PepsiCo

The
Power 
of

2011 Annual Report

Table of Contents 

CEO Letter 
Financial Highlights 
PepsiCo Mega Brands 
Our Global Businesses 
Innovation 
The Power of One 

2
6
8
10
12
14

Best Place to Work 
Performance with Purpose 
The Power of PepsiCo 
PepsiCo Board of Directors 
PepsiCo Leadership 
Financials 

16
18
20
21
22
23

One billion times a day, in 200 countries and 
territories around the world, PepsiCo provides 
consumers with affordable, aspirational and 
authentic foods and beverages. Our consumers 
are refreshed, rejuvenated and restored by 
PepsiCo’s beloved snack, beverage and nutrition 
brands. That is the Power of PepsiCo.

As we look ahead, we are positioning our 
company for sustainable growth by building 
our brands around the globe, bringing innovative 
products to the marketplace, capitalizing on 
the coincidence of consumption of snacks and 
beverages, unleashing the full potential of our 
global scale, and ensuring that PepsiCo continues  
to be a best place to work.

As our businesses develop and grow, we 

are guided by Performance with Purpose, 

our commitment to do right for the business 
by doing right for people and the planet. 
We view sustainability as a catalyst for business 
growth and innovation, enabling us to be a 
company that is both financially successful and 
globally responsible.

With a portfolio of iconic, beloved and 
locally relevant brands, we’re delivering results 
today and confidently preparing for the future.

11

PepsiCo, Inc. 2011 Annual Report

Dear Fellow Shareholders,

developing markets. We continued to build our 
portfolio of billion-dollar brands. We boosted 
our investment in research and development to 
build long-term, differentiated platforms and 
significantly expand our healthier offerings within 
our snacks and beverages portfolios. We focused 
on making our business more efficient, and we 
began to align our global operating structure to 
fully leverage the scale of PepsiCo.

I am pleased to report that we have made 
strong progress. In 2011, despite a still-difficult 
macroeconomic environment, we delivered 
solid results.

(cid:116)(cid:1) (cid:48)(cid:79)(cid:1)(cid:66)(cid:1)(cid:68)(cid:80)(cid:83)(cid:70)(cid:1)(cid:67)(cid:66)(cid:84)(cid:74)(cid:84)(cid:13)(cid:1)(cid:79)(cid:70)(cid:85)(cid:1)(cid:83)(cid:70)(cid:87)(cid:70)(cid:79)(cid:86)(cid:70)1 was up 14 percent 

to $66 billion.

(cid:116)(cid:1) (cid:36)(cid:80)(cid:83)(cid:70)(cid:1)(cid:69)(cid:74)(cid:87)(cid:74)(cid:84)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:81)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:81)(cid:83)(cid:80)(cid:246)(cid:85)1 rose 7 percent 
with core operating margins1 of 16 percent.
(cid:116)(cid:1) (cid:36)(cid:80)(cid:83)(cid:70)(cid:1)(cid:70)(cid:66)(cid:83)(cid:79)(cid:74)(cid:79)(cid:72)(cid:84)(cid:1)(cid:81)(cid:70)(cid:83)(cid:1)(cid:84)(cid:73)(cid:66)(cid:83)(cid:70)2 (EPS) grew 7 percent.
(cid:116)(cid:1) (cid:48)(cid:79)(cid:1)(cid:66)(cid:1)(cid:68)(cid:80)(cid:83)(cid:70)(cid:1)(cid:67)(cid:66)(cid:84)(cid:74)(cid:84)(cid:13)(cid:1)(cid:88)(cid:70)(cid:1)(cid:66)(cid:68)(cid:73)(cid:74)(cid:70)(cid:87)(cid:70)(cid:69)(cid:1)(cid:66)(cid:1)(cid:79)(cid:70)(cid:85)(cid:1)(cid:83)(cid:70)(cid:85)(cid:86)(cid:83)(cid:79)(cid:1)(cid:80)(cid:79)(cid:1)

invested capital1(cid:1)(cid:9)(cid:51)(cid:48)(cid:42)(cid:36)(cid:10)(cid:1)(cid:80)(cid:71)(cid:1)(cid:18)(cid:24)(cid:835)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:83)(cid:70)(cid:85)(cid:86)(cid:83)(cid:79)(cid:1)
on equity1(cid:1)(cid:9)(cid:51)(cid:48)(cid:38)(cid:10)(cid:1)(cid:80)(cid:71)(cid:1)(cid:20)(cid:18)(cid:835)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:15)

(cid:116)(cid:1) (cid:46)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:80)(cid:81)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:68)(cid:66)(cid:84)(cid:73)(cid:1)(cid:248)(cid:80)(cid:88)(cid:13)(cid:20) excluding 

certain items, reached $6.1 billion.

(cid:116)(cid:1) (cid:5)(cid:22)(cid:15)(cid:23)(cid:835)(cid:67)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:88)(cid:66)(cid:84)(cid:1)(cid:83)(cid:70)(cid:85)(cid:86)(cid:83)(cid:79)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:73)(cid:80)(cid:77)(cid:69)(cid:70)(cid:83)(cid:84)(cid:1)
through share repurchases and dividends.

Equally important, 2011 capped a five-year 
performance that delivered, on a core basis, 
compounded growth rates for net revenue1 of 
(cid:18)(cid:20)(cid:835)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:13)(cid:1)(cid:80)(cid:81)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:81)(cid:83)(cid:80)(cid:246)(cid:85)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73)1 of 9 percent 
and EPS growth1 of 8 percent. We also delivered 
impressive cash returns: not only have dividends 
per share grown at 12 percent annually, but since 
2007, through share repurchases and dividends,  
(cid:88)(cid:70)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:83)(cid:70)(cid:85)(cid:86)(cid:83)(cid:79)(cid:70)(cid:69)(cid:1)(cid:5)(cid:20)(cid:17)(cid:835)(cid:67)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:85)(cid:80)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:73)(cid:80)(cid:77)(cid:69)(cid:70)(cid:83)(cid:84)(cid:15)

The greatest challenge in business today 
is to renew a successful company —  positioning 
it for long-term growth and profitability while 
performing in the current marketplace. This is 
a challenge we embrace.

In late 2006, we recognized that our consumers 
and the competitive environment were chang-
ing, and that PepsiCo faced a dual challenge 
to perform in the short term while making some 
bold, transformative moves to realize future 
growth opportunities and create long-term 
shareholder value.

Starting in 2007, we began our journey of renewal. 
We stepped up our investments in emerging and 

2

PepsiCo, Inc. 2011 Annual Report

11

10

09

Net revenue1 grew 14 percent on a core basis.

+14%

Core division operating profit1 rose 7 percent.

+7%

Core earnings per share2 grew 7 percent in 2011.

(cid:116)(cid:1) We are creating mega brands that  consumers 
love around the world. In 2011, we announced 
(cid:85)(cid:73)(cid:66)(cid:85)(cid:1)(cid:85)(cid:73)(cid:83)(cid:70)(cid:70)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:1)(cid:137)(cid:1)(cid:1)(cid:37)(cid:74)(cid:70)(cid:85)(cid:1)(cid:46)(cid:80)(cid:86)(cid:79)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:37)(cid:70)(cid:88)(cid:13)(cid:1)(cid:35)(cid:83)(cid:74)(cid:84)(cid:76)(cid:1)
and Starbucks ready-to-drink beverages —  had 
each grown to more than $1 billion in annual 
retail sales, expanding PepsiCo’s portfolio of  
billion-dollar brands to 22. That number is double  
(cid:88)(cid:73)(cid:66)(cid:85)(cid:1)(cid:74)(cid:85)(cid:1)(cid:88)(cid:66)(cid:84)(cid:1)(cid:266)(cid:266)(cid:1)(cid:90)(cid:70)(cid:66)(cid:83)(cid:84)(cid:1)(cid:66)(cid:72)(cid:80)(cid:15)(cid:1)(cid:48)(cid:86)(cid:83)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:85)(cid:90)(cid:81)(cid:74)(cid:68)(cid:66)(cid:77)(cid:77)(cid:90)(cid:1)
number one or number two in their respective 
categories. Importantly, Lay’s is the number 
one global food brand, and Pepsi is one of the 
world’s leading consumer brands. We will con-
tinue to drive growth and profitability through 
all of our mega brands —  including the 12 core 
(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:1)(cid:137)(cid:1)(cid:1)(cid:66)(cid:84)(cid:1)(cid:88)(cid:70)(cid:77)(cid:77)(cid:1)(cid:66)(cid:84)(cid:1)(cid:78)(cid:80)(cid:83)(cid:70)(cid:1)(cid:85)(cid:73)(cid:66)(cid:79)(cid:1)(cid:20)(cid:17)(cid:1)(cid:80)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:1)
in our portfolio with annual retail sales between 
(cid:5)(cid:19)(cid:22)(cid:17)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:5)(cid:18)(cid:835)(cid:67)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:15)

$4.40

$4.13

$3.71

(cid:116)(cid:1) We are extremely well-positioned to 

Management Operating Cash Flow(cid:20)
(in billions)

11

10

09

$6.1

$6.9

$5.6

Cash returned to shareholders

$5.6 billion

Today, PepsiCo is a global powerhouse, the largest 
food and beverage business in North America 
(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:84)(cid:70)(cid:68)(cid:80)(cid:79)(cid:69)(cid:1)(cid:77)(cid:66)(cid:83)(cid:72)(cid:70)(cid:84)(cid:85)(cid:1)(cid:74)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:88)(cid:80)(cid:83)(cid:77)(cid:69)(cid:15)(cid:1)(cid:48)(cid:86)(cid:83)(cid:1)(cid:78)(cid:74)(cid:84)(cid:84)(cid:74)(cid:80)(cid:79)(cid:1)
is clear: to captivate consumers with the world’s 
most loved and best-tasting convenient foods 
and beverages. We deliver on our mission through 
these key strengths:

grow —  by category, region and trend. 
Snacks, beverages and nutritional categories 
all have attractive growth, margins and returns, 
and are projected to grow revenue globally at 
(cid:22)(cid:835)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:1)(cid:80)(cid:83)(cid:1)(cid:73)(cid:74)(cid:72)(cid:73)(cid:70)(cid:83)(cid:15)(cid:1)(cid:56)(cid:70)(cid:1)(cid:67)(cid:70)(cid:77)(cid:74)(cid:70)(cid:87)(cid:70)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:70)(cid:84)(cid:1)
will continue to benefit from favorable global 
trends, including on-the-go lifestyles and a 
rapidly growing middle class in emerging and 
developing markets.

(cid:116)(cid:1) We are innovating globally by delighting 
locally. In 2011, we continued to innovate by 
leveraging our global platforms such as Lay’s 
(cid:49)(cid:80)(cid:85)(cid:66)(cid:85)(cid:80)(cid:1)(cid:36)(cid:73)(cid:74)(cid:81)(cid:84)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:77)(cid:80)(cid:68)(cid:66)(cid:77)(cid:1)(cid:248)(cid:66)(cid:87)(cid:80)(cid:83)(cid:84)(cid:13)(cid:1)(cid:70)(cid:89)(cid:81)(cid:66)(cid:79)(cid:69)(cid:74)(cid:79)(cid:72)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)
baked grain snacks, rolling out Gatorade G 
Series and launching brands geared to local 
tastes like Tropicana Pulp Sacs in China and 
(cid:41)(cid:83)(cid:86)(cid:84)(cid:85)(cid:70)(cid:66)(cid:78)(cid:1)(cid:68)(cid:83)(cid:74)(cid:84)(cid:81)(cid:1)(cid:67)(cid:83)(cid:70)(cid:66)(cid:69)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:51)(cid:86)(cid:84)(cid:84)(cid:74)(cid:66)(cid:15)(cid:1)(cid:48)(cid:86)(cid:83)(cid:1)(cid:67)(cid:66)(cid:77)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)
of global and local innovation has delivered 
strong, sustained growth. In fact, our emerging 
and developing markets revenue has grown 
from $8 billion to $22 billion since 2006. In 2011, 
(cid:80)(cid:86)(cid:83)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:56)(cid:74)(cid:78)(cid:78)(cid:14)(cid:35)(cid:74)(cid:77)(cid:77)(cid:14)(cid:37)(cid:66)(cid:79)(cid:79)(cid:13)(cid:1)(cid:51)(cid:86)(cid:84)(cid:84)(cid:74)(cid:66)(cid:8)(cid:84)(cid:1)
leading branded food and beverage company, 
(cid:66)(cid:84)(cid:1)(cid:88)(cid:70)(cid:77)(cid:77)(cid:1)(cid:66)(cid:84)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:46)(cid:66)(cid:67)(cid:70)(cid:77)(cid:13)(cid:1)(cid:66)(cid:1)(cid:84)(cid:86)(cid:68)(cid:68)(cid:70)(cid:84)(cid:84)(cid:71)(cid:86)(cid:77)(cid:1)

1(cid:1)(cid:1)(cid:36)(cid:80)(cid:83)(cid:70)(cid:1)(cid:83)(cid:70)(cid:84)(cid:86)(cid:77)(cid:85)(cid:84)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:79)(cid:80)(cid:79)(cid:14)(cid:40)(cid:34)(cid:34)(cid:49)(cid:1)(cid:246)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:78)(cid:70)(cid:66)(cid:84)(cid:86)(cid:83)(cid:70)(cid:84)(cid:1)(cid:85)(cid:73)(cid:66)(cid:85)(cid:1)(cid:70)(cid:89)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70)(cid:1)(cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:74)(cid:85)(cid:70)(cid:78)(cid:84)(cid:15)(cid:1)(cid:52)(cid:70)(cid:70)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:25)(cid:22)(cid:111)(cid:25)(cid:23)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:83)(cid:70)(cid:68)(cid:80)(cid:79)(cid:68)(cid:74)(cid:77)(cid:74)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:78)(cid:80)(cid:84)(cid:85)(cid:1)(cid:69)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:77)(cid:90)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:83)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:246)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1) 

measures in accordance with GAAP.

2  Core results are non-GAAP financial measures that exclude certain items. See page 41 for a reconciliation to the most directly comparable financial measure  

in accordance with GAAP.

(cid:20)  Represents a non-GAAP financial measure that excludes certain items. See page 48 for a reconciliation to the most directly comparable financial  

measure in accordance with GAAP.

3

PepsiCo, Inc. 2011 Annual Report

(cid:68)(cid:80)(cid:80)(cid:76)(cid:74)(cid:70)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:67)(cid:74)(cid:84)(cid:68)(cid:86)(cid:74)(cid:85)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:35)(cid:83)(cid:66)(cid:91)(cid:74)(cid:77)(cid:13)(cid:1)(cid:71)(cid:86)(cid:83)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)
advantaged our innovation platforms by giving 
us increased access to baked products and 
value-added dairy —  both growing categories 
that are well-aligned with consumer trends 
around the world.

  To rapidly expand our global brand platforms, 
we created new global groups focused on 
snacks, beverages and nutrition. We have 
also increased our investment in research 
(cid:66)(cid:79)(cid:69)(cid:835)(cid:69)(cid:70)(cid:87)(cid:70)(cid:77)(cid:80)(cid:81)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:67)(cid:90)(cid:1)(cid:22)(cid:17)(cid:835)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:1)(cid:74)(cid:79)(cid:1)(cid:76)(cid:70)(cid:90)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73)(cid:1)
areas, from advanced sweetener technology 
to a 100 percent plant-based recyclable bottle.

(cid:116)(cid:1) Our world-class operation has unmatched 
distribution capabilities. We are highly 
focused on excellence in execution as we go to 
market via multiple best-in-class distribution 
systems in each country, including direct-store-
delivery (DSD), warehouse, foodservice and 
wholesale. We match the best route to market 
with local consumer demand for our brands, 
driving efficiency and unparalleled availability. 
In 2011, we successfully changed distribution for 
Gatorade products in the U.S. in the convenience 
and other channels from a warehouse-delivered 
go-to-market system to DSD, in order to more 
efficiently serve our customers.

(cid:116)(cid:1) We have an intense productivity focus.  
At PepsiCo, we believe that every penny is 
a prisoner. In 2011, we laid the groundwork 
for a new operating model to simplify our 
processes, make decisions faster, reduce 
costs, minimize duplication of effort, increase 
our speed to market and better match our 
innovations with market needs. And in early 
2012, we announced a plan aimed to double 
our productivity over the next three years.

