so we need to go and acquire a SodaStream. And there's more cases like that where if you buy in a scale business, then your business focuses on that platform. And it's much easier to develop.

A lot of our strategic choices, we make them from PepsiCo out. So we develop ourselves, we have great R&D capabilities, we have other capabilities that allow us to build businesses, new brands from zero. And so it's a combination of both platforms, how we think about the future of the company.

BRIAN SOZZI: How did the pandemic change how you think about making products. I really-- I think, you gave me the term in your last earnings call. You called it unstructured meals. I never heard that before.

RAMON LAGUARTA: Well, that is-- I don't think the pandemic changed that. I think this has been a global trend for many years. If you think about lifestyle evolutions and urbanization and dual-income families and all that.

Unstructured meals means that more and more calories are being eaten in informal sit-down meals with the full family. And I think we have a unique opportunity to build the right set of solutions for consumers as they think about nutrition, convenience, taste, that triangle that is very strategic. So we think that that is a big idea for us.

We think our brands belong in food meals. A lot of consumers think about our brands as snacks. And I think our brands belong in meals more and more. And that's where we're evolving some of our innovation, to provide consumers with more satiating solutions that-- basically, you're substituting a meal with some of our products.

BRIAN SOZZI: You've done a large part of your life's work here at PepsiCo. You've taken sugar out of products. You've reduced calories, salt content, and really pivoted to better for you products in the Frito-Lay business, for example. Does it bother you that a lot of these products are being called ultra processed? And what does that word even mean to you?

RAMON LAGUARTA: Yeah, and I don't like the word ultra processed. And I don't believe in it. I think we are using kitchen logic to define our products. So what we're trying to do is things that consumers do at home, we're going to do it at scale in our large plant.

So we call our plants actually large kitchens. And the people that are working the lines, when you talk to them, they'll call themselves cooks. So we're using kitchen logic to say we can give consumers great tasting products, nutritious-- as you said, we've been at this for many, many years.

And this debate of vilifying anything that is packaged goods almost, and call it ultra processed, I think it's not going to help us move towards food safety and what is giving people food around the world. So it's a debate that is a little bit nuanced.

And we have to bring clarity in what is ultra processed. I don't think our products are at all ultra processed. Our products are follow kitchen logic, and are just good packaged solutions for consumers that need solutions throughout the day and around the world.

BRIAN SOZZI: Does that debate push you and your team to moving faster reinventing products?

RAMON LAGUARTA: Yes. And I think we've been at this for many years, but in the last few years, we've accelerated even more the transformation of our portfolio. So you will see in the US, Lay's already salted that are below WHO levels of sodium. And that's something that three years ago, we didn't even-- we were scared to do it. We thought the consumer would be very negative.

The consumer is actually embracing these solutions at scale. And including countries like the US, where the levels of sugar and salt are higher than other parts of the world. So we're very-- we feel very strong, and we feel very-- like I think we have the solutions to how we transform our portfolio into better options with the same great taste, which I think is the intersection the consumer is looking for.

BRIAN SOZZI: And no impact from weight loss drugs. I mean, these drugs, to me, seem confined to the East Coast, West Coast. There's the whole middle America is still consuming your products. Do you see any impact from that yet?

RAMON LAGUARTA: Well, the-- I think the East Coast and the West Coast also consume our products. So--

BRIAN SOZZI: I can attest to that.

RAMON LAGUARTA: And I'm happy for that. But so the obesity drugs-- we've been studying this for a long time now. There's still a lot of unknowns on how big this could be, the level of adoption, and how fast it could go. Our current assumptions is that this will be a long-term, if anything, adoption in the US.

And that also, the consumers that we're seeing taking the drugs, they have a very balanced diet. And actually, they continue to eat our snacks and our drinks. And so our portfolio is almost naturally hedged against the consumer behavior changes that we're observing when people adopt the drugs.

And it's going to be a small burn. It's not going to happen overnight. So we'll have time to continue to double down on our R&D capabilities, evolve the portfolio, maybe even accelerate if needed. Or as you were saying, there could be M&A opportunities that we can use to complement some of the maybe protein spaces where we have some brands, or maybe not enough, or some other opportunities that we might see in the portfolio as we understand better what are the behavioral changes that consumers have when they take these sort of medications.

BRIAN SOZZI: I told you off camera, PepsiCo is one of the first companies I wrote about as a young reporter. I think I'm in 15 years in to covering this company. And I've always been amazed by the consistency and performance.

And one stat that I came across recently, you have beaten your earnings estimates by 55 straight quarters. That's not even normal. But I think to do that, it says a lot about leadership. And it says a lot about your leadership at the company. Talk to us about how you lead a company like PepsiCo, a global company like PepsiCo. Some of your, I guess, tips to success.

RAMON LAGUARTA: Some principles that I have-- the one principle, as you said in the talk, you mentioned the word global. I think we are actually a set of local companies. And the way I think about us in the marketplace is we need to win in 200 markets where we participate. And the equation for success in every market is different.

So I want to have very empowered general managers that think end-to-end about how to optimize the cost structure, the portfolio, the talent base that we have to win in that market. That is enabled by a global company in technology, data, values, culture, obviously financial capabilities. But that's the way I think about the company.

Now I think also about the company with the concept that I use in my life all the time, which is perform to potential. I think my role is to help the organization reach its potential all the time, which means every individual needs to be inspired to reach its potential, and the teams need to be inspired to reach its potential, which is not easy. But it's a good mental model on how you drive an organization.

Another principle of mine is big changes to big things. And, you know--

BRIAN SOZZI: Which you've done at PepsiCo.

RAMON LAGUARTA: And it's-- sometimes, it's not easy, because obviously, there is a risk aversion in the teams. But you can inspire people to make big changes to big things, take bigger risks, and reach the potential of the company. So that's how I'm thinking about the organization.

I like transparency. I like trust. I like empowerment. I think those are ways how you run an organization of our scale in today's world. Because the truth is that the last four years, five years have shown us that you cannot run a company from a central point.

This is a-- there's so much going on, and there's local events. You just mentioned some geopolitics. You know, devaluations-- everything happening. You cannot have a company run from a point of-- central point. You need to empower the organization to run it.

And we have great people. We have great talent. We've always been investing in people. I came from the bottom of the company. And I know the kind of people we have and how important they are to the success of the company.

And I believe that, for example, AI will help us become an even more empowered company. We'll be able to move more decision making, more information to the frontline. And they will really be the owners of a lot of decisions. They make many, many decisions every day. If we can help them make better decisions every day, the company will be better. So those are philosophies on how I run the business. And they are a bit my personality and I guess my experience as well.

BRIAN SOZZI: Well, it's a real treat to get some time with you here at the World Economic Forum. Ramon Laguarta, chairman and CEO of PepsiCo. We'll talk to you soon, and enjoy the rest of the week.

RAMON LAGUARTA: Thank you very much, Brian.

BRIAN SOZZI: Appreciate it.

RAMON LAGUARTA: Great, thanks.