Yahoo Finance PepsiCo CFO: The potential for AI is huge, but we 'need to be responsible'
PepsiCo's (PEP) impressive first quarter and upbeat outlook on Tuesday is giving the company some breathing room to weigh in on the great artificial intelligence debate that its competitor Coca-Cola (KO) hyped up on its earnings release just yesterday.
Unlike its Atlanta-based rival, however, PepsiCo is taking a more measured stance on the impact of AI.
"AI is certainly broader than ChatGPT," PepsiCo vice chairman and CFO Hugh Johnston said on Yahoo Finance Live (video above). Johnston has been on the board of Microsoft, the backer of ChatGPT developer OpenAI, since 2017.
"We are experimenting right now with AI," he added. "I think we also need to be responsible with how we use AI. We have actually filed with NIST [National Institute of Standards and Technology] a responsible AI framework, and we need to make sure that we protect employee data, we need to make sure we protect consumer data."
PepsiCo has been investing in AI in its daily operations to include the technology in developing new products, analyzing sales, and increasing safety at warehouses, the company said.
"So we are using it, but we're using it in a controlled environment so we learn about all of this," Johnston said. "The potential is huge, which is why we are certainly fully involved in it, but we are trying to do this in a very, very responsible way."
Johnston's view on AI comes after another solid quarter for the maker of Pepsi soda and Frito Lay snacks. The company was able to successfully pass through price increases on the consumer while also seeing demand rebound in China as the economy reopens from the COVID-19 pandemic.
PepsiCo stock rose 2% in early trading on Tuesday.
The earnings rundown
Net Sales: +10.2% year over year to $17.84 billion vs. estimates for $17.24 billion
Frito-Lay North America Sales: +15% year over year to $5.58 billion vs. estimates for $5.43 billion
Quaker Foods North America Sales: +9% year over to $777 million vs. estimates for $500 million
North America Beverages: +8% year over year to $5.79 billion vs. estimates for $5.67 billion
Europe Sales: +5% year over year to $1.89 billion vs. estimates for $1.84 billion
Latin America Sales: +21% year over year to $1.78 billion vs. estimates for $1.64 billion
Africa/Middle East Sales: +2% year over year to $1.01 billion vs. estimates for $960.8 million
Asia Pacific Sales: -1% year over year to $1 billion vs. estimates for $1.02 billion
Organic Sales Growth: +14.3% year over year vs. estimates for +9.5%
Core EPS: +65% year over year to $1.40 vs. estimates for $1.38
What else caught our attention
Organic sales growth for 2023 is seen at 8%, up from 6% previously
Core EPS growth for 2023 is seen at 9%, up from 8% previously
From the C-suite
"I am not that surprised [by how consumers responded to price increases]," PepsiCo vice chairman and CFO Hugh Johnston said. "I have been through a few economic cycles. One of the reasons defensive stocks do well in these types of environments is because consumers want to have the same, simple affordable treats and luxuries in their lives. You may not be able to go out and get a new car and you may not be able to go out and get a fancy piece of technology, but you can afford a bag of Doritos. You can afford an energy drink in the morning."
"We tend to do pretty well through times when the consumer is more stressed on a macroeconomic basis because we are a simple treat in your life that makes you happy," Johnston continued.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com
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