(cid:116)(cid:1) We have phenomenal people.(cid:1)(cid:48)(cid:86)(cid:83)(cid:1)(cid:84)(cid:86)(cid:68)(cid:68)(cid:70)(cid:84)(cid:84)(cid:1) 
is a testament to the resilience of PepsiCo 
associates around the world. They drive our 
success through their commitment to excel-
lence, belief in our company’s values and by 
embracing our commitment to Performance 
(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:49)(cid:86)(cid:83)(cid:81)(cid:80)(cid:84)(cid:70)(cid:15)(cid:1)(cid:48)(cid:79)(cid:70)(cid:1)(cid:72)(cid:83)(cid:80)(cid:86)(cid:81)(cid:1)(cid:85)(cid:73)(cid:66)(cid:85)(cid:1)(cid:70)(cid:78)(cid:67)(cid:80)(cid:69)(cid:74)(cid:70)(cid:69)(cid:1)(cid:85)(cid:73)(cid:66)(cid:85)(cid:1)

(cid:84)(cid:81)(cid:74)(cid:83)(cid:74)(cid:85)(cid:1)(cid:74)(cid:79)(cid:1)(cid:19)(cid:17)(cid:266)(cid:266)(cid:1)(cid:88)(cid:66)(cid:84)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:85)(cid:70)(cid:66)(cid:78)(cid:1)(cid:74)(cid:79)(cid:1)(cid:34)(cid:84)(cid:74)(cid:66)(cid:13)(cid:1)(cid:46)(cid:74)(cid:69)(cid:69)(cid:77)(cid:70)(cid:1)(cid:38)(cid:66)(cid:84)(cid:85)(cid:835)(cid:7)(cid:1)
(cid:34)(cid:71)(cid:83)(cid:74)(cid:68)(cid:66)(cid:1)(cid:9)(cid:80)(cid:86)(cid:83)(cid:1)(cid:34)(cid:46)(cid:38)(cid:34)(cid:1)(cid:83)(cid:70)(cid:72)(cid:74)(cid:80)(cid:79)(cid:10)(cid:13)(cid:1)(cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1)(cid:69)(cid:70)(cid:77)(cid:74)(cid:87)(cid:70)(cid:83)(cid:70)(cid:69)(cid:1)
double-digit net revenue and operating profit 
(cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73)(cid:1)(cid:69)(cid:70)(cid:84)(cid:81)(cid:74)(cid:85)(cid:70)(cid:1)(cid:70)(cid:66)(cid:83)(cid:85)(cid:73)(cid:82)(cid:86)(cid:66)(cid:76)(cid:70)(cid:84)(cid:13)(cid:1)(cid:248)(cid:80)(cid:80)(cid:69)(cid:84)(cid:13)(cid:1)(cid:66)(cid:1)(cid:85)(cid:84)(cid:86)(cid:79)(cid:66)(cid:78)(cid:74)(cid:1)
and political unrest.

(cid:116)(cid:1) We are dedicated to delivering Performance 
with Purpose. In 2011, we worked proactively 
with other stakeholders to create a positive 
business environment while investing in 
sustainability as a catalyst for growth. Frito-Lay 
rolled out North America’s largest commercial 
(cid:248)(cid:70)(cid:70)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:66)(cid:77)(cid:77)(cid:14)(cid:70)(cid:77)(cid:70)(cid:68)(cid:85)(cid:83)(cid:74)(cid:68)(cid:1)(cid:85)(cid:83)(cid:86)(cid:68)(cid:76)(cid:84)(cid:15)(cid:1)(cid:42)(cid:79)(cid:1)(cid:38)(cid:85)(cid:73)(cid:74)(cid:80)(cid:81)(cid:74)(cid:66)(cid:13)(cid:1)(cid:88)(cid:70)(cid:1)
partnered with the World Food Programme 
and the U.S. Agency for International Develop-
ment to improve chickpea production, while 
supporting the development of a nutritious 
chickpea-based food to address malnutrition. 
(cid:46)(cid:70)(cid:66)(cid:79)(cid:88)(cid:73)(cid:74)(cid:77)(cid:70)(cid:13)(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)(cid:88)(cid:66)(cid:84)(cid:1)(cid:84)(cid:70)(cid:77)(cid:70)(cid:68)(cid:85)(cid:70)(cid:69)(cid:1)(cid:66)(cid:84)(cid:1)(cid:80)(cid:79)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)
world’s most admired companies by Fortune, 
one of its most innovative by Fast Company, one  
of its most respected by Barron’s and one of its  
(cid:78)(cid:80)(cid:84)(cid:85)(cid:1)(cid:70)(cid:85)(cid:73)(cid:74)(cid:68)(cid:66)(cid:77)(cid:1)(cid:67)(cid:90)(cid:1)(cid:38)(cid:85)(cid:73)(cid:74)(cid:84)(cid:81)(cid:73)(cid:70)(cid:83)(cid:70)(cid:15)(cid:1)(cid:48)(cid:86)(cid:83)(cid:1)(cid:19)(cid:17)(cid:266)(cid:266)(cid:1)(cid:66)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1) 
accolades underscore the fact that Performance  
with Purpose is not merely a series of initiatives —   
it is woven into everything we do.

2012 and Beyond
We made important strides in 2011. In 2012, our 
journey of renewal continues as we focus on five 
strategic imperatives.

1. Build and extend our macrosnacks portfolio 
globally. PepsiCo is the undisputed leader in 
macrosnacks around the world. We will work to 
build our much-loved global snack brands —  
Lay’s, Doritos, Cheetos and SunChips —  while 
expanding our successful grain-based snacks 
platform globally. We will continue to create 
(cid:79)(cid:70)(cid:88)(cid:1)(cid:248)(cid:66)(cid:87)(cid:80)(cid:83)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:85)(cid:86)(cid:79)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:77)(cid:80)(cid:68)(cid:66)(cid:77)(cid:1)(cid:85)(cid:66)(cid:84)(cid:85)(cid:70)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:77)(cid:70)(cid:87)(cid:70)(cid:83)-
age our go-to-market expertise to ensure that 
our brands are always available wherever our 
consumers shop.

2. Sustainably and profitably grow our 

beverage business worldwide.(cid:1)(cid:48)(cid:86)(cid:83)(cid:1)(cid:67)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:1)
business remains large and highly profitable, 

4

PepsiCo, Inc. 2011 Annual Report

marketing. We intend to increasingly capitalize 
on our cross-category presence to grow our 
positions in both snacks and beverages.

5. Ensure prudent and responsible financial 
management. PepsiCo is highly focused 
on shareholder value creation, as we have 
always been. We achieve this by maintaining 
or growing our strong value shares in our key 
markets, relentlessly pursuing sustainable, 
profitable growth, rigorously scrutinizing 
capital investments and aggressively returning 
cash to shareholders through both dividends 
(cid:66)(cid:79)(cid:69)(cid:1)(cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:1)(cid:83)(cid:70)(cid:81)(cid:86)(cid:83)(cid:68)(cid:73)(cid:66)(cid:84)(cid:70)(cid:84)(cid:15)(cid:1)(cid:35)(cid:90)(cid:1)(cid:69)(cid:80)(cid:74)(cid:79)(cid:72)(cid:1)(cid:84)(cid:80)(cid:13)(cid:1)(cid:88)(cid:70)(cid:1)(cid:70)(cid:89)(cid:81)(cid:70)(cid:68)(cid:85)(cid:1)
to perform in the top tier of consumer pack-
aged goods companies as measured by total 
 shareholder return.

Underlying these imperatives, we are pursuing 
specific strategic investment and productivity 
initiatives. These include strengthening our 
investments in brand building —  beverages 
and snacks —  by increasing our advertising and 
(cid:78)(cid:66)(cid:83)(cid:76)(cid:70)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:84)(cid:81)(cid:70)(cid:79)(cid:69)(cid:1)(cid:67)(cid:90)(cid:1)(cid:66)(cid:81)(cid:81)(cid:83)(cid:80)(cid:89)(cid:74)(cid:78)(cid:66)(cid:85)(cid:70)(cid:77)(cid:90)(cid:1)(cid:5)(cid:22)(cid:17)(cid:17)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)
to $600 million in 2012, the majority in North 
America. In addition, we have begun to imple-
ment a multiyear productivity program that we 
believe will further strengthen our complemen-
tary foods and beverages businesses.

The challenge to renew  
a successful company is one  
that we embrace.

Conclusion
The Power of PepsiCo has always been our 
beloved, iconic brands that drive our sustainable 
(cid:246)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:81)(cid:70)(cid:83)(cid:71)(cid:80)(cid:83)(cid:78)(cid:66)(cid:79)(cid:68)(cid:70)(cid:15)(cid:1)(cid:48)(cid:86)(cid:83)(cid:1)(cid:84)(cid:85)(cid:83)(cid:70)(cid:79)(cid:72)(cid:85)(cid:73)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:87)(cid:70)(cid:83)(cid:84)(cid:66)(cid:85)(cid:74)(cid:77)(cid:74)(cid:85)(cid:90)(cid:1)
derive from the consumer appeal of our brands 
and position us to perform in a world that is 
rapidly changing.

In an uncertain global economy, we believe we 
need to control the things we can control —  while 
managing through turbulence. It means building 

We are proud to host the 2012 Annual 
Meeting of Shareholders in New Bern, N.C.(cid:2)—(cid:2)
the birthplace of Pepsi-Cola.

accounting for approximately half of our 
(cid:79)(cid:70)(cid:85)(cid:1)(cid:83)(cid:70)(cid:87)(cid:70)(cid:79)(cid:86)(cid:70)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:19)(cid:17)(cid:266)(cid:266)(cid:15)(cid:1)(cid:48)(cid:86)(cid:83)(cid:1)(cid:72)(cid:80)(cid:66)(cid:77)(cid:1)(cid:74)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:1)
our  developed market beverage business while 
building on promising gains in emerging and 
developing markets. We will continue to invest 
in and strengthen our most powerful and iconic 
(cid:67)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:1)(cid:137)(cid:1)(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:13)(cid:1)(cid:46)(cid:80)(cid:86)(cid:79)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:37)(cid:70)(cid:88)(cid:13)(cid:1)
(cid:52)(cid:74)(cid:70)(cid:83)(cid:83)(cid:66)(cid:1)(cid:46)(cid:74)(cid:84)(cid:85)(cid:13)(cid:1)(cid:24)(cid:54)(cid:49)(cid:1)(cid:9)(cid:80)(cid:86)(cid:85)(cid:84)(cid:74)(cid:69)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:54)(cid:15)(cid:52)(cid:15)(cid:10)(cid:13)(cid:1)(cid:46)(cid:74)(cid:83)(cid:74)(cid:79)(cid:69)(cid:66)(cid:1)
and Lipton.

3. Build and expand our nutrition business. 

Today, PepsiCo has three of the most admired 
and loved brands in the category —  Quaker, 
Tropicana and Gatorade. For the categories in 
which we compete, the global market for health 
and wellness within consumer packaged goods 
(cid:70)(cid:89)(cid:68)(cid:70)(cid:70)(cid:69)(cid:84)(cid:1)(cid:5)(cid:22)(cid:17)(cid:17)(cid:1)(cid:67)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:74)(cid:84)(cid:1)(cid:70)(cid:89)(cid:81)(cid:70)(cid:68)(cid:85)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:1)(cid:74)(cid:79)(cid:1)
the high-single-digits, driven by strong demo-
(cid:72)(cid:83)(cid:66)(cid:81)(cid:73)(cid:74)(cid:68)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:68)(cid:80)(cid:79)(cid:84)(cid:86)(cid:78)(cid:70)(cid:83)(cid:1)(cid:85)(cid:83)(cid:70)(cid:79)(cid:69)(cid:84)(cid:15)(cid:1)(cid:35)(cid:86)(cid:74)(cid:77)(cid:69)(cid:74)(cid:79)(cid:72)(cid:1)(cid:71)(cid:83)(cid:80)(cid:78)(cid:1)
our core brands, we believe that we are well-
positioned to grow our global nutrition portfolio.

4. Increase and capitalize on the high coinci-

dence of snack and beverage consumption. 
Snacks and beverages are hugely complemen-
(cid:85)(cid:66)(cid:83)(cid:90)(cid:1)(cid:68)(cid:66)(cid:85)(cid:70)(cid:72)(cid:80)(cid:83)(cid:74)(cid:70)(cid:84)(cid:15)(cid:1)(cid:42)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:54)(cid:15)(cid:52)(cid:15)(cid:13)(cid:1)(cid:66)(cid:67)(cid:80)(cid:86)(cid:85)(cid:1)(cid:22)(cid:17)(cid:835)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)
the time, when people buy a salty snack they 
(cid:66)(cid:77)(cid:84)(cid:80)(cid:1)(cid:67)(cid:86)(cid:90)(cid:1)(cid:66)(cid:1)(cid:83)(cid:70)(cid:71)(cid:83)(cid:70)(cid:84)(cid:73)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:67)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:15)(cid:1)(cid:48)(cid:86)(cid:83)(cid:1)(cid:66)(cid:67)(cid:74)(cid:77)(cid:74)(cid:85)(cid:90)(cid:1)(cid:85)(cid:80)(cid:1)
use that combined power goes beyond selling —  
to innovation, production, distribution and 

5

PepsiCo, Inc. 2011 Annual Report

on our strengths, while anticipating and planning 
for challenges.

(cid:48)(cid:86)(cid:83)(cid:1)(cid:85)(cid:66)(cid:84)(cid:76)(cid:1)(cid:85)(cid:80)(cid:69)(cid:66)(cid:90)(cid:1)(cid:74)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:68)(cid:83)(cid:70)(cid:66)(cid:85)(cid:70)(cid:1)(cid:66)(cid:79)(cid:1)(cid:66)(cid:69)(cid:66)(cid:81)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:85)(cid:70)(cid:66)(cid:78)(cid:1)
and culture —  one that can continually renew 
itself and thrive on change. As a company, 
we began that journey of renewal in 2007. As we 
gear up for the next decade, 2012 will be a year 
in which PepsiCo takes the next step in our 
transformation by reinvesting in our brands, 
our regions, our products and our people, to 
ensure that we continue to deliver great results 
for our shareholders.

PepsiCo is performing today while transforming 
for tomorrow. We are made for this moment, 
changing with the times and building for the 
(cid:71)(cid:86)(cid:85)(cid:86)(cid:83)(cid:70)(cid:15)(cid:1)(cid:48)(cid:71)(cid:1)(cid:85)(cid:73)(cid:74)(cid:84)(cid:1)(cid:42)(cid:1)(cid:66)(cid:78)(cid:1)(cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:27)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:67)(cid:70)(cid:84)(cid:85)(cid:1)(cid:69)(cid:66)(cid:90)(cid:84)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)
yet to come.

Indra K. Nooyi 
(cid:36)(cid:73)(cid:66)(cid:74)(cid:83)(cid:78)(cid:66)(cid:79)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)

Financial Highlights
PepsiCo, Inc. and subsidiaries
(in millions except per share data; all per share amounts assume dilution)

Summary of Operations

Core net revenue(b)

Core division operating profit(c)

Core total operating profit(d)

Core net income attributable to PepsiCo(e)

Core earnings per share attributable to PepsiCo(e)

Other Data
(cid:46)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:80)(cid:81)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:68)(cid:66)(cid:84)(cid:73)(cid:1)(cid:248)(cid:80)(cid:88)(cid:13)(cid:1)(cid:70)(cid:89)(cid:68)(cid:77)(cid:86)(cid:69)(cid:74)(cid:79)(cid:72)(cid:1)(cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:74)(cid:85)(cid:70)(cid:78)(cid:84)(f)

Net cash provided by operating activities

Capital spending

Common share repurchases

Dividends paid

Long-term debt

2011

(cid:1) (cid:5)(cid:1)(cid:23)(cid:22)(cid:13)(cid:25)(cid:25)(cid:18)

(cid:1) (cid:5)(cid:1)(cid:18)(cid:18)(cid:13)(cid:20)(cid:19)(cid:26)

(cid:1) (cid:5)(cid:1)(cid:18)(cid:17)(cid:13)(cid:20)(cid:23)(cid:25)

(cid:1) (cid:5)(cid:1) (cid:24)(cid:13)(cid:17)(cid:20)(cid:22)

  $  4.40

(cid:1) (cid:5)(cid:1) (cid:23)(cid:13)(cid:18)(cid:21)(cid:22)

  $  8,944

(cid:1) (cid:5)(cid:1) (cid:20)(cid:13)(cid:20)(cid:20)(cid:26)

  $  2,489

(cid:1) (cid:5)(cid:1) (cid:20)(cid:13)(cid:18)(cid:22)(cid:24)

(cid:1) (cid:5)(cid:1)(cid:19)(cid:17)(cid:13)(cid:22)(cid:23)(cid:25)

2010

(cid:1) (cid:5)(cid:1)(cid:22)(cid:24)(cid:13)(cid:25)(cid:20)(cid:25)

  $ 10,626

(cid:1) (cid:5)(cid:1) (cid:26)(cid:13)(cid:24)(cid:24)(cid:20)

(cid:1) (cid:5)(cid:1) (cid:23)(cid:13)(cid:23)(cid:24)(cid:22)

(cid:1) (cid:1)

(cid:1) (cid:5)(cid:1) (cid:21)(cid:15)(cid:18)(cid:20)

  $  6,892

  $  8,448

(cid:1) (cid:5)(cid:1) (cid:20)(cid:13)(cid:19)(cid:22)(cid:20)

  $  4,978

  $  2,978

  $ 19,999

(cid:1) (cid:1)

(cid:1) (cid:1)

(cid:1) (cid:1)

Chg(a)

14%

7%

6%

(cid:22)%

7%

(11)%

6%

(cid:20)%

(cid:9)(cid:22)(cid:17))%

6%

(cid:20)%

(a) Percentage changes are based on unrounded amounts.
(cid:9)(cid:67)(cid:10)(cid:1)(cid:1)(cid:42)(cid:79)(cid:1)(cid:19)(cid:17)(cid:18)(cid:18)(cid:13)(cid:1)(cid:70)(cid:89)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70)(cid:84)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:74)(cid:78)(cid:81)(cid:66)(cid:68)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:66)(cid:79)(cid:1)(cid:70)(cid:89)(cid:85)(cid:83)(cid:66)(cid:1)(cid:83)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:88)(cid:70)(cid:70)(cid:76)(cid:15)(cid:1)(cid:52)(cid:70)(cid:70)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:1)(cid:25)(cid:22)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:66)(cid:1)(cid:83)(cid:70)(cid:68)(cid:80)(cid:79)(cid:68)(cid:74)(cid:77)(cid:74)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:78)(cid:80)(cid:84)(cid:85)(cid:1)(cid:69)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:77)(cid:90)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:83)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:246)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:78)(cid:70)(cid:66)(cid:84)(cid:86)(cid:83)(cid:70)(cid:1)(cid:74)(cid:79)(cid:1)

accordance with GAAP.

