Argument for PepsiCo needing to 'play Coke's game' in order to succeed; Three reasons why I don't like PepsiCo's stock at these levels; Columnist Jason Zweig on keeping the soaring market from 'melting your retirement dreams'; My daughter Katharine and I went to the Yankees game yesterday

1) Following up on Wednesday's and yesterday's e-mails about beverage and snack giant PepsiCo (PEP)...

A "Heard on the Street" column in today's Wall Street Journal takes a look at activist investor Elliott Investment Management's proposals to unlock value.

The article supports the idea of PepsiCo spinning off the bottling business. As it notes, Coca-Cola (KO) and PepsiCo both bought back their bottlers 15 years ago in order to "tighten" control. Eventually, Coca-Cola spun the business back out. But PepsiCo held on.

The WSJ says that the split "proved critical":

Coca-Cola, freed from trucks and warehouses, doubled down on brand building and pruning underperforming products. PepsiCo – already more complex because of its giant snacks business – was left managing fleets of trucks and armies of sales reps.

The payoff has been clear. Coca-Cola's discipline shows up in steady share gains from stadium coolers to corner stores. PepsiCo, weighed down by a sprawl of products and bottling baggage, has slipped. And while Coke's asset-light model has lifted profit margins, margins at PepsiCo's North American beverage division are down from where they were in the past.

As the article concludes:

"In 25 years of covering the industry, I've rarely seen a brand owner succeed as a distributor," [RBC analyst Nik Modi] says.

The message is simple: Pepsi doesn't need to reinvent the model – it just needs to follow Coke.

However, PepsiCo is likely to resist pressure from Elliott to do so. As the WSJ noted earlier in the article:

On bottling, the idea is neither new nor hard to grasp, but management is likely to balk. It has long argued that the integrated system allows better customer service, faster product launches and promotional flexibility, explains [Modi], whose call for refranchising presaged Elliott's campaign. Roughly a quarter of PepsiCo's U.S. beverage distribution is handled by independent businesses. Spinning off the remaining operations would certainly be messy. Earnings would take a hit for years.

Ultimately, I think PepsiCo will cave and spin off its bottlers. But that doesn't mean the stock is a buy today...

As the WSJ article notes, "Even Coca-Cola absorbed margin pain and hefty restructuring costs before finally shedding bottling."

This chart of Coca-Cola's revenue and operating income shows what happened:

We can see that revenue surged in 2011 after Coca-Cola bought its largest bottler, Coca-Cola Enterprises. But the company reversed course in 2013 and started selling off its bottlers over the next several years.

As a result, revenue and operating income declined by 25% and 17%, respectively, from 2012 to 2017.

Not surprisingly, the stock didn't do well from the beginning of 2013 through 2017. Take a look at its big underperformance versus the S&P 500 Index:

My takeaway here is that it's much too soon to buy PepsiCo's stock for three reasons:

• It's not clear how big an impact the GLP-1 weight-loss drugs will have on both its beverages and snack-foods businesses...

• It's not clear whether the company will adopt Elliott's ideas (most importantly, spinning off its bottlers)...
• And even if PepsiCo does adopt the ideas, it will likely be a long and difficult process – resulting in uncertainty and earnings misses that will knock the stock down to a more attractive level.

2) On the other hand, turning to a stock I've long been bullish on...

The stock of electric air-taxi company Joby Aviation (JOBY) more than doubled in July and peaked above $20 per share in early August.

That surge was thanks to numerous developments that I've covered in previous e-mails (see archive here).

With no additional news in the past month, the stock drifted back to $13 per share last week. But it has rallied over the past two days – it was up as much as 11% this morning – thanks to two announcements...

The first is an expansion of Joby's partnership with Uber Technologies (UBER), following its recent acquisition of Blade: Here's an excerpt from the company's press release on Tuesday:

Joby acquired Blade's passenger business in August 2025 and intends to capitalize on Blade's existing infrastructure and decade of experience delivering vertical air travel at scale to accelerate Joby's launch of its electric air taxi service in markets across the world.

As the release notes, these markets include Dubai, New York, Los Angeles, the U.K., and Japan.

The second announcement underscores how President Donald Trump's administration is committed to accelerating the eVTOL ("electric vertical takeoff and landing") sector and how well Joby is positioned to benefit.

Here are more details from the company's press release from this morning:

Joby... today announced plans to participate in the White House eVTOL Integration Pilot Program (eIPP). The President's recent Executive Order directs the Department of Transportation and Federal Aviation Administration (FAA) to ensure that mature eVTOL aircraft can begin operations in select markets ahead of full FAA certification, a critical step in preparing for scaled commercial service.

Joby continues to be my favorite speculative stock.

3) On a different note, a recent column from the WSJ's Jason Zweig caught my eye...

It has some good advice on keeping the soaring market from "melting your retirement dreams":

With indexes at record highs, it's the perfect time to remind yourself that saving for your retirement isn't the stock market's job. It's yours.

Whether you have decades of working ahead of you, you're nearing retirement or you're already retired, you're probably going to need more money to sustain you in your post-working years than you think.

As Zweig argues, there are two reasons for this...

The first is that future stock market returns aren't likely to be nearly as high as they've been in recent years. Since the market bottomed in March 2009, the S&P 500 is up by nearly 10 times, which is highly unusual. As Zweig notes:

Over the three decades ended in December 2023, U.S. stocks returned an annualized 6.9% after inflation. Over the 360 months ended in July 1982, however, they earned only 4.7%. And in the 30 years ended May 1932, stocks gained only 0.9% annually after inflation.

Secondly, Zweig throws cold water on the assumption that spending declines upon retirement:

It's widely believed that people spend less in retirement than when they were working. One popular rule of thumb is that you will have to cover only 70% to 80% of your pre-retirement spending...

That's nonsense, according to researchers Edward McQuarrie and William Bernstein, who are writing a book with the working title "How Much You Must Save to Retire." Several studies have shown that, on average, people spend around 93% to 97% as much in retirement as they did when they were working.

So if you want to have a comfortable retirement, be careful not to make overly optimistic assumptions about investment returns and spending levels. And save more than you think you will need.

Three big keys to doing so are:

• Build your skills and relationships such that you have a good career characterized by steady and growing income.

• Marry someone who does the same – and stay married! (A divorce can easily undo years, if not decades, of diligent saving.)

• No matter what your income, control your spending such that you live beneath your means. Every year, spend less than your after-tax income. (This is increasingly hard to do, as one can buy nearly anything with a few clicks.)

Every year, take those savings and put them in retirement accounts – IRAs, 401(k)s, etc. Ideally, max them out every year such that they can compound tax-free for decades.

If possible, have contributions to your retirement account automatically withdrawn from your paycheck so that you never see – and therefore won't be tempted to spend – the money.

And as a default, consider having all funds in your retirement automatically invested in a small handful of index funds. (For more details on funds, see my August 19 e-mail.)

4) My youngest daughter Katharine and I went to the Yankees-Tigers game last night – the same one that President Trump attended. Here's a picture of me and Katharine in the stands:

She graduated from Carleton College in Minnesota a few months ago and has since moved home. And she just started working as a third-grade teacher last week.

My wife Susan and I are delighted to be reverse empty nesters. And we're proud of you, Katharine!

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.