Investors in PepsiCo support activist hedge fund Elliott’s cost-cutting suggestions but are cautious about the idea to separate the bottling network. Elliott believes this move will increase margins and focus the company on new products. Pepsi’s operating margins trail Coca-Cola’s, and Elliott suggests spinning off the bottling business to improve profitability.

PepsiCo is considering Elliott’s proposal to separate bottling, but some long-term investors believe it will be costly and take years to implement, hurting margins in the short term. Pepsi’s operating margins were 14%, trailing Coca-Cola’s 21.2% and 24.7%. PepsiCo has struggled to revive sales in the US amid consumer pushback on pricing and product sizes.

CEO Ramon Laguarta has been working to integrate Pepsi’s chips and sodas divisions to cut costs. Elliott’s involvement signals dissatisfaction with the status quo, and investors view favorably the suggestion to divest smaller brands like Quaker. Selling Quaker could fetch around $6 billion, helping offset margin declines from divesting bottling.

PepsiCo franchisees suggest separating company-owned bottlers to improve service to retailers. PepsiCo acquired its largest bottlers over 15 years ago, aiming to speed up decision-making and save costs. When Coca-Cola refranchised its bottlers, sales and profits initially dropped, but margins eventually improved. Separating bottlers would be a cost for PepsiCo without immediate returns.

Elliott has not criticized Pepsi’s management publicly, but the hedge fund’s involvement indicates a desire for change. PepsiCo has acquired new brands to appeal to health-conscious consumers. The company’s shares rose when Elliott’s stake was revealed but have since declined. PepsiCo is reviewing Elliott’s presentation and maintaining an active dialogue with shareholders.

Read more at Yahoo Finance: Some PepsiCo investors cautious of Elliott’s plan to spin out bottling