(c)  Excludes corporate unallocated expenses and merger and integration charges in both years. In 2011, also excludes restructuring charges, certain  
(cid:74)(cid:79)(cid:87)(cid:70)(cid:79)(cid:85)(cid:80)(cid:83)(cid:90)(cid:1)(cid:71)(cid:66)(cid:74)(cid:83)(cid:1)(cid:87)(cid:66)(cid:77)(cid:86)(cid:70)(cid:1)(cid:66)(cid:69)(cid:75)(cid:86)(cid:84)(cid:85)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:68)(cid:80)(cid:79)(cid:79)(cid:70)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:56)(cid:35)(cid:37)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:67)(cid:80)(cid:85)(cid:85)(cid:77)(cid:74)(cid:79)(cid:72)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:74)(cid:78)(cid:81)(cid:66)(cid:68)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:66)(cid:79)(cid:1)(cid:70)(cid:89)(cid:85)(cid:83)(cid:66)(cid:1)(cid:83)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:88)(cid:70)(cid:70)(cid:76)(cid:15)(cid:1)(cid:42)(cid:79)(cid:1)(cid:19)(cid:17)(cid:18)(cid:17)(cid:13)(cid:1)(cid:66)(cid:77)(cid:84)(cid:80)(cid:1)
excludes certain inventory fair value adjustments in connection with our bottling acquisitions and a one-time net charge related to the currency 
(cid:69)(cid:70)(cid:87)(cid:66)(cid:77)(cid:86)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:74)(cid:79)(cid:1)(cid:55)(cid:70)(cid:79)(cid:70)(cid:91)(cid:86)(cid:70)(cid:77)(cid:66)(cid:15)(cid:1)(cid:52)(cid:70)(cid:70)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:1)(cid:25)(cid:22)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:66)(cid:1)(cid:83)(cid:70)(cid:68)(cid:80)(cid:79)(cid:68)(cid:74)(cid:77)(cid:74)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:78)(cid:80)(cid:84)(cid:85)(cid:1)(cid:69)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:77)(cid:90)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:83)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:246)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:78)(cid:70)(cid:66)(cid:84)(cid:86)(cid:83)(cid:70)(cid:1)(cid:74)(cid:79)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:83)(cid:69)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:40)(cid:34)(cid:34)(cid:49)(cid:15)
(d)  Excludes merger and integration charges and the net mark-to-market impact of our commodity hedges in both years. In 2011, also excludes 

(cid:1)(cid:83)(cid:70)(cid:84)(cid:85)(cid:83)(cid:86)(cid:68)(cid:85)(cid:86)(cid:83)(cid:74)(cid:79)(cid:72)(cid:1)(cid:68)(cid:73)(cid:66)(cid:83)(cid:72)(cid:70)(cid:84)(cid:13)(cid:1)(cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:74)(cid:79)(cid:87)(cid:70)(cid:79)(cid:85)(cid:80)(cid:83)(cid:90)(cid:1)(cid:71)(cid:66)(cid:74)(cid:83)(cid:1)(cid:87)(cid:66)(cid:77)(cid:86)(cid:70)(cid:1)(cid:66)(cid:69)(cid:75)(cid:86)(cid:84)(cid:85)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:68)(cid:80)(cid:79)(cid:79)(cid:70)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:56)(cid:35)(cid:37)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:67)(cid:80)(cid:85)(cid:85)(cid:77)(cid:74)(cid:79)(cid:72)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:74)(cid:78)(cid:81)(cid:66)(cid:68)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:66)(cid:79)(cid:1)(cid:70)(cid:89)(cid:85)(cid:83)(cid:66)(cid:1)
reporting week. In 2010, also excludes certain inventory fair value adjustments in connection with our bottling acquisitions, a one-time net charge 
related to the currency devaluation in Venezuela, an asset write-off charge for SAP software and a contribution to The PepsiCo Foundation, Inc. 
(cid:52)(cid:70)(cid:70)(cid:835)(cid:81)(cid:66)(cid:72)(cid:70)(cid:1)(cid:25)(cid:22)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:66)(cid:1)(cid:83)(cid:70)(cid:68)(cid:80)(cid:79)(cid:68)(cid:74)(cid:77)(cid:74)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:78)(cid:80)(cid:84)(cid:85)(cid:1)(cid:69)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:77)(cid:90)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:83)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:246)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:78)(cid:70)(cid:66)(cid:84)(cid:86)(cid:83)(cid:70)(cid:1)(cid:74)(cid:79)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:83)(cid:69)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:40)(cid:34)(cid:34)(cid:49)(cid:15)

(e)  Excludes merger and integration charges and the net mark-to-market impact of our commodity hedges in both years. In 2011, also excludes 

(cid:1)(cid:83)(cid:70)(cid:84)(cid:85)(cid:83)(cid:86)(cid:68)(cid:85)(cid:86)(cid:83)(cid:74)(cid:79)(cid:72)(cid:1)(cid:68)(cid:73)(cid:66)(cid:83)(cid:72)(cid:70)(cid:84)(cid:13)(cid:1)(cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:74)(cid:79)(cid:87)(cid:70)(cid:79)(cid:85)(cid:80)(cid:83)(cid:90)(cid:1)(cid:71)(cid:66)(cid:74)(cid:83)(cid:1)(cid:87)(cid:66)(cid:77)(cid:86)(cid:70)(cid:1)(cid:66)(cid:69)(cid:75)(cid:86)(cid:84)(cid:85)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:68)(cid:80)(cid:79)(cid:79)(cid:70)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:56)(cid:35)(cid:37)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:67)(cid:80)(cid:85)(cid:85)(cid:77)(cid:74)(cid:79)(cid:72)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:74)(cid:78)(cid:81)(cid:66)(cid:68)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:66)(cid:79)(cid:1)(cid:70)(cid:89)(cid:85)(cid:83)(cid:66)(cid:1)
reporting week. In 2010, also excludes a gain on previously held equity interests and certain inventory fair value adjustments in connection with 
our bottling acquisitions, a one-time net charge related to the currency devaluation in Venezuela, an asset write-off charge for SAP software, 
a contribution to The PepsiCo Foundation, Inc. and interest expense incurred in connection with our debt repurchase. See pages 41 and 86 for 
reconciliations to the most directly comparable financial measures in accordance with GAAP.

(f )  Includes the impact of net capital spending, and excludes merger and integration payments, restructuring payments and capital expenditures 

related to the integration of our bottlers in both years. In 2011, also excludes discretionary pension payments. In 2010, also excludes discretionary 
pension and retiree medical payments, a contribution to The PepsiCo Foundation, Inc. and interest paid related to our debt repurchase. See also 
(cid:105)(cid:48)(cid:86)(cid:83)(cid:835)(cid:45)(cid:74)(cid:82)(cid:86)(cid:74)(cid:69)(cid:74)(cid:85)(cid:90)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:36)(cid:66)(cid:81)(cid:74)(cid:85)(cid:66)(cid:77)(cid:1)(cid:51)(cid:70)(cid:84)(cid:80)(cid:86)(cid:83)(cid:68)(cid:70)(cid:84)(cid:119)(cid:1)(cid:74)(cid:79)(cid:1)(cid:46)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:8)(cid:84)(cid:1)(cid:37)(cid:74)(cid:84)(cid:68)(cid:86)(cid:84)(cid:84)(cid:74)(cid:80)(cid:79)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:34)(cid:79)(cid:66)(cid:77)(cid:90)(cid:84)(cid:74)(cid:84)(cid:15)(cid:1)(cid:52)(cid:70)(cid:70)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:1)(cid:25)(cid:23)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:66)(cid:1)(cid:83)(cid:70)(cid:68)(cid:80)(cid:79)(cid:68)(cid:74)(cid:77)(cid:74)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:78)(cid:80)(cid:84)(cid:85)(cid:1)(cid:69)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:77)(cid:90)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:83)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)
financial measure in accordance with GAAP.

6

PepsiCo, Inc. 2011 Annual Report

   
   
   
   
   
   
   
Cumulative Total Shareholder Return
(cid:51)(cid:70)(cid:85)(cid:86)(cid:83)(cid:79)(cid:1)(cid:80)(cid:79)(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)(cid:84)(cid:85)(cid:80)(cid:68)(cid:76)(cid:1)(cid:74)(cid:79)(cid:87)(cid:70)(cid:84)(cid:85)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:9)(cid:74)(cid:79)(cid:68)(cid:77)(cid:86)(cid:69)(cid:74)(cid:79)(cid:72)(cid:1)(cid:69)(cid:74)(cid:87)(cid:74)(cid:69)(cid:70)(cid:79)(cid:69)(cid:84)(cid:10)(cid:13)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:52)(cid:7)(cid:49)(cid:1)(cid:22)(cid:17)(cid:17)®(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:52)(cid:7)(cid:49)® Average of Industry Groups*

250

PepsiCo, Inc.  (cid:52)(cid:7)(cid:49)(cid:1)(cid:22)(cid:17)(cid:17)  (cid:52)(cid:7)(cid:49)(cid:1)(cid:34)(cid:87)(cid:72)(cid:15)(cid:1)(cid:80)(cid:71)(cid:1)(cid:42)(cid:79)(cid:69)(cid:86)(cid:84)(cid:85)(cid:83)(cid:90)(cid:1)(cid:40)(cid:83)(cid:80)(cid:86)(cid:81)(cid:84)(cid:11)

s
r
a

l
l

o
D

.

.

S
U

200

150

100

50

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

12/99

12/00

12/01

12/02

(cid:18)(cid:19)(cid:16)(cid:17)(cid:20)

12/04

(cid:18)(cid:19)(cid:16)(cid:17)(cid:22)

12/06

12/07

12/08

12/09

12/10

12/11

PepsiCo, Inc.

(cid:52)(cid:7)(cid:49)(cid:1)(cid:22)(cid:17)(cid:17)

$100 

(cid:5)(cid:18)(cid:21)(cid:20)(cid:1)

$142 

(cid:5)(cid:18)(cid:19)(cid:22)(cid:1)

$140 

(cid:5)(cid:18)(cid:22)(cid:26)(cid:1)

(cid:5)(cid:18)(cid:25)(cid:20)(cid:1)

$198 

(cid:5)(cid:19)(cid:21)(cid:22)(cid:1)

$181 

$208 

$100 

$  91 

$  80 

$  62 

$  80 

$  89 

(cid:5)(cid:1) (cid:26)(cid:20)(cid:1)

$108 

$114 

$  72 

$  91 

(cid:5)(cid:19)(cid:20)(cid:17)(cid:1)

(cid:5)(cid:18)(cid:17)(cid:22)(cid:1)

(cid:52)(cid:7)(cid:49)(cid:1)(cid:34)(cid:87)(cid:72)(cid:15)(cid:1)(cid:80)(cid:71)(cid:1)(cid:42)(cid:79)(cid:69)(cid:86)(cid:84)(cid:85)(cid:83)(cid:90)(cid:1)(cid:40)(cid:83)(cid:80)(cid:86)(cid:81)(cid:84)(cid:11)

$100 

(cid:5)(cid:18)(cid:19)(cid:20)(cid:1)

$118 

$117 

(cid:5)(cid:18)(cid:20)(cid:17)(cid:1)

(cid:5)(cid:18)(cid:21)(cid:20)(cid:1)

(cid:5)(cid:18)(cid:20)(cid:26)(cid:1)

$161 

$179 

$148 

$179 

$210 

$241 

$107 

(cid:5)(cid:19)(cid:20)(cid:22)(cid:1)

(cid:11)(cid:1)(cid:1)(cid:53)(cid:73)(cid:70)(cid:1)(cid:52)(cid:7)(cid:49)(cid:1)(cid:34)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:42)(cid:79)(cid:69)(cid:86)(cid:84)(cid:85)(cid:83)(cid:90)(cid:1)(cid:40)(cid:83)(cid:80)(cid:86)(cid:81)(cid:84)(cid:1)(cid:74)(cid:84)(cid:1)(cid:69)(cid:70)(cid:83)(cid:74)(cid:87)(cid:70)(cid:69)(cid:1)(cid:67)(cid:90)(cid:1)(cid:88)(cid:70)(cid:74)(cid:72)(cid:73)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:83)(cid:70)(cid:85)(cid:86)(cid:83)(cid:79)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:88)(cid:80)(cid:1)(cid:66)(cid:81)(cid:81)(cid:77)(cid:74)(cid:68)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:52)(cid:7)(cid:49)(cid:1)(cid:42)(cid:79)(cid:69)(cid:86)(cid:84)(cid:85)(cid:83)(cid:90)(cid:1)(cid:40)(cid:83)(cid:80)(cid:86)(cid:81)(cid:84)(cid:1)(cid:9)(cid:47)(cid:80)(cid:79)(cid:14)(cid:34)(cid:77)(cid:68)(cid:80)(cid:73)(cid:80)(cid:77)(cid:74)(cid:68)(cid:1)(cid:35)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:39)(cid:80)(cid:80)(cid:69)(cid:10)(cid:1)
(cid:67)(cid:90)(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:8)(cid:84)(cid:1)(cid:84)(cid:66)(cid:77)(cid:70)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:74)(cid:85)(cid:84)(cid:1)(cid:67)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:71)(cid:80)(cid:80)(cid:69)(cid:84)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:70)(cid:84)(cid:15)(cid:1)(cid:53)(cid:73)(cid:70)(cid:1)(cid:83)(cid:70)(cid:85)(cid:86)(cid:83)(cid:79)(cid:84)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:13)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:52)(cid:7)(cid:49)(cid:1)(cid:22)(cid:17)(cid:17)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:52)(cid:7)(cid:49)(cid:1)(cid:34)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:1)(cid:74)(cid:79)(cid:69)(cid:74)(cid:68)(cid:70)(cid:84)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:68)(cid:66)(cid:77)(cid:68)(cid:86)(cid:77)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:85)(cid:73)(cid:83)(cid:80)(cid:86)(cid:72)(cid:73)(cid:1)
(cid:37)(cid:70)(cid:68)(cid:70)(cid:78)(cid:67)(cid:70)(cid:83)(cid:1)(cid:20)(cid:18)(cid:13)(cid:1)(cid:19)(cid:17)(cid:18)(cid:18)(cid:15)

Mix of Net Revenue

Food

48%

(cid:48)(cid:86)(cid:85)(cid:84)(cid:74)(cid:69)(cid:70)(cid:1) 
the U.S.

(cid:22)(cid:17)(cid:6)

(cid:22)(cid:19)(cid:6)

(cid:35)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)

Net Revenues

Division Operating Profit

(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)(cid:34)(cid:46)(cid:38)(cid:34)

PepsiCo 
Europe

11%

PepsiCo 
Americas 
Foods

20%

(cid:20)(cid:22)(cid:6)

PepsiCo 
Americas 
(cid:35)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)

(cid:20)(cid:21)(cid:6)

(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)(cid:34)(cid:46)(cid:38)(cid:34)

PepsiCo 
Europe

8%

11%

(cid:20)(cid:17)(cid:6)

PepsiCo 
Americas 
(cid:35)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)

7

PepsiCo, Inc. 2011 Annual Report

(cid:22)(cid:17)(cid:6)

U.S.

PepsiCo 
Americas 
Foods

(cid:22)(cid:18)(cid:6)

 
PepsiCo  
Mega Brands

PepsiCo has 22 mega brands that each generated $1 billion or more in 2011 in 
annual retail sales. The number of billion-dollar brands in our portfolio has 
grown considerably since 2000. In fact, we have doubled the number in the 
last 11 years, adding five in the last five years alone.

(cid:42)(cid:79)(cid:1)(cid:19)(cid:17)(cid:266)(cid:266)(cid:13)(cid:1)(cid:85)(cid:73)(cid:83)(cid:70)(cid:70)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:1)(cid:75)(cid:80)(cid:74)(cid:79)(cid:70)(cid:69)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:81)(cid:80)(cid:83)(cid:85)(cid:71)(cid:80)(cid:77)(cid:74)(cid:80)(cid:1)(cid:80)(cid:71)(cid:1)(cid:78)(cid:70)(cid:72)(cid:66)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:27)(cid:1)(cid:37)(cid:74)(cid:70)(cid:85)(cid:1)(cid:46)(cid:80)(cid:86)(cid:79)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)

(cid:37)(cid:70)(cid:88)(cid:13)(cid:1)(cid:35)(cid:83)(cid:74)(cid:84)(cid:76)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:52)(cid:85)(cid:66)(cid:83)(cid:67)(cid:86)(cid:68)(cid:76)(cid:84)(cid:1)(cid:83)(cid:70)(cid:66)(cid:69)(cid:90)(cid:14)(cid:85)(cid:80)(cid:14)(cid:69)(cid:83)(cid:74)(cid:79)(cid:76)(cid:1)(cid:67)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)(cid:15)(cid:1)(cid:35)(cid:70)(cid:73)(cid:74)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73)(cid:1)(cid:80)(cid:71)(cid:1)
(cid:35)(cid:83)(cid:74)(cid:84)(cid:76)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:52)(cid:85)(cid:66)(cid:83)(cid:67)(cid:86)(cid:68)(cid:76)(cid:84)(cid:1)(cid:83)(cid:70)(cid:66)(cid:69)(cid:90)(cid:14)(cid:85)(cid:80)(cid:14)(cid:69)(cid:83)(cid:74)(cid:79)(cid:76)(cid:1)(cid:67)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:74)(cid:84)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:84)(cid:85)(cid:83)(cid:70)(cid:79)(cid:72)(cid:85)(cid:73)(cid:1)(cid:80)(cid:71)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:75)(cid:80)(cid:74)(cid:79)(cid:85)(cid:1)
venture partnerships with Unilever and Starbucks, respectively.

88

PepsiCo, Inc. 2011 Annual Report

PepsiCo Mega Brands
Estimated Worldwide Retail Sales (in billions)

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9

PepsiCo, Inc. 2011 Annual Report

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Our Global Businesses

Global Snacks, Global Beverages, Global Nutrition
PepsiCo is a $66 billion global powerhouse focused on 
two complementary businesses with attractive growth, 
margins and returns(cid:4)—(cid:4) global snacks and global beverages. 
In 2011, they delivered core net revenue growth1 of 
14 percent. Nestled within these two businesses is our 
global nutrition business, which in 2011 grew core net 
revenue1 9 percent, excluding acquisitions.

48% 
Global Snacks

2011 Portfolio N

Global Snacks
(cid:48)(cid:86)(cid:83)(cid:1)(cid:5)(cid:20)(cid:19)(cid:835)(cid:67)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:72)(cid:77)(cid:80)(cid:67)(cid:66)(cid:77)(cid:1)(cid:71)(cid:80)(cid:80)(cid:69)(cid:84)(cid:1)(cid:81)(cid:80)(cid:83)(cid:85)(cid:71)(cid:80)(cid:77)(cid:74)(cid:80)(cid:1)(cid:74)(cid:79)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70)(cid:84)(cid:1)(cid:66)(cid:1)(cid:84)(cid:79)(cid:66)(cid:68)(cid:76)(cid:84)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:85)(cid:73)(cid:66)(cid:85)(cid:1)(cid:74)(cid:84)(cid:1)(cid:80)(cid:79)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:68)(cid:80)(cid:79)(cid:84)(cid:86)(cid:78)(cid:70)(cid:83)(cid:1)(cid:81)(cid:66)(cid:68)(cid:76)(cid:66)(cid:72)(cid:70)(cid:69)(cid:1)
goods industry’s best performing franchises of the last two decades. We’ve also expanded into 
adjacencies like bread snacks and refrigerated dips, in which we have built a market-leading presence.
(cid:48)(cid:86)(cid:83)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:1)(cid:74)(cid:79)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70)(cid:1)(cid:45)(cid:66)(cid:90)(cid:8)(cid:84)(cid:13)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:77)(cid:66)(cid:83)(cid:72)(cid:70)(cid:84)(cid:85)(cid:1)(cid:72)(cid:77)(cid:80)(cid:67)(cid:66)(cid:77)(cid:1)(cid:71)(cid:80)(cid:80)(cid:69)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:13)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:78)(cid:80)(cid:83)(cid:70)(cid:1)(cid:85)(cid:73)(cid:66)(cid:79)(cid:1)(cid:5)(cid:26)(cid:835)(cid:67)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:74)(cid:79)(cid:1)(cid:83)(cid:70)(cid:85)(cid:66)(cid:74)(cid:77)(cid:1)(cid:84)(cid:66)(cid:77)(cid:70)(cid:84)(cid:1)
in 2011; Doritos, the world’s leading corn snack; and Cheetos, the leader in its category. In 2011, all three 
of these snack mega brands delivered double-digit volume growth in markets around the world.

In 2011, global snacks volume2 rose 8 percent.

10

PepsiCo, Inc. 2011 Annual Report

Global Beverages
(cid:48)(cid:86)(cid:83)(cid:1)(cid:5)(cid:20)(cid:21)(cid:835)(cid:67)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:72)(cid:77)(cid:80)(cid:67)(cid:66)(cid:77)(cid:1)(cid:67)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:73)(cid:66)(cid:84)(cid:1)(cid:66)(cid:1)(cid:84)(cid:85)(cid:83)(cid:80)(cid:79)(cid:72)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:69)(cid:74)(cid:87)(cid:70)(cid:83)(cid:84)(cid:70)(cid:1)(cid:81)(cid:80)(cid:83)(cid:85)(cid:71)(cid:80)(cid:77)(cid:74)(cid:80)(cid:1) 
that enables us to move into emerging markets early and quickly, as shoppers  
new to consumer packaged goods seek out the simple pleasures of beverages.  
(cid:48)(cid:86)(cid:83)(cid:1)(cid:1)(cid:67)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:66)(cid:77)(cid:84)(cid:80)(cid:1)(cid:73)(cid:70)(cid:77)(cid:81)(cid:84)(cid:1)(cid:86)(cid:84)(cid:1)(cid:84)(cid:68)(cid:66)(cid:77)(cid:70)(cid:1)(cid:86)(cid:81)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:71)(cid:80)(cid:80)(cid:69)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:84)(cid:70)(cid:1)(cid:78)(cid:66)(cid:83)(cid:76)(cid:70)(cid:85)(cid:84)(cid:15)
(cid:48)(cid:86)(cid:83)(cid:1)(cid:67)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:81)(cid:80)(cid:83)(cid:85)(cid:71)(cid:80)(cid:77)(cid:74)(cid:80)(cid:1)(cid:74)(cid:79)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70)(cid:84)(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:13)(cid:1)(cid:80)(cid:79)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:88)(cid:80)(cid:83)(cid:77)(cid:69)(cid:8)(cid:84)(cid:1)(cid:77)(cid:70)(cid:66)(cid:69)(cid:74)(cid:79)(cid:72)(cid:1)(cid:68)(cid:80)(cid:79)(cid:84)(cid:86)(cid:78)(cid:70)(cid:83)(cid:1)
(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:28)(cid:1)(cid:46)(cid:80)(cid:86)(cid:79)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:37)(cid:70)(cid:88)(cid:13)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:71)(cid:66)(cid:84)(cid:85)(cid:70)(cid:84)(cid:85)(cid:14)(cid:72)(cid:83)(cid:80)(cid:88)(cid:74)(cid:79)(cid:72)(cid:1)(cid:78)(cid:66)(cid:75)(cid:80)(cid:83)(cid:1)(cid:68)(cid:66)(cid:83)(cid:67)(cid:80)(cid:79)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:84)(cid:80)(cid:71)(cid:85)(cid:1)(cid:69)(cid:83)(cid:74)(cid:79)(cid:76)(cid:1)(cid:85)(cid:83)(cid:66)(cid:69)(cid:70)(cid:78)(cid:66)(cid:83)(cid:76)(cid:1)
(cid:74)(cid:79)(cid:1)(cid:47)(cid:80)(cid:83)(cid:85)(cid:73)(cid:1)(cid:34)(cid:78)(cid:70)(cid:83)(cid:74)(cid:68)(cid:66)(cid:1)(cid:66)(cid:84)(cid:1)(cid:78)(cid:70)(cid:66)(cid:84)(cid:86)(cid:83)(cid:70)(cid:69)(cid:1)(cid:67)(cid:90)(cid:1)(cid:19)(cid:17)(cid:266)(cid:266)(cid:1)(cid:83)(cid:70)(cid:85)(cid:66)(cid:74)(cid:77)(cid:1)(cid:84)(cid:66)(cid:77)(cid:70)(cid:84)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:52)(cid:74)(cid:70)(cid:83)(cid:83)(cid:66)(cid:1)(cid:46)(cid:74)(cid:84)(cid:85)(cid:13)(cid:1)(cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1)(cid:74)(cid:79)(cid:1)(cid:19)(cid:17)(cid:266)(cid:266)(cid:1)
attracted new consumers to the category.

In 2011, global beverages volume2(cid:1)(cid:72)(cid:83)(cid:70)(cid:88)(cid:1)(cid:22)(cid:835)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:15)

(cid:22)(cid:19)(cid:6) 
(cid:40)(cid:77)(cid:80)(cid:67)(cid:66)(cid:77)(cid:1)(cid:35)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)

Global Nutrition

Net Revenue Mix

Global Nutrition
(cid:48)(cid:86)(cid:83)(cid:1)(cid:72)(cid:77)(cid:80)(cid:67)(cid:66)(cid:77)(cid:1)(cid:79)(cid:86)(cid:85)(cid:83)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:77)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:84)(cid:85)(cid:83)(cid:70)(cid:79)(cid:72)(cid:85)(cid:73)(cid:1)(cid:80)(cid:71)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:68)(cid:80)(cid:83)(cid:70)(cid:1)(cid:81)(cid:83)(cid:80)(cid:69)(cid:86)(cid:68)(cid:85)(cid:84)(cid:13)(cid:1)
enabling us to stay ahead of the increasing demand for more  nutritious food and 
(cid:67)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:1)(cid:68)(cid:73)(cid:80)(cid:74)(cid:68)(cid:70)(cid:84)(cid:15)(cid:1)(cid:48)(cid:86)(cid:83)(cid:1)(cid:79)(cid:86)(cid:85)(cid:83)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:67)(cid:83)(cid:66)(cid:79)(cid:69)(cid:84)(cid:1)(cid:74)(cid:79)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70)(cid:1)(cid:50)(cid:86)(cid:66)(cid:76)(cid:70)(cid:83)(cid:13)(cid:1)(cid:53)(cid:83)(cid:80)(cid:81)(cid:74)(cid:68)(cid:66)(cid:79)(cid:66)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:40)(cid:66)(cid:85)(cid:80)(cid:83)(cid:66)(cid:69)(cid:70)(cid:15)

(cid:48)(cid:86)(cid:83)(cid:1)(cid:79)(cid:86)(cid:85)(cid:83)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:81)(cid:80)(cid:83)(cid:85)(cid:71)(cid:80)(cid:77)(cid:74)(cid:80)(cid:1)(cid:74)(cid:84)(cid:1)(cid:66)(cid:1)(cid:78)(cid:80)(cid:83)(cid:70)(cid:1)(cid:85)(cid:73)(cid:66)(cid:79)(cid:1)(cid:5)(cid:18)(cid:20)(cid:835)(cid:67)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:15)(cid:1)(cid:56)(cid:70)(cid:1)(cid:74)(cid:79)(cid:85)(cid:70)(cid:79)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:1) 

(cid:74)(cid:85)(cid:1)(cid:85)(cid:80)(cid:1)(cid:5)(cid:20)(cid:17)(cid:835)(cid:67)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:67)(cid:90)(cid:1)(cid:19)(cid:17)(cid:19)(cid:17)(cid:15)

1 (cid:36)(cid:80)(cid:83)(cid:70) (cid:83)(cid:70)(cid:84)(cid:86)(cid:77)(cid:85)(cid:84) (cid:66)(cid:83)(cid:70) (cid:79)(cid:80)(cid:79)(cid:14)(cid:40)(cid:34)(cid:34)(cid:49) (cid:246)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77) (cid:78)(cid:70)(cid:66)(cid:84)(cid:86)(cid:83)(cid:70)(cid:84) (cid:85)(cid:73)(cid:66)(cid:85) (cid:70)(cid:89)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70) (cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79) (cid:74)(cid:85)(cid:70)(cid:78)(cid:84)(cid:15) (cid:52)(cid:70)(cid:70) (cid:81)(cid:66)(cid:72)(cid:70)(cid:84) (cid:25)(cid:22)(cid:111)(cid:25)(cid:23) (cid:71)(cid:80)(cid:83) (cid:83)(cid:70)(cid:68)(cid:80)(cid:79)(cid:68)(cid:74)(cid:77)(cid:74)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84) (cid:85)(cid:80) (cid:85)(cid:73)(cid:70) (cid:78)(cid:80)(cid:84)(cid:85) (cid:69)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:77)(cid:90) (cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:83)(cid:66)(cid:67)(cid:77)(cid:70) (cid:246)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77) (cid:78)(cid:70)(cid:66)(cid:84)(cid:86)(cid:83)(cid:70)(cid:84) (cid:74)(cid:79) (cid:66)(cid:68)(cid:68)(cid:80)(cid:83)(cid:69)(cid:66)(cid:79)(cid:68)(cid:70) (cid:88)(cid:74)(cid:85)(cid:73) (cid:40)(cid:34)(cid:34)(cid:49)(cid:15)
2 (cid:19)(cid:17)(cid:266)(cid:266) (cid:87)(cid:80)(cid:77)(cid:86)(cid:78)(cid:70) (cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73) (cid:83)(cid:70)(cid:248)(cid:70)(cid:68)(cid:85)(cid:84) (cid:66)(cid:79) (cid:66)(cid:69)(cid:75)(cid:86)(cid:84)(cid:85)(cid:78)(cid:70)(cid:79)(cid:85) (cid:85)(cid:80) (cid:85)(cid:73)(cid:70) (cid:67)(cid:66)(cid:84)(cid:70) (cid:90)(cid:70)(cid:66)(cid:83) (cid:9)(cid:19)(cid:17)(cid:18)(cid:17)(cid:10) (cid:71)(cid:80)(cid:83) (cid:69)(cid:74)(cid:87)(cid:70)(cid:84)(cid:85)(cid:74)(cid:85)(cid:86)(cid:83)(cid:70)(cid:84) (cid:85)(cid:73)(cid:66)(cid:85) (cid:80)(cid:68)(cid:68)(cid:86)(cid:83)(cid:83)(cid:70)(cid:69) (cid:74)(cid:79) (cid:19)(cid:17)(cid:266)(cid:266) (cid:66)(cid:79)(cid:69) (cid:70)(cid:89)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70)(cid:84) (cid:85)(cid:73)(cid:70) (cid:74)(cid:78)(cid:81)(cid:66)(cid:68)(cid:85) (cid:80)(cid:71) (cid:66)(cid:79) (cid:70)(cid:89)(cid:85)(cid:83)(cid:66) (cid:83)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:74)(cid:79)(cid:72) (cid:88)(cid:70)(cid:70)(cid:76) (cid:74)(cid:79) (cid:19)(cid:17)(cid:266)(cid:266)(cid:15)

11

PepsiCo, Inc. 2011 Annual Report

Innovating 
Globally

Through innovation, we bring new experiences to our consumers, providing 
fun, refreshment and nutrition. Innovation also drives our expansion globally, 
as we develop our businesses and grow our position country by country.
In 2011, we achieved a significant milestone, with approximately 

(cid:22)(cid:17)(cid:835)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:83)(cid:70)(cid:87)(cid:70)(cid:79)(cid:86)(cid:70)(cid:1)(cid:68)(cid:80)(cid:78)(cid:74)(cid:79)(cid:72)(cid:1)(cid:71)(cid:83)(cid:80)(cid:78)(cid:1)(cid:80)(cid:86)(cid:85)(cid:84)(cid:74)(cid:69)(cid:70)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:54)(cid:15)(cid:52)(cid:15)(cid:13)(cid:1)(cid:74)(cid:79)(cid:68)(cid:77)(cid:86)(cid:69)(cid:74)(cid:79)(cid:72)(cid:1)(cid:20)(cid:21)(cid:835)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:1) 
from developing and emerging markets. We drove this success by  recognizing  
that we have to win one consumer at a time, striking the right balance 
between global scale and local relevance.

Importantly, we also continued to build our research and development 

capabilities as well as to strengthen new platforms for growth in global 
categories such as grain snacks. 

The Gatorade G Series, which 
provides fuel to athletes 
before, during and after their 
workouts and competitions, is 
expanding outside the U.S. —  
(cid:85)(cid:80)(cid:1)(cid:35)(cid:83)(cid:66)(cid:91)(cid:74)(cid:77)(cid:13)(cid:1)(cid:46)(cid:70)(cid:89)(cid:74)(cid:68)(cid:80)(cid:13)(cid:1)(cid:34)(cid:86)(cid:84)(cid:85)(cid:83)(cid:66)(cid:77)(cid:74)(cid:66)(cid:13)(cid:1)
Canada and the U.K.

The fastest-growing cola in North 
(cid:34)(cid:78)(cid:70)(cid:83)(cid:74)(cid:68)(cid:66)(cid:1)(cid:74)(cid:79)(cid:1)(cid:19)(cid:17)(cid:266)(cid:266)(cid:13)(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:1)(cid:46)(cid:34)(cid:57)(cid:1)(cid:66)(cid:77)(cid:84)(cid:80)(cid:1)(cid:72)(cid:83)(cid:70)(cid:88)(cid:1)
volume in the U.K., France, Australia  
and Japan, among other markets.

Lay’s growth in 2011 was driven by  
expansion in many local markets, including 
Russia, where Lay’s has become the 
number one snack brand. For our Russian 
consumers, we created Lay’s pickled 
cucumber, which delivered strong volume 
growth in 2011.

Quaker cookies, developed 
(cid:74)(cid:79)(cid:1)(cid:46)(cid:70)(cid:89)(cid:74)(cid:68)(cid:80)(cid:13)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:79)(cid:80)(cid:88)(cid:1)(cid:66)(cid:77)(cid:84)(cid:80)(cid:1)
made and sold in the U.S., 
(cid:35)(cid:83)(cid:66)(cid:91)(cid:74)(cid:77)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:80)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)(cid:78)(cid:66)(cid:83)(cid:76)(cid:70)(cid:85)(cid:84)(cid:15)(cid:1)

12

PepsiCo, Inc. 2011 Annual Report

Delighting 
Locally

We are unique in our ability to innovate for local tastes and cultures.  
In 2011, we grew sales and market share by making our powerful global 
brands locally relevant, with innovation that encompassed new products, 
engaging packaging and groundbreaking marketing. 

(cid:48)(cid:86)(cid:83)(cid:1)(cid:74)(cid:79)(cid:79)(cid:80)(cid:87)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:66)(cid:77)(cid:84)(cid:80)(cid:1)(cid:68)(cid:80)(cid:78)(cid:70)(cid:84)(cid:1)(cid:71)(cid:83)(cid:80)(cid:78)(cid:1)(cid:77)(cid:80)(cid:68)(cid:66)(cid:77)(cid:1)(cid:76)(cid:79)(cid:80)(cid:88)(cid:14)(cid:73)(cid:80)(cid:88)(cid:15)(cid:1)(cid:56)(cid:70)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:105)(cid:77)(cid:74)(cid:71)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)
(cid:84)(cid:73)(cid:74)(cid:71)(cid:85)(cid:74)(cid:79)(cid:72)(cid:119)(cid:1)(cid:74)(cid:79)(cid:79)(cid:80)(cid:87)(cid:66)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:74)(cid:69)(cid:70)(cid:66)(cid:84)(cid:1)(cid:69)(cid:70)(cid:87)(cid:70)(cid:77)(cid:80)(cid:81)(cid:70)(cid:69)(cid:1)(cid:67)(cid:90)(cid:1)(cid:77)(cid:80)(cid:68)(cid:66)(cid:77)(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)(cid:85)(cid:70)(cid:66)(cid:78)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:80)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)(cid:78)(cid:66)(cid:83)(cid:76)(cid:70)(cid:85)(cid:84)(cid:1)
and regions, where they take root and grow.

PepsiCo has built a grain snacks business 
that is expanding around the world. Its 
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and other markets, and Hrusteam crisp 
bread snacks in Russia.

In 2011, Quaker products, including 
Quaker congee, were in approximately 
11 million households in China, following 
(cid:66)(cid:1)(cid:84)(cid:70)(cid:68)(cid:80)(cid:79)(cid:69)(cid:1)(cid:68)(cid:80)(cid:79)(cid:84)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:90)(cid:70)(cid:66)(cid:83)(cid:1)(cid:80)(cid:71)(cid:1)(cid:22)(cid:17)(cid:1)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:1)
(cid:87)(cid:80)(cid:77)(cid:86)(cid:78)(cid:70)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73)(cid:1)(cid:74)(cid:79)(cid:1)(cid:85)(cid:73)(cid:66)(cid:85)(cid:1)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:83)(cid:90)(cid:15)(cid:1)(cid:46)(cid:70)(cid:66)(cid:79)(cid:88)(cid:73)(cid:74)(cid:77)(cid:70)(cid:13)(cid:1)
Tropicana Pulp Sacs juice drinks, created 
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of Chinese consumers, delivered double-
digit volume growth in 2011. 

In Saudi Arabia, our new Tropicana Frutz 
sparkling juice drink grew market share in 
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(cid:69)(cid:83)(cid:74)(cid:79)(cid:76)(cid:1)(cid:68)(cid:83)(cid:70)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:78)(cid:66)(cid:83)(cid:76)(cid:70)(cid:85)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:46)(cid:74)(cid:69)(cid:69)(cid:77)(cid:70)(cid:1)(cid:38)(cid:66)(cid:84)(cid:85)(cid:13)(cid:1)
delivered double-digit volume growth.

13

PepsiCo, Inc. 2011 Annual Report

The  
Power  
of  
One

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which gives us critical competitive advantages.

(cid:53)(cid:73)(cid:70)(cid:1)(cid:49)(cid:80)(cid:88)(cid:70)(cid:83)(cid:1)(cid:80)(cid:71)(cid:1)(cid:48)(cid:79)(cid:70)(cid:1)(cid:67)(cid:70)(cid:72)(cid:74)(cid:79)(cid:84)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:86)(cid:79)(cid:74)(cid:82)(cid:86)(cid:70)(cid:1)(cid:66)(cid:67)(cid:74)(cid:77)(cid:74)(cid:85)(cid:90)(cid:1)(cid:85)(cid:80)(cid:1)(cid:68)(cid:80)(cid:79)(cid:79)(cid:70)(cid:68)(cid:85)(cid:1)
(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:68)(cid:80)(cid:79)(cid:84)(cid:86)(cid:78)(cid:70)(cid:83)(cid:84)(cid:15)(cid:1)(cid:42)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:54)(cid:15)(cid:52)(cid:15)(cid:13)(cid:1)(cid:66)(cid:67)(cid:80)(cid:86)(cid:85)(cid:1)(cid:22)(cid:17)(cid:1)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:85)(cid:74)(cid:78)(cid:70)(cid:13)(cid:1)(cid:88)(cid:73)(cid:70)(cid:79)(cid:1)
people buy a salty snack they also buy a refreshment beverage, 
so we can capitalize on the leading positions of our iconic brands in 
both categories to drive the purchase of our snacks and beverages 
together. As we grow globally, this idea is more powerful 
than ever. In 2012, we intend to improve our country positions 
through a decided focus on cross-category promotions and 
co-merchandising initiatives.

(cid:53)(cid:73)(cid:70)(cid:1)(cid:49)(cid:80)(cid:88)(cid:70)(cid:83)(cid:1)(cid:80)(cid:71)(cid:1)(cid:48)(cid:79)(cid:70)(cid:1)(cid:70)(cid:89)(cid:85)(cid:70)(cid:79)(cid:69)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:66)(cid:83)(cid:70)(cid:66)(cid:84)(cid:1)(cid:85)(cid:73)(cid:83)(cid:80)(cid:86)(cid:72)(cid:73)(cid:80)(cid:86)(cid:85)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:87)(cid:66)(cid:77)(cid:86)(cid:70)(cid:1)
(cid:68)(cid:73)(cid:66)(cid:74)(cid:79)(cid:15)(cid:1)(cid:35)(cid:90)(cid:1)(cid:73)(cid:66)(cid:83)(cid:79)(cid:70)(cid:84)(cid:84)(cid:74)(cid:79)(cid:72)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:71)(cid:86)(cid:77)(cid:77)(cid:1)(cid:81)(cid:80)(cid:85)(cid:70)(cid:79)(cid:85)(cid:74)(cid:66)(cid:77)(cid:1)(cid:80)(cid:71)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:72)(cid:77)(cid:80)(cid:67)(cid:66)(cid:77)(cid:1)(cid:84)(cid:68)(cid:66)(cid:77)(cid:70)(cid:13)(cid:1)(cid:88)(cid:70)(cid:1)
aim to double our productivity in the next few years vs. 2011. To 
increase efficiencies and speed across the system while reducing 
costs, we are developing common global processes in product 
development, supply chain, operations and global procurement. 
(cid:34)(cid:835)(cid:49)(cid:80)(cid:88)(cid:70)(cid:83)(cid:1)(cid:80)(cid:71)(cid:1)(cid:48)(cid:79)(cid:70)(cid:1)(cid:66)(cid:81)(cid:81)(cid:83)(cid:80)(cid:66)(cid:68)(cid:73)(cid:1)(cid:66)(cid:77)(cid:84)(cid:80)(cid:1)(cid:74)(cid:84)(cid:1)(cid:70)(cid:79)(cid:66)(cid:67)(cid:77)(cid:74)(cid:79)(cid:72)(cid:1)(cid:70)(cid:243)(cid:68)(cid:74)(cid:70)(cid:79)(cid:68)(cid:74)(cid:70)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:80)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)
areas, including sales, finance and IT.

14

PepsiCo, Inc. 2011 Annual Report

Best  
Place  
to  
Work

PepsiCo knows that talent and leadership development is a 
growth driver. Across the world, our associates keep PepsiCo 
(cid:84)(cid:85)(cid:83)(cid:80)(cid:79)(cid:72)(cid:1)(cid:105)(cid:71)(cid:83)(cid:80)(cid:78)(cid:1)(cid:84)(cid:70)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:84)(cid:73)(cid:70)(cid:77)(cid:71)(cid:119)(cid:137)(cid:1)(cid:66)(cid:69)(cid:87)(cid:66)(cid:79)(cid:68)(cid:74)(cid:79)(cid:72)(cid:1)(cid:84)(cid:86)(cid:84)(cid:85)(cid:66)(cid:74)(cid:79)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:66)(cid:72)(cid:83)(cid:74)(cid:68)(cid:86)(cid:77)(cid:85)(cid:86)(cid:83)(cid:66)(cid:77)(cid:1)
practices, developing new product ideas and making our foods 
and beverages. They ensure the quality of our products, market 
them in engaging ways and deliver them dependably.

The women and men of PepsiCo enable us to generate 
(cid:78)(cid:80)(cid:83)(cid:70)(cid:1)(cid:85)(cid:73)(cid:66)(cid:79)(cid:1)(cid:5)(cid:20)(cid:17)(cid:17)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:74)(cid:79)(cid:1)(cid:83)(cid:70)(cid:85)(cid:66)(cid:74)(cid:77)(cid:1)(cid:84)(cid:66)(cid:77)(cid:70)(cid:84)(cid:1)(cid:70)(cid:87)(cid:70)(cid:83)(cid:90)(cid:1)(cid:69)(cid:66)(cid:90)(cid:15)(cid:1)(cid:53)(cid:73)(cid:70)(cid:74)(cid:83)(cid:1)(cid:84)(cid:85)(cid:70)(cid:66)(cid:69)(cid:71)(cid:66)(cid:84)(cid:85)(cid:1)
commitment to our consumers, customers and communities 
keeps PepsiCo moving into the future.

(cid:48)(cid:86)(cid:83)(cid:1)(cid:66)(cid:85)(cid:85)(cid:70)(cid:79)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:66)(cid:77)(cid:70)(cid:79)(cid:85)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:77)(cid:70)(cid:66)(cid:69)(cid:70)(cid:83)(cid:84)(cid:73)(cid:74)(cid:81)(cid:1)(cid:69)(cid:70)(cid:87)(cid:70)(cid:77)(cid:80)(cid:81)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:73)(cid:66)(cid:84)(cid:1)
earned PepsiCo recog nition on numerous 2011 rankings as one 
of the best places to work. We also were recognized in 2011  
(cid:66)(cid:84)(cid:1)(cid:66)(cid:1)(cid:105)(cid:53)(cid:80)(cid:81)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:90)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:45)(cid:70)(cid:66)(cid:69)(cid:70)(cid:83)(cid:84)(cid:119)(cid:1)(cid:67)(cid:90)(cid:1)(cid:34)(cid:80)(cid:79)(cid:1)(cid:41)(cid:70)(cid:88)(cid:74)(cid:85)(cid:85)(cid:13)(cid:1)Fortune and the 
(cid:51)(cid:35)(cid:45)(cid:1)(cid:40)(cid:83)(cid:80)(cid:86)(cid:81)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:66)(cid:84)(cid:1)(cid:80)(cid:79)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:105)(cid:35)(cid:70)(cid:84)(cid:85)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:74)(cid:70)(cid:84)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:45)(cid:70)(cid:66)(cid:69)(cid:70)(cid:83)(cid:84)(cid:73)(cid:74)(cid:81)(cid:119)(cid:1)
by Hay Group.

Our 2011 Awards (partial list)

(cid:116)(cid:1) Dow Jones Sustainability Index
  New Supersector Leader for Food and Beverage  

Maintained Beverage Sector Leadership

(cid:116)(cid:1) Fortune(cid:8)(cid:84)(cid:1)(cid:56)(cid:80)(cid:83)(cid:77)(cid:69)(cid:8)(cid:84)(cid:1)(cid:46)(cid:80)(cid:84)(cid:85)(cid:1)(cid:34)(cid:69)(cid:78)(cid:74)(cid:83)(cid:70)(cid:69)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:74)(cid:70)(cid:84)
(cid:116)(cid:1) Fast Company(cid:8)(cid:84)(cid:1)(cid:22)(cid:17)(cid:1)(cid:46)(cid:80)(cid:84)(cid:85)(cid:1)(cid:42)(cid:79)(cid:79)(cid:80)(cid:87)(cid:66)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:74)(cid:70)(cid:84)
(cid:116)(cid:1) Barron’s(cid:1)(cid:56)(cid:80)(cid:83)(cid:77)(cid:69)(cid:8)(cid:84)(cid:1)(cid:46)(cid:80)(cid:84)(cid:85)(cid:1)(cid:51)(cid:70)(cid:84)(cid:81)(cid:70)(cid:68)(cid:85)(cid:70)(cid:69)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:74)(cid:70)(cid:84)
(cid:116)(cid:1) (cid:38)(cid:85)(cid:73)(cid:74)(cid:84)(cid:81)(cid:73)(cid:70)(cid:83)(cid:70)(cid:8)(cid:84)(cid:1)(cid:56)(cid:80)(cid:83)(cid:77)(cid:69)(cid:8)(cid:84)(cid:1)(cid:46)(cid:80)(cid:84)(cid:85)(cid:1)(cid:38)(cid:85)(cid:73)(cid:74)(cid:68)(cid:66)(cid:77)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:74)(cid:70)(cid:84)
(cid:116)(cid:1) Black Enterprise(cid:8)(cid:84)(cid:1)(cid:35)(cid:70)(cid:84)(cid:85)(cid:1)(cid:21)(cid:17)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:74)(cid:70)(cid:84)(cid:1)(cid:71)(cid:80)(cid:83)(cid:835)(cid:37)(cid:74)(cid:87)(cid:70)(cid:83)(cid:84)(cid:74)(cid:85)(cid:90)
(cid:116)(cid:1) LATINA Style Magazine(cid:8)(cid:84)(cid:1)(cid:22)(cid:17)(cid:1)(cid:35)(cid:70)(cid:84)(cid:85)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:74)(cid:70)(cid:84)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1) 

Latinas to Work for in the U.S.

(cid:116)(cid:1) Working Mother(cid:8)(cid:84)(cid:1)(cid:35)(cid:70)(cid:84)(cid:85)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:74)(cid:70)(cid:84)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1) 

(cid:46)(cid:86)(cid:77)(cid:85)(cid:74)(cid:68)(cid:86)(cid:77)(cid:85)(cid:86)(cid:83)(cid:66)(cid:77)(cid:1)(cid:56)(cid:80)(cid:78)(cid:70)(cid:79)

(cid:46)(cid:66)(cid:83)(cid:76)(cid:1)(cid:52)(cid:66)(cid:72)(cid:72)(cid:86)(cid:84)(cid:13)  
United States

(cid:42)(cid:69)(cid:80)(cid:74)(cid:66)(cid:1)(cid:46)(cid:66)(cid:83)(cid:85)(cid:74)(cid:79)(cid:70)(cid:91)(cid:1)
Ramiro, Spain

16

PepsiCo, Inc. 2011 Annual Report

(cid:46)(cid:66)(cid:83)(cid:88)(cid:66)(cid:1)(cid:42)(cid:67)(cid:83)(cid:66)(cid:73)(cid:74)(cid:78)(cid:1) 
Kamesh, Egypt

Garry Lock,  
United Kingdom

Lindy Liu,  
China

(cid:45)(cid:74)(cid:77)(cid:74)(cid:79)(cid:66)(cid:1)(cid:37)(cid:70)(cid:46)(cid:74)(cid:83)(cid:66)(cid:79)(cid:69)(cid:66)(cid:13)  
United States

João Rodrigues  
da Silva Filho, Brazil

Fredrico Sanchez,  
United States

Jaime Amacosta,  
Mexico

Kaan Koray  
Kümbet, Turkey

Govindasamy  
Kumaravel, India

(cid:46)(cid:74)(cid:68)(cid:73)(cid:66)(cid:70)(cid:77)(cid:1)(cid:38)(cid:76)(cid:88)(cid:70)(cid:80)(cid:72)(cid:88)(cid:86)(cid:13)  
Italy

Elena Skirda,  
Russia

17

PepsiCo, Inc. 2011 Annual Report

Performance  
with  
Purpose

As we grow, we are guided by Performance with Purpose, 
our commitment to sustained growth with a focus on 
Performance, Human, Environmental and Talent Sustainability.  
We believe that doing what’s right for people and our planet 
leads to a more successful future for PepsiCo.

We continuously manage our activities against measur-

able goals that are designed to ensure strong financial 
performance; a balanced portfolio with healthier choices; 
sound environmental stewardship; and a safe, supportive 
workplace for our associates and supply chain partners.

In 2011, for example, PepsiCo signed a landmark partner-

(cid:84)(cid:73)(cid:74)(cid:81)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:42)(cid:79)(cid:85)(cid:70)(cid:83)(cid:14)(cid:34)(cid:78)(cid:70)(cid:83)(cid:74)(cid:68)(cid:66)(cid:79)(cid:1)(cid:37)(cid:70)(cid:87)(cid:70)(cid:77)(cid:80)(cid:81)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:35)(cid:66)(cid:79)(cid:76)(cid:1)(cid:85)(cid:80)(cid:1)(cid:84)(cid:81)(cid:86)(cid:83)(cid:1)
economic growth in 26 countries across Latin America 
and the Caribbean. The partnership’s inaugural project 
(cid:88)(cid:74)(cid:77)(cid:77)(cid:835)(cid:70)(cid:89)(cid:81)(cid:66)(cid:79)(cid:69)(cid:1)(cid:68)(cid:80)(cid:78)(cid:78)(cid:70)(cid:83)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:84)(cid:86)(cid:79)(cid:248)(cid:80)(cid:88)(cid:70)(cid:83)(cid:1)(cid:81)(cid:83)(cid:80)(cid:69)(cid:86)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:85)(cid:80)(cid:1)(cid:81)(cid:83)(cid:80)(cid:87)(cid:74)(cid:69)(cid:70)(cid:1)(cid:66)(cid:1)
(cid:84)(cid:80)(cid:86)(cid:83)(cid:68)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:73)(cid:70)(cid:66)(cid:83)(cid:85)(cid:14)(cid:73)(cid:70)(cid:66)(cid:77)(cid:85)(cid:73)(cid:90)(cid:13)(cid:1)(cid:73)(cid:74)(cid:72)(cid:73)(cid:14)(cid:80)(cid:77)(cid:70)(cid:74)(cid:68)(cid:1)(cid:84)(cid:86)(cid:79)(cid:248)(cid:80)(cid:88)(cid:70)(cid:83)(cid:1)(cid:80)(cid:74)(cid:77)(cid:1)(cid:9)(cid:41)(cid:48)(cid:52)(cid:48)(cid:10)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)
(cid:84)(cid:79)(cid:66)(cid:68)(cid:76)(cid:84)(cid:1)(cid:74)(cid:79)(cid:835)(cid:46)(cid:70)(cid:89)(cid:74)(cid:68)(cid:80)(cid:15)(cid:1)(cid:42)(cid:85)(cid:1)(cid:66)(cid:77)(cid:84)(cid:80)(cid:1)(cid:88)(cid:74)(cid:77)(cid:77)(cid:1)(cid:81)(cid:83)(cid:80)(cid:87)(cid:74)(cid:69)(cid:70)(cid:1)(cid:77)(cid:80)(cid:66)(cid:79)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:66)(cid:1)(cid:84)(cid:80)(cid:86)(cid:83)(cid:68)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)
(cid:74)(cid:79)(cid:68)(cid:80)(cid:78)(cid:70)(cid:1)(cid:71)(cid:80)(cid:83)(cid:835)(cid:78)(cid:80)(cid:83)(cid:70)(cid:1)(cid:85)(cid:73)(cid:66)(cid:79)(cid:1)(cid:23)(cid:22)(cid:17)(cid:1)(cid:46)(cid:70)(cid:89)(cid:74)(cid:68)(cid:66)(cid:79)(cid:1)(cid:71)(cid:66)(cid:83)(cid:78)(cid:70)(cid:83)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:74)(cid:83)(cid:1)(cid:71)(cid:66)(cid:78)(cid:74)(cid:77)(cid:74)(cid:70)(cid:84)(cid:15)
(cid:48)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:70)(cid:79)(cid:87)(cid:74)(cid:83)(cid:80)(cid:79)(cid:78)(cid:70)(cid:79)(cid:85)(cid:66)(cid:77)(cid:1)(cid:71)(cid:83)(cid:80)(cid:79)(cid:85)(cid:13)(cid:1)(cid:85)(cid:73)(cid:83)(cid:80)(cid:86)(cid:72)(cid:73)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:85)(cid:73)(cid:74)(cid:83)(cid:69)(cid:1)(cid:82)(cid:86)(cid:66)(cid:83)(cid:85)(cid:70)(cid:83)(cid:1)

of 2011, we achieved an average reduction in per-unit 
(cid:86)(cid:84)(cid:70)(cid:835)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:83)(cid:78)(cid:66)(cid:77)(cid:1)(cid:70)(cid:79)(cid:70)(cid:83)(cid:72)(cid:90)(cid:1)(cid:80)(cid:71)(cid:1)(cid:18)(cid:17)(cid:15)(cid:22)(cid:835)(cid:81)(cid:70)(cid:83)(cid:68)(cid:70)(cid:79)(cid:85)(cid:1)(cid:74)(cid:79)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:71)(cid:80)(cid:80)(cid:69)(cid:1)(cid:81)(cid:77)(cid:66)(cid:79)(cid:85)(cid:84)(cid:1)
and 27.6 percent in our beverage plants, against a 2006 
baseline, and we improved our overall water-use efficiency 
by 22.1 percent during the same time frame.1

(cid:42)(cid:79)(cid:1)(cid:53)(cid:66)(cid:77)(cid:70)(cid:79)(cid:85)(cid:1)(cid:52)(cid:86)(cid:84)(cid:85)(cid:66)(cid:74)(cid:79)(cid:66)(cid:67)(cid:74)(cid:77)(cid:74)(cid:85)(cid:90)(cid:13)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:19)(cid:17)(cid:266)(cid:266)(cid:1)(cid:48)(cid:83)(cid:72)(cid:66)(cid:79)(cid:74)(cid:91)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:66)(cid:77)(cid:1)(cid:41)(cid:70)(cid:66)(cid:77)(cid:85)(cid:73)(cid:1)
Survey of all PepsiCo associates globally found that we have 
maintained high levels of employee engagement as bench-
marked against historical survey data. The Survey also showed 
that PepsiCo has made progress in many key areas, including 
 work-life balance.

PepsiCo’s Corporate Sustainability Report, scheduled for release later  
this year, will provide a more in-depth look at our progress as we advance 
on our Performance with Purpose journey.

18

PepsiCo, Inc. 2011 Annual Report

Expand commercial 
production of 

heart-healthy

sunflower oil

Improved overall water-use 
efficiency by 22.1 percent1

+22.1%

Maintained high levels of

associate 
engagement

1  This data excludes major acquisitions and divestitures after the 2006 baseline year.

19

PepsiCo, Inc. 2011 Annual Report

The  
Power  
of  
PepsiCo

PepsiCo’s key to success is our ability to change 
with the times and build for the future. We not only 
see opportunities, we create them.

Powerhouse brands in growing categories, 
backed by strong global and local innovation and a 
 commitment to sustainable financial performance …  
this is the Power of PepsiCo.

20

PepsiCo, Inc. 2011 Annual Report

PepsiCo 
Board of Directors

Shown in the photo from left to right

Alberto Weisser
Chairman and  
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13) 
(cid:35)(cid:86)(cid:79)(cid:72)(cid:70)(cid:1)(cid:45)(cid:74)(cid:78)(cid:74)(cid:85)(cid:70)(cid:69) 
56. Elected 2011.

Shona L. Brown
Senior Vice President,  
Google.org of Google Inc. 
46. Elected 2009.

James J. Schiro
Former Chief Executive 
(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13) 
Zurich Financial Services 
66. Elected 2003.
Presiding Director

Ray L. Hunt
(cid:36)(cid:73)(cid:66)(cid:74)(cid:83)(cid:78)(cid:66)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:35)(cid:80)(cid:66)(cid:83)(cid:69)(cid:13)(cid:1) 
President and  
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1) 
Hunt Consolidated, Inc.  
68. Elected 1996.

Sharon Percy Rockefeller
President and  
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1) 
WETA Public Radio and 
Television Stations 
67. Elected 1986.

Daniel Vasella, M.D.
(cid:36)(cid:73)(cid:66)(cid:74)(cid:83)(cid:78)(cid:66)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:35)(cid:80)(cid:66)(cid:83)(cid:69)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1) 
Former Chief Executive 
(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1) 
Novartis AG 
58. Elected 2002.

Dina Dublon
Former Executive Vice 
President and  
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:39)(cid:74)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1) 
(cid:43)(cid:49)(cid:46)(cid:80)(cid:83)(cid:72)(cid:66)(cid:79)(cid:1)(cid:36)(cid:73)(cid:66)(cid:84)(cid:70)(cid:1)(cid:7)(cid:1)(cid:36)(cid:80)(cid:15)(cid:1) 
58. Elected 2005.

Ian M. Cook
(cid:36)(cid:73)(cid:66)(cid:74)(cid:83)(cid:78)(cid:66)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:35)(cid:80)(cid:66)(cid:83)(cid:69)(cid:13)(cid:1) 
President and  
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1) 
Colgate-Palmolive Company 
59. Elected 2008.

Arthur C. Martinez
Former Chairman of the 
(cid:35)(cid:80)(cid:66)(cid:83)(cid:69)(cid:13)(cid:1)(cid:49)(cid:83)(cid:70)(cid:84)(cid:74)(cid:69)(cid:70)(cid:79)(cid:85)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1) 
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1) 
Sears, Roebuck and Co. 
72. Elected 1999.

Indra K. Nooyi
(cid:36)(cid:73)(cid:66)(cid:74)(cid:83)(cid:78)(cid:66)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:35)(cid:80)(cid:66)(cid:83)(cid:69)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1) 
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1) 
PepsiCo, Inc. 
56. Elected 2001.

Lloyd G. Trotter
(cid:46)(cid:66)(cid:79)(cid:66)(cid:72)(cid:74)(cid:79)(cid:72)(cid:1)(cid:49)(cid:66)(cid:83)(cid:85)(cid:79)(cid:70)(cid:83)(cid:13)(cid:1) 
(cid:40)(cid:70)(cid:79)(cid:47)(cid:89)(cid:20)(cid:23)(cid:17)(cid:1)(cid:36)(cid:66)(cid:81)(cid:74)(cid:85)(cid:66)(cid:77)(cid:1)(cid:49)(cid:66)(cid:83)(cid:85)(cid:79)(cid:70)(cid:83)(cid:84) 
66. Elected 2008.

Victor J. Dzau, M.D.
Chancellor for Health Affairs,  
Duke University; 
President and  
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1) 
Duke University Health 
System 
66. Elected 2005.

Alberto Ibargüen
President and  
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1) 
John S. and James L. Knight 
Foundation 
68. Elected 2005.

21

PepsiCo, Inc. 2011 Annual Report

PepsiCo
Leadership

PepsiCo Executive Officers1

Zein Abdalla
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1)
PepsiCo Europe

Brian C. Cornell
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1)
PepsiCo Americas Foods

Saad Abdul-Latif
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1)
(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)(cid:34)(cid:84)(cid:74)(cid:66)(cid:13)(cid:1)(cid:46)(cid:74)(cid:69)(cid:69)(cid:77)(cid:70)(cid:1) 
(cid:38)(cid:66)(cid:84)(cid:85)(cid:1)(cid:7)(cid:1)(cid:34)(cid:71)(cid:83)(cid:74)(cid:68)(cid:66)

Marie T. Gallagher
Senior Vice President 
and Controller

Albert P. Carey
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1)
(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)(cid:34)(cid:78)(cid:70)(cid:83)(cid:74)(cid:68)(cid:66)(cid:84)(cid:1)(cid:35)(cid:70)(cid:87)(cid:70)(cid:83)(cid:66)(cid:72)(cid:70)(cid:84)

Thomas R. Greco
Executive Vice President, 
PepsiCo; President, Frito-Lay 
North America

John C. Compton
President, PepsiCo

Enderson Guimaraes
Executive Vice President, 
PepsiCo; President, 
(cid:40)(cid:77)(cid:80)(cid:67)(cid:66)(cid:77)(cid:1)(cid:48)(cid:81)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)

Hugh F. Johnston
Executive Vice President, 
PepsiCo Chief Financial 
(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)

Mehmood Khan
Executive Vice President, 
PepsiCo Chief Scientific 
(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:13)(cid:1)(cid:40)(cid:77)(cid:80)(cid:67)(cid:66)(cid:77)(cid:1)(cid:51)(cid:70)(cid:84)(cid:70)(cid:66)(cid:83)(cid:68)(cid:73)(cid:1)
and Development

Indra K. Nooyi
(cid:36)(cid:73)(cid:66)(cid:74)(cid:83)(cid:78)(cid:66)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:35)(cid:80)(cid:66)(cid:83)(cid:69)(cid:1)
and PepsiCo Chief 
(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)

Maura Abeln Smith
Executive Vice President, 
PepsiCo General 
(cid:36)(cid:80)(cid:86)(cid:79)(cid:84)(cid:70)(cid:77)(cid:13)(cid:1)(cid:49)(cid:86)(cid:67)(cid:77)(cid:74)(cid:68)(cid:1)(cid:49)(cid:80)(cid:77)(cid:74)(cid:68)(cid:90)(cid:1)(cid:7)(cid:1)
Government Affairs, and 
Corporate Secretary

Cynthia M. Trudell
Executive Vice President, 
PepsiCo Chief Human 
(cid:51)(cid:70)(cid:84)(cid:80)(cid:86)(cid:83)(cid:68)(cid:70)(cid:84)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)

Shown in the photo from left to right: 
(cid:41)(cid:86)(cid:72)(cid:73)(cid:1)(cid:39)(cid:15)(cid:1)(cid:43)(cid:80)(cid:73)(cid:79)(cid:84)(cid:85)(cid:80)(cid:79)(cid:13)(cid:1)(cid:35)(cid:83)(cid:74)(cid:66)(cid:79)(cid:1)(cid:36)(cid:15)(cid:1)(cid:36)(cid:80)(cid:83)(cid:79)(cid:70)(cid:77)(cid:77)(cid:13)(cid:1)(cid:1)
(cid:46)(cid:66)(cid:86)(cid:83)(cid:66)(cid:1)(cid:34)(cid:67)(cid:70)(cid:77)(cid:79)(cid:1)(cid:52)(cid:78)(cid:74)(cid:85)(cid:73)(cid:13)(cid:1)(cid:59)(cid:70)(cid:74)(cid:79)(cid:1)(cid:34)(cid:67)(cid:69)(cid:66)(cid:77)(cid:77)(cid:66)(cid:13)(cid:1)
Indra K. Nooyi, Saad Abdul-Latif, 
(cid:46)(cid:70)(cid:73)(cid:78)(cid:80)(cid:80)(cid:69)(cid:1)(cid:44)(cid:73)(cid:66)(cid:79)(cid:13)(cid:1)(cid:34)(cid:77)(cid:67)(cid:70)(cid:83)(cid:85)(cid:1)(cid:49)(cid:15)(cid:1)(cid:36)(cid:66)(cid:83)(cid:70)(cid:90)(cid:13)(cid:1)
(cid:36)(cid:90)(cid:79)(cid:85)(cid:73)(cid:74)(cid:66)(cid:1)(cid:46)(cid:15)(cid:1)(cid:53)(cid:83)(cid:86)(cid:69)(cid:70)(cid:77)(cid:77)(cid:13)(cid:1)(cid:43)(cid:80)(cid:73)(cid:79)(cid:835)(cid:36)(cid:15)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:85)(cid:80)(cid:79)

1(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:83)(cid:84)(cid:1)(cid:84)(cid:86)(cid:67)(cid:75)(cid:70)(cid:68)(cid:85)(cid:1)(cid:85)(cid:80)(cid:1)(cid:52)(cid:70)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:18)(cid:23)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:52)(cid:70)(cid:68)(cid:86)(cid:83)(cid:74)(cid:85)(cid:74)(cid:70)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:38)(cid:89)(cid:68)(cid:73)(cid:66)(cid:79)(cid:72)(cid:70)(cid:1)(cid:34)(cid:68)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:18)(cid:26)(cid:20)(cid:21)(cid:1)(cid:66)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:46)(cid:66)(cid:83)(cid:68)(cid:73)(cid:1)(cid:26)(cid:13)(cid:1)(cid:19)(cid:17)(cid:18)(cid:19)(cid:15)

22

PepsiCo, Inc. 2011 Annual Report

Financials

Management’s Discussion and Analysis
Our Business
Executive Overview 
Our Operations 
Our Customers 
Our Distribution Network 
Our Competition 
Other Relationships 
Our Business Risks 

Our Critical Accounting Policies
Revenue Recognition 
Goodwill and Other Intangible Assets 
Income Tax Expense and Accruals 
Pension and Retiree Medical Plans 

Our Financial Results
Items Affecting Comparability 
Results of Operations —  Consolidated Review 
Results of Operations —  Division Review 
  Frito- Lay North America 
  Quaker Foods North America 
  Latin America Foods 
  PepsiCo Americas Beverages 
  Europe 
  Asia, Middle East & Africa 
Our Liquidity and Capital Resources 

Consolidated Statement of Income 

Consolidated Statement of Cash Flows 

Consolidated Balance Sheet 

Consolidated Statement of Equity 

Notes to Consolidated Financial Statements
Note 1   Basis of Presentation and Our Divisions 
Note 2   Our Significant Accounting Policies 
Note 3   Restructuring, Impairment and  

Integration Charges 

Note 4   Property, Plant and Equipment and  

Intangible Assets 

Note 5   Income Taxes 
Note 6   Stock- Based Compensation 
Note 7   Pension, Retiree Medical and Savings Plans 
Note 8    Related Party Transactions 
Note 9   Debt Obligations and Commitments 
Note 10   Financial Instruments 
Note 11   Net Income Attributable to PepsiCo per 

Common Share 
Note 12    Preferred Stock 
Note 13   Accumulated Other Comprehensive Loss 

Attributable to PepsiCo 

Note 14   Supplemental Financial Information 
Note 15   Acquisitions 

Management’s Responsibility for  
Financial Reporting 

Management’s Report on Internal Control  
Over Financial Reporting 

Report of Independent Registered Public  
Accounting Firm 

Selected Financial Data 

Reconciliation of GAAP and Non- GAAP  
Information 

Glossary 

24
25
26
26
27
27
27

35
35
36
37

38
40
42
43
43
44
45
46
47
47

50

51

53

54

56
59

61

62
64
65
66
71
72
73

75
76

76
76
77

79

80

81

82

84

87

Management’s Discussion and Analysis

Our discussion and analysis is an integral part of our consolidated 
 financial statements and is provided as an addition to, and should 
be read in connection with, our consolidated financial statements 
and the accompanying notes. Definitions of key terms can be found 
in the glossary on page 87. Tabular dollars are presented in millions, 
except per share amounts. All per share amounts reflect common 
per share amounts, assume dilution unless otherwise noted, and are 
based on unrounded amounts. Percentage changes are based on 
unrounded amounts.

Our first imperative is to build and extend our macrosnacks 

portfolio globally.
PepsiCo is the undisputed leader in macrosnacks around the world. 
We will work to grow our core salty snack brands —  Lay’s, Doritos, 
Cheetos and SunChips —  while continuing to expand into adja-
cent categories like whole grain-based snacks. We will continue 
to create new flavors in tune with local tastes and leverage our 
go-to-market expertise to ensure our products are easily accessible 
in  consumers’ lives.

Our Business

Executive Overview
We are a leading global food and beverage company with 
 hundreds of brands that are respected household names 
throughout the world. Either independently or through contract 
manufacturers or authorized bottlers, we make, market, sell and 
 distribute a variety of convenient and enjoyable foods and bever-
ages in more than 200 countries and territories.

We continue to be guided by Performance with Purpose —  our 
belief that what is good for business can and should be good for 
society. Our commitment to deliver sustainable growth by investing 
in a healthier future for people and our planet is as much of a finan-
cial decision as it is an ethical one. In 2011, PepsiCo earned a place 
on the prestigious Dow Jones Sustainability World Index for the fifth 
consecutive year, the North America Index for the sixth consecutive 
year and was ranked as the number one company in the index’s 
Food and Beverage Supersector.

Our management monitors a variety of key indicators to evalu-
ate our business results and financial condition. These indicators 
include market share, volume, net revenue, operating profit, man-
agement operating cash flow, earnings per share and return on 
invested capital.

Strategies to Drive Our Growth into the Future
We made important strides in 2011. In 2012, our journey continues. 
We are pursuing specific strategic investment and productivity ini-
tiatives to build a stronger, more successful company. This includes 
an increased investment in our iconic, global brands, bringing 
innovation to market and increasing our advertising and marketing 
spending by approximately $500–$600 million in 2012, the majority 
in North America. In addition, we have begun to implement a multi- 
year productivity program that we believe will further strengthen 
our complementary food and beverage businesses. These initiatives 
support our five strategic imperatives on which we continue to 
be focused.

Our second imperative is to sustainably and profitably grow our 

beverage business worldwide.
Our beverage business remains large and highly profitable, account-
ing for approximately 52 percent of our net revenues in 2011. Our 
goal is to grow our developed market beverage business while 
building on promising gains in emerging and developing markets. 
We intend to continue to invest in and strengthen our most power-
ful and iconic beverage brands —  Pepsi, Mountain Dew, Sierra Mist, 
7UP (outside of the U.S.), Gatorade, Tropicana, Mirinda and Lipton 
(through our joint venture with Unilever).

Our third imperative is to build and expand our nutrition business.
Today, PepsiCo has three of the top brands in the category —  
Quaker, Tropicana and Gatorade —  in a global market for health and 
wellness in consumer packaged goods that exceeds $500 billion, 
driven by strong demographic and consumer trends. Building from 
our core brands, we believe that we are well-positioned to grow our 
global nutrition portfolio.

Our fourth imperative is to increase and capitalize on the already 

high coincidence of snack and beverage consumption.
Snacks and beverages are complementary categories. When people 
reach for a salty snack, about 30 percent of the time, they reach for 
a carbonated beverage. Our ability to use that combined power 
goes beyond marketing —  to innovation, production, distribution 
and brand management. We intend to increasingly capitalize on 
our cross-category presence to grow our positions in both snacks 
and beverages.

Our fifth imperative is to ensure prudent and responsible 

financial management.
Prudent financial management has always been a hallmark of 
PepsiCo. In 2012, we are bringing renewed focus to value  creation in 
everything we do. We intend to continue to deliver attractive cash 
returns for shareholders by scrutinizing every capital expenditure, 
expense and working capital investment.

24

PepsiCo, Inc. 2011 Annual Report

Our Operations
We are organized into four business units, as follows:
1)  PepsiCo Americas Foods (PAF), which includes Frito- Lay North 
America (FLNA), Quaker Foods North America (QFNA) and all of 
our Latin American food and snack businesses (LAF);

2)  PepsiCo Americas Beverages (PAB), which includes all of our 
North American and Latin American beverage businesses;
3)  PepsiCo Europe, which includes all beverage, food and snack 

 businesses in Europe; and

4)  PepsiCo Asia, Middle East and Africa (AMEA), which includes all 

beverage, food and snack businesses in AMEA.

Our four business units are comprised of six reportable segments 

(referred to as divisions), as follows:
(cid:116)(cid:1) (cid:39)(cid:45)(cid:47)(cid:34)(cid:13)
(cid:116)(cid:1) (cid:50)(cid:39)(cid:47)(cid:34)(cid:13)
(cid:116)(cid:1) (cid:45)(cid:34)(cid:39)(cid:13)
(cid:116)(cid:1) (cid:49)(cid:34)(cid:35)(cid:13)
(cid:116)(cid:1) (cid:38)(cid:86)(cid:83)(cid:80)(cid:81)(cid:70)(cid:13)(cid:1)(cid:66)(cid:79)(cid:69)
(cid:116)(cid:1) (cid:34)(cid:46)(cid:38)(cid:34)(cid:15)

Frito- Lay North America
Either independently or through contract manufacturers, FLNA 
makes, markets, sells and distributes branded snack foods. These 
foods include Lay’s potato chips, Doritos tortilla chips, Cheetos 
cheese flavored snacks, Tostitos tortilla chips, branded dips, Ruffles 
potato chips, Fritos corn chips, SunChips multigrain snacks and 
Santitas tortilla chips. FLNA branded products are sold to indepen-
dent distributors and retailers. In addition, FLNA’s joint venture with 
Strauss Group makes, markets, sells and distributes Sabra refriger-
ated dips and spreads.

Quaker Foods North America
Either independently or through contract manufacturers, QFNA 
makes, markets, sells and distributes cereals, rice, pasta and other 
branded products. QFNA’s products include Quaker oatmeal, Aunt 
Jemima mixes and syrups, Quaker Chewy granola bars, Quaker grits, 
Cap’n Crunch cereal, Life cereal, Rice- A-Roni side dishes, Quaker rice 
cakes, Pasta Roni and Near East side dishes. These branded products 
are sold to independent distributors and retailers.

Management’s Discussion and Analysis

Latin America Foods
Either independently or through contract manufacturers, LAF 
makes, markets, sells and distributes a number of snack food brands 
including Marias Gamesa, Doritos, Cheetos, Ruffles, Saladitas, 
Emperador, Tostitos and Sabritas, as well as many Quaker- brand 
cereals and snacks. These branded products are sold to indepen-
dent distributors and retailers.

PepsiCo Americas Beverages
Either independently or through contract manufacturers, PAB 
makes, markets, sells and distributes beverage concentrates, foun-
tain syrups and finished goods, under various beverage brands 
including Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, 7UP 
(outside the U.S.), Diet Mountain Dew, Tropicana Pure Premium, 
Sierra Mist and Mirinda. PAB also, either independently or through 
contract manufacturers, makes, markets and sells ready- to-drink 
tea, coffee and water products through joint ventures with Unilever 
(under the Lipton brand name) and Starbucks. In addition, PAB 
licenses the Aquafina water brand to its independent bottlers. 
Furthermore, PAB manufactures and distributes certain brands 
licensed from Dr Pepper Snapple Group, Inc. (DPSG), including 
Dr Pepper and Crush. PAB operates its own bottling plants and 
distribution facilities. PAB also sells concentrate and finished goods 
for our brands to authorized bottlers, and some of these branded 
finished goods are sold directly by us to independent distributors 
and retailers. We and the independent bottlers sell our brands as 
finished goods to independent distributors and retailers.

PAB’s volume reflects sales to its independent distributors and 
retailers, as well as the sales of beverages bearing our trademarks 
that bottlers have reported as sold to independent distributors and 
retailers. Bottler case sales (BCS) and concentrate shipments and 
equivalents (CSE) are not necessarily equal during any given period 
due to seasonality, timing of product launches, product mix,  bottler 
inventory practices and other factors. However, the difference 
between BCS and CSE measures has been greatly reduced since 
our acquisitions of our anchor bottlers, The Pepsi Bottling Group, 
Inc. (PBG) and PepsiAmericas, Inc. (PAS), on February 26, 2010, as 
we now consolidate these bottlers and thus eliminate the impact 
of differences between BCS and CSE for a substantial majority of 
PAB’s total volume. While our revenues are not entirely based 
on BCS volume, as there continue to be independent bottlers in 
the supply chain, we believe that BCS is a valuable measure as it 
 quantifies the sell-through of our products at the consumer level.

See Note 15 for additional information about our acquisitions of 

PBG and PAS in 2010.

25

PepsiCo, Inc. 2011 Annual Report

Management’s Discussion and Analysis

Europe
Either independently or through contract manufacturers, Europe 
makes, markets, sells and distributes a number of leading snack 
foods including Lay’s, Walkers, Doritos, Chudo, Cheetos and Ruffles, 
as well as many Quaker- brand cereals and snacks, through con-
solidated businesses as well as through noncontrolled affiliates. 
Europe also, either independently or through contract manufactur-
ers, makes, markets, sells and distributes beverage concentrates, 
fountain syrups and finished goods under various beverage brands 
including Pepsi, Pepsi Max, 7UP, Diet Pepsi and Tropicana. These 
branded products are sold to authorized bottlers, independent 
distributors and retailers. In certain markets, however, Europe oper-
ates its own bottling plants and distribution facilities. In addition, 
Europe licenses the Aquafina water brand to certain of its authorized 
bottlers and markets this brand. Europe also, either independently 
or through contract manufacturers, makes, markets and sells ready- 
to-drink tea products through an international joint venture with 
Unilever (under the Lipton brand name).

Europe reports two measures of volume. Snacks volume is 
reported on a system- wide basis, which includes our own sales  
and the sales by our noncontrolled affiliates of snacks bearing  
Company- owned or licensed trademarks. Beverage volume 
reflects Company- owned or authorized bottler sales of beverages 
bearing Company- owned or licensed trademarks to independent 
distributors and retailers (see PepsiCo Americas Beverages above). 
In 2011, we acquired Wimm- Bill-Dann Foods OJSC (WBD), Russia’s 
leading branded food and beverage company. WBD’s portfolio of 
products is included within Europe’s snacks or beverage reporting, 
depending on product type.

See Note 15 for additional information about our acquisition of 

WBD in 2011.

Asia, Middle East & Africa
Either independently or through contract manufacturers, AMEA 
makes, markets, sells and distributes a number of leading snack 
food brands including Lay’s, Chipsy, Kurkure, Doritos, Cheetos and 
Smith’s through consolidated businesses as well as through noncon-
trolled affiliates. Further, either independently or through contract 
manufacturers, AMEA makes, markets and sells many Quaker- brand 
cereals and snacks. AMEA also makes, markets, sells and distributes 
beverage concentrates, fountain syrups and finished goods, under 
various beverage brands including Pepsi, Mirinda, 7UP, Mountain 
Dew, Aquafina and Tropicana. These branded products are sold 
to authorized bottlers, independent distributors and retailers. 
However, in certain markets, AMEA operates its own bottling plants 
and distribution facilities. In addition, AMEA licenses the Aquafina 
water brand to certain of its authorized bottlers. AMEA also, either 
independently or through contract manufacturers, makes, markets 
and sells ready- to-drink tea products through an international joint 
venture with Unilever (under the Lipton brand name). AMEA reports 
two measures of volume (see Europe above).

Our Customers
Our primary customers include wholesale distributors, grocery 
stores, convenience stores, mass merchandisers, membership stores,  
authorized independent bottlers and foodservice distributors, 
including hotels and restaurants. We normally grant our indepen-
dent bottlers exclusive contracts to sell and manufacture certain 
beverage products bearing our trademarks within a specific 
 geographic area. These arrangements provide us with the right 
to charge our independent bottlers for concentrate, finished goods 
and Aquafina royalties and specify the manufacturing process 
required for product quality.

Since we do not sell directly to the consumer, we rely on and 
 provide financial incentives to our customers to assist in the dis-
tribution and promotion of our products. For our independent 
distributors and retailers, these incentives include volume- based 
rebates, product placement fees, promotions and displays. For our 
independent bottlers, these incentives are referred to as bottler 
funding and are negotiated annually with each bottler to support a 
variety of trade and consumer programs, such as consumer incen-
tives, advertising support, new product support, and vending and 
cooler equipment placement. Consumer incentives include cou-
pons, pricing discounts and promotions, and other promotional 
offers. Advertising support is directed at advertising programs 
and supporting independent bottler media. New product sup-
port includes targeted consumer and retailer incentives and direct 
marketplace support, such as point- of-purchase materials, product 
placement fees, media and advertising. Vending and cooler equip-
ment placement programs support the acquisition and placement 
of vending machines and cooler equipment. The nature and type of 
programs vary annually.

In 2011, sales to Wal- Mart (including Sam’s) represented approxi-

mately 11% of our total net revenue. Our top five retail customers 
represented approximately 30% of our 2011 North American net rev-
enue, with Wal- Mart (including Sam’s) representing approximately 
18%. These percentages include concentrate sales to our indepen-
dent bottlers which were used in finished goods sold by them to 
these retailers.

Our Distribution Network
Our products are brought to market through direct- store-delivery 
(DSD), customer warehouse and foodservice and vending distribu-
tion networks. The distribution system used depends on customer 
needs, product characteristics and local trade practices.

Direct- Store-Delivery
We, our independent bottlers and our distributors operate DSD 
systems that deliver snacks and beverages directly to retail stores 
where the products are merchandised by our employees or our bot-
tlers. DSD enables us to merchandise with maximum visibility and 
appeal. DSD is especially well- suited to products that are restocked 
often and respond to in- store promotion and merchandising.

26

PepsiCo, Inc. 2011 Annual Report

Customer Warehouse
Some of our products are delivered from our manufacturing plants 
and warehouses to customer warehouses and retail stores. These 
less costly systems generally work best for products that are less 
fragile and perishable, have lower turnover, and are less likely to be 
impulse purchases.

Foodservice and Vending
Our foodservice and vending sales force distributes snacks, foods 
and beverages to third- party foodservice and vending distribu-
tors and operators. Our foodservice and vending sales force also 
distributes certain beverages through our independent bottlers. 
This distribution system supplies our products to restaurants, 
 businesses, schools, stadiums and similar locations.

Our Competition
Our businesses operate in highly competitive markets. Our bever-
age, snack and food brands compete against global, regional, local 
and private label manufacturers and other value competitors.

In U.S. measured channels, our chief beverage competitor, The 
Coca- Cola Company, has a larger share of carbonated soft drinks 
(CSD) consumption, while we have a larger share of liquid refresh-
ment beverages consumption. In addition, The Coca- Cola Company 
has a significant CSD share advantage in many markets outside the 
United States.

Our snack and food brands hold significant leadership positions 

in the snack and food industry worldwide.

Our beverage, snack and food brands compete on the basis 
of price, quality, product variety and distribution. Success in this 
competitive environment is dependent on effective promotion of 
existing products, the introduction of new products and the effec-
tiveness of our advertising campaigns, marketing programs, product 
packaging, pricing, increased efficiency in production techniques 
and brand and trademark development and protection. We believe 
that the strength of our brands, innovation and marketing, coupled 
with the quality of our products and flexibility of our distribution 
network, allows us to compete effectively.

Other Relationships
Certain members of our Board of Directors also serve on the 
boards of certain vendors and customers. Those Board members 
do not participate in our vendor selection and negotiations nor in 
our customer negotiations. Our transactions with these vendors and 
customers are in the normal course of business and are consistent 
with terms negotiated with other vendors and customers. In addi-
tion, certain of our employees serve on the boards of Pepsi Bottling 
Ventures LLC and other affiliated companies of PepsiCo and do not 
receive incremental compensation for their Board services.

Management’s Discussion and Analysis

Our Business Risks

Forward- Looking Statements
This Annual Report contains statements reflecting our views about our 
future performance that constitute “forward- looking statements” within 
the meaning of the Private Securities Litigation Reform Act of 1995 (the 
“Reform Act”). Statements that constitute forward- looking statements 
within the meaning of the Reform Act are generally identified through 
the inclusion of words such as “believe,” “expect,” “intend,” “estimate,” 
“project,” “anticipate,” “will” and variations of such words and other 
similar expressions. All statements addressing our future operating per-
formance, and statements addressing events and developments that we 
expect or anticipate will occur in the future, are forward- looking state-
ments within the meaning of the Reform Act. These forward- looking 
statements are based on currently available information, operating 
plans and projections about future events and trends. They inherently 
involve risks and uncertainties that could cause actual results to differ 
materially from those predicted in any such forward- looking state-
ments. Investors are cautioned not to place undue reliance on any such 
forward- looking statements, which speak only as of the date they are 
made. We undertake no obligation to update any forward- looking 
statement, whether as a result of new information, future events or 
otherwise. The discussion of risks below and elsewhere in this report is by 
no means all inclusive but is designed to highlight what we believe are 
important factors to consider when evaluating our future performance.

Demand for our products may be adversely affected by changes in 

consumer preferences and tastes or if we are unable to innovate or 

market our products effectively.
We are a consumer products company operating in highly competi-
tive categories and rely on continued demand for our products. To 
generate revenues and profits, we must sell products that appeal 
to our customers and to consumers. Any significant changes in con-
sumer preferences or any inability on our part to anticipate or react 
to such changes could result in reduced demand for our products 
and erosion of our competitive and financial position. Our success 
depends on: our ability to anticipate and respond to shifts in con-
sumer trends, including increased demand for products that meet 
the needs of consumers who are increasingly concerned with health 
and wellness; our product quality; our ability to extend our portfolio 
of convenient foods in growing markets; our ability to develop new 
products that are responsive to consumer preferences, including 
our “fun- for-you”, “good- for-you” and “better- for-you” products; and 
our ability to respond to competitive product and pricing pressures. 
For example, our growth rate may be adversely affected if we are 
unable to maintain or grow our current share of the liquid refresh-
ment beverage market in North America, or our current share of the 
snack market globally, or if demand for our products does not grow 
in emerging and developing markets.

In general, changes in product category consumption or con-

sumer demographics could result in reduced demand for our 
products. Consumer preferences may shift due to a variety of 
factors, including the aging of the general population; consumer 
concerns regarding the health effects of ingredients such as sodium, 

27

PepsiCo, Inc. 2011 Annual Report

Management’s Discussion and Analysis

sugar or other product ingredients or attributes; changes in social 
trends that impact travel, vacation or leisure activity patterns; 
changes in weather patterns or seasonal consumption cycles; nega-
tive publicity (whether or not valid) resulting from regulatory action 
or litigation against us or other companies in our industry; a down-
turn in economic conditions; or taxes that would increase the cost of 
our products to consumers. Any of these changes may reduce con-
sumers’ willingness to purchase our products. See also “Our financial 
performance could suffer if we are unable to compete effectively.”, 
“Unfavorable economic conditions may have an adverse impact 
on our business results or financial condition.”, “Any damage to our 
reputation could have a material adverse effect on our business, 
financial condition and results of operations.” and “Changes in the 
legal and regulatory environment could limit our business activities, 
increase our operating costs, reduce demand for our products or 
result in litigation.”

Our continued success is also dependent on our product innova-
tion, including maintaining a robust pipeline of new products and 
improving the quality of existing products, and the effectiveness 
of our product packaging, advertising campaigns and marketing 
programs, including our ability to successfully adapt to a rapidly 
changing media environment, such as through use of social media 
and online advertising campaigns and marketing programs. 
Although we devote significant resources to the actions mentioned 
above, there can be no assurance as to our continued ability to 
develop and launch successful new products or variants of existing 
products or to effectively execute advertising campaigns and mar-
keting programs. In addition, both the launch and ongoing success 
of new products and advertising campaigns are inherently uncer-
tain, especially as to their appeal to consumers. Our failure to make 
the right strategic investments to drive innovation or successfully 
launch new products or variants of existing products could decrease 
demand for our existing products by negatively affecting consumer 
perception of existing brands, as well as result in inventory write- offs 
and other costs.

Our financial performance could suffer if we are unable to 

compete effectively.
The food, snack and beverage industries in which we operate are 
highly competitive. We compete with major international food, 
snack and beverage companies that, like us, operate in multiple 
geographic areas, as well as regional, local and private label manu-
facturers and other value competitors. In many countries where we 
do business, including the United States, The Coca- Cola Company 
is our primary beverage competitor. We also compete with other 
large companies in each of the food, snack and beverage categories, 
including Nestlé S.A., Kraft Foods Inc. and Dr Pepper Snapple Group, 
Inc. We compete on the basis of brand recognition, taste, price, qual-
ity, product variety, distribution, marketing and promotional activity, 
convenience, service and the ability to identify and satisfy consumer 
preferences. If we are unable to compete effectively, we may be 
unable to grow or maintain sales or gross margins in the global 
market or in various local markets. This may have a material adverse 
impact on our revenues and profit margins. See also “Unfavorable 

economic conditions may have an adverse impact on our business 
results or financial condition.”

Unfavorable economic conditions may have an adverse impact  

on our business results or financial condition.
Many of the countries in which we operate, including the United 
States and several of the members of the European Union, have 
experienced and continue to experience unfavorable economic 
conditions. Our business or financial results may be adversely 
impacted by these unfavorable economic conditions, including: 
adverse changes in interest rates, tax laws or tax rates; volatile com-
modity markets and inflation; contraction in the availability of credit 
in the marketplace, potentially impairing our ability to access the 
capital markets on terms commercially acceptable to us or at all; the 
effects of government initiatives to manage economic conditions; 
reduced demand for our products resulting from a slow- down in 
the general global economy or a shift in consumer preferences for 
economic reasons or otherwise to regional, local or private label 
products or other economy products, or to less profitable chan-
nels; impairment of assets; or a decrease in the fair value of pension 
assets that could increase future employee benefit costs and/or 
funding requirements of our pension plans. In addition, we cannot 
predict how current or worsening economic conditions will affect 
our critical customers, suppliers and distributors and any negative 
impact on our critical customers, suppliers or distributors may also 
have an adverse impact on our business results or financial condi-
tion. In addition, some of the major financial institutions with which 
we execute transactions, including U.S. and non- U.S. commercial 
banks, insurance companies, investment banks, and other financial 
institutions, may be exposed to a ratings downgrade, bankruptcy, 
liquidity, default or similar risks as a result of unfavorable economic 
conditions. A ratings downgrade, bankruptcy, receivership, default 
or similar event involving a major financial institution may limit 
the availability of credit or willingness of financial institutions to 
extend credit on terms commercially acceptable to us or at all or, 
with respect to financial institutions who are parties to our financ-
ing arrangements, leave us with reduced borrowing capacity or 
unhedged against certain currencies or price risk associated with 
forecasted purchases of raw materials which could have an adverse 
impact on our business results or financial condition.

Any damage to our reputation could have a material adverse effect  

on our business, financial condition and results of operations.
Maintaining a good reputation globally is critical to selling our 
branded products. Product contamination or tampering, the 
failure to maintain high standards for product quality, safety and 
integrity, including with respect to raw materials and ingredients 
obtained from suppliers, or allegations of product quality issues, 
mislabeling or contamination, even if untrue, may reduce demand 
for our products or cause production and delivery disruptions. If 
any of our products becomes unfit for consumption, causes injury 
or is mislabeled, we may have to engage in a product recall and/or 
be subject to liability. A widespread product recall or a significant 
product liability issue could cause our products to be unavailable 

28

PepsiCo, Inc. 2011 Annual Report

for a period of time, which could further reduce consumer demand 
and brand equity. Our reputation could also be adversely impacted 
by any of the following, or by adverse publicity (whether or not 
valid) relating thereto: the failure to maintain high ethical, social and 
environmental standards for all of our operations and activities; the 
failure to achieve our goals with respect to sodium, saturated fat and 
added sugar reduction or the development of our global nutrition 
business; our research and development efforts; our environmental 
impact, including use of agricultural materials, packaging, energy 
use and waste management; or our responses to any of the fore-
going. In addition, water is a limited resource in many parts of the 
world and demand for water continues to increase. Our reputation 
could be damaged if we or others in our industry do not act, or are 
perceived not to act, responsibly with respect to water use. Failure 
to comply with local laws and regulations, to maintain an effec-
tive system of internal controls or to provide accurate and timely 
financial information could also hurt our reputation. Damage to our 
reputation or loss of consumer confidence in our products for any 
of these or other reasons could result in decreased demand for our 
products and could have a material adverse effect on our business, 
financial condition and results of operations, as well as require addi-
tional resources to rebuild our reputation.

Our financial performance could be adversely affected if we are unable 

to grow our business in developing and emerging markets or as a result 

of unstable political conditions, civil unrest or other developments and 

risks in the markets where our products are sold.
Our operations outside of the United States, particularly in Russia, 
Mexico, Canada and the United Kingdom, contribute significantly 
to our revenue and profitability, and we believe that our businesses 
in developing and emerging markets, particularly China and India, 
present important future growth opportunities for us. However, 
there can be no assurance that our existing products, variants of 
our existing products or new products that we make, manufac-
ture, market or sell will be accepted or successful in any particular 
developing or emerging market, due to local competition, product 
price, cultural differences or otherwise. If we are unable to expand 
our businesses in developing and emerging markets, or achieve 
the return on capital we expect as a result of our investments, 
particularly in Russia, as a result of economic and political condi-
tions, increased competition, reduced demand for our products, an 
inability to acquire or form strategic business alliances or to make 
necessary infrastructure investments or for any other reason, our 
financial performance could be adversely affected. Unstable politi-
cal conditions, civil unrest or other developments and risks in the 
markets where our products are sold, including in Russia, the Middle 
East and Egypt, could also have an adverse impact on our business 
results or financial condition. Factors that could adversely affect our 
business results in these markets include: foreign ownership restric-
tions; nationalization of our assets; regulations on the transfer of 
funds to and from foreign countries, which, from time to time, result 
in significant cash balances in foreign countries such as Venezuela, 
and on the repatriation of funds; currency hyperinflation or devalu-
ation; the lack of well- established or reliable legal systems; and 

Management’s Discussion and Analysis

increased costs of business due to compliance with complex foreign 
and United States laws and regulations that apply to our interna-
tional operations, including the Foreign Corrupt Practices Act and 
the UK Bribery Act, and adverse consequences, such as the assess-
ment of fines or penalties, for failing to comply with these laws and 
regulations. In addition, disruption in these markets due to political 
instability or civil unrest could result in a decline in consumer pur-
chasing power, thereby reducing demand for our products. See also 
“Demand for our products may be adversely affected by changes in 
consumer preferences and tastes or if we are unable to innovate or 
market our products effectively.”, “Our financial performance could 
suffer if we are unable to compete effectively.”, “Changes in the 
legal and regulatory environment could limit our business activities, 
increase our operating costs, reduce demand for our products or 
result in litigation.” and “Disruption of our supply chain could have 
an adverse impact on our business, financial condition and results 
of operations.”

Trade consolidation or the loss of any key customer could adversely 

affect our financial performance.
We must maintain mutually beneficial relationships with our key 
customers, including Wal- Mart, as well as other retailers, to effec-
tively compete. The loss of any of our key customers, including 
Wal- Mart, could have an adverse effect on our financial perfor-
mance. In addition, in the event that retail ownership becomes more 
concentrated, retailers may demand lower pricing and increased 
promotional programs. Further, should larger retailers increase uti-
lization of their own distribution networks and private label brands, 
the competitive advantages we derive from our go- to-market 
systems and brand equity may be eroded. Failure to appropriately 
respond to any such actions or to offer effective sales incentives and 
marketing programs to our customers could reduce our ability to 
secure adequate shelf space at our retailers and adversely affect our 
financial performance.

Changes in the legal and regulatory environment could limit our 

business activities, increase our operating costs, reduce demand for 

our products or result in litigation.
The conduct of our businesses, including the production, distribu-
tion, sale, advertising, marketing, labeling, safety, transportation 
and use of many of our products, are subject to various laws and 
regulations administered by federal, state and local governmental 
agencies in the United States, as well as to laws and regulations 
administered by government entities and agencies outside the 
United States in markets in which our products are made, manufac-
tured or sold, including in emerging and developing markets where 
legal and regulatory systems may be less developed. These laws 
and regulations and interpretations thereof may change, sometimes 
dramatically, as a result of political, economic or social events. Such 
changes may include changes in: food and drug laws; laws related to 
product labeling, advertising and marketing practices; laws regard-
ing the import of ingredients used in our products; laws regarding 
the export of our products; laws and programs aimed at reducing 
ingredients present in certain of our products, such as sodium, 

29

PepsiCo, Inc. 2011 Annual Report

Management’s Discussion and Analysis

saturated fat and added sugar; increased regulatory scrutiny of, and 
increased litigation involving, product claims and concerns regard-
ing the effects on health of ingredients in, or attributes of, certain 
of our products; state consumer protection laws; taxation require-
ments, including taxes that would increase the cost of our products 
to consumers; competition laws; privacy laws; laws regulating the 
price we may charge for our products; laws regulating access to 
and use of water or utilities; and environmental laws, including laws 
relating to the regulation of water rights and treatment. New laws, 
regulations or governmental policy and their related interpreta-
tions, or changes in any of the foregoing, may alter the environment 
in which we do business and, therefore, may impact our results or 
increase our costs or liabilities.

Governmental entities or agencies in jurisdictions where we 
operate may also impose new labeling, product or production 
requirements, or other restrictions. Studies are underway by third 
parties to assess the health implications of consumption of carbon-
ated soft drinks as well as certain ingredients present in some of our 
products. In addition, third- party studies are also underway to assess 
the effect on humans due to acrylamide in the diet. Acrylamide is 
a chemical compound naturally formed in a wide variety of foods 
when they are cooked (whether commercially or at home), including 
french fries, potato chips, cereal, bread and coffee. Certain of these 
studies have found that it is probable that acrylamide causes cancer 
in laboratory animals when consumed in extraordinary amounts. 
If consumer concerns about the health implications of consump-
tion of carbonated soft drinks, certain ingredients present in some 
of our products or acrylamide increase as a result of these studies, 
other new scientific evidence, or for any other reason, whether or 
not valid, demand for our products could decline and we could be 
subject to lawsuits or new regulations that could affect sales of our 
products, any of which could have an adverse effect on our busi-
ness, financial condition or results of operations.

We are also subject to Proposition 65 in California, a law which 

requires that a specific warning appear on any product sold in 
California that contains a substance listed by that State as having 
been found to cause cancer or birth defects. If we were required to 
add warning labels to any of our products or place warnings in cer-
tain locations where our products are sold, sales of those products 
could suffer not only in those locations but elsewhere.

In many jurisdictions, compliance with competition laws is of 
special importance to us due to our competitive position in those 
jurisdictions. Regulatory authorities under whose laws we operate 
may also have enforcement powers that can subject us to actions 
such as product recall, seizure of products or other sanctions, which 
could have an adverse effect on our sales or damage our reputa-
tion. Although we have policies and procedures in place that are 
designed to promote legal and regulatory compliance, our employ-
ees or suppliers could take actions that violate these policies and 
procedures or applicable laws or regulations. Violations of these 
laws or regulations could subject us to criminal or civil enforcement 
actions which could have a material adverse effect on our business.

In addition, we and our subsidiaries are party to a variety of 
legal and environmental remediation obligations arising in the 

normal course of business, as well as environmental remediation, 
product liability, toxic tort and related indemnification proceed-
ings in connection with certain historical activities and contractual 
 obligations of businesses acquired by our subsidiaries. Due to 
regulatory complexities, uncertainties inherent in litigation and the 
risk of unidentified contaminants on current and former properties 
of ours and our subsidiaries, the potential exists for remediation, 
 liability and indemnification costs to differ materially from the costs 
we have estimated. We cannot assure you that our costs in relation to 
these matters will not exceed our established liabilities or otherwise 
have an adverse effect on our results of operations. See also “Our 
financial performance could be adversely affected if we are unable 
to grow our business in developing and emerging markets or as a 
result of unstable political conditions, civil unrest or other develop-
ments and risks in the markets where our products are sold.” above.

If we are not able to build and sustain proper information technology 

infrastructure, successfully implement our ongoing business 

transformation initiative or outsource certain functions effectively, 

our business could suffer.
We depend on information technology as an enabler to improve 
the effectiveness of our operations, to interface with our custom-
ers, to maintain financial accuracy and efficiency, to comply with 
regulatory financial reporting, legal and tax requirements, and for 
digital marketing activities and electronic communication among 
our locations around the world and between our personnel and the 
personnel of our independent bottlers, contract manufacturers and 
suppliers. If we do not allocate and effectively manage the resources 
necessary to build and sustain the proper information technology 
infrastructure, we could be subject to transaction errors, processing 
inefficiencies, the loss of customers, business disruptions, the loss of 
or damage to intellectual property, or the loss of sensitive or confi-
dential data through security breach or otherwise.

We have embarked on multi- year business transformation ini-
tiatives to migrate certain of our financial processing systems to 
enterprise- wide systems solutions. There can be no certainty that 
these initiatives will deliver the expected benefits. The failure to 
deliver our goals may impact our ability to (1) process transactions 
accurately and efficiently and (2) remain in step with the changing 
needs of the trade, which could result in the loss of customers. In 
addition, the failure to either deliver the applications on time, or 
anticipate the necessary readiness and training needs, could lead to 
business disruption and loss of customers and revenue.

In addition, we have outsourced certain information technol-
ogy support services and administrative functions, such as payroll 
processing and benefit plan administration, to third- party service 
providers and may outsource other functions in the future to 
achieve cost savings and efficiencies. If the service providers that 
we outsource these functions to do not perform or do not perform 
effectively, we may not be able to achieve the expected cost sav-
ings and may have to incur additional costs to correct errors made 
by such service providers. Depending on the function involved, 
such errors may also lead to business disruption, processing inef-
ficiencies, the loss of or damage to intellectual property through 

30

PepsiCo, Inc. 2011 Annual Report

security breach, the loss of sensitive data through security breach or 
otherwise, litigation, or remediation costs and could have a negative 
impact on employee morale.

Our information systems could also be penetrated by outside 
parties intent on extracting confidential information, corrupting 
information or disrupting business processes. Such unauthorized 
access could disrupt our business and could result in the loss of 
assets, litigation, remediation costs, damage to our reputation and 
loss of revenue resulting from unauthorized use of confidential 
information or failure to retain or attract customers following such 
an event.

Fluctuations in exchange rates may have an adverse impact on our 

business results or financial condition.
We hold assets and incur liabilities, earn revenues and pay expenses 
in a variety of currencies other than the U.S. dollar. Because our 
consolidated financial statements are presented in U.S. dollars, the 
financial statements of our subsidiaries outside the United States 
are translated into U.S. dollars. Our operations outside of the U.S. 
generate a significant portion of our net revenue. Fluctuations in 
exchange rates may therefore adversely impact our business results 
or financial condition. See also “Market Risks” and Note 1 to our 
 consolidated financial statements.

Our operating results may be adversely affected by increased costs, 

disruption of supply or shortages of raw materials and other supplies.
We and our business partners use various raw materials and other 
supplies in our business. The principal ingredients we use include 
apple, orange and pineapple juice and other juice concentrates, 
aspartame, corn, corn sweeteners, flavorings, flour, grapefruit and 
other fruits, oats, oranges, potatoes, raw milk, rice, seasonings, 
sucralose, sugar, vegetable and essential oils, and wheat. Our key 
packaging materials include plastic resins, including polyethylene 
terephthalate (PET) and polypropylene resin used for plastic bever-
age bottles and film packaging used for snack foods, aluminum 
used for cans, glass bottles, closures, cardboard and paperboard 
cartons. Fuel and natural gas are also important commodities due 
to their use in our plants and facilities and in the trucks delivering 
our products. Some of these raw materials and supplies are sourced 
internationally and some are available from a limited number of 
suppliers. We are exposed to the market risks arising from adverse 
changes in commodity prices, affecting the cost of our raw materi-
als and energy. The raw materials and energy which we use for the 
production of our products are largely commodities that are subject 
to price volatility and fluctuations in availability caused by changes 
in global supply and demand, weather conditions, agricultural 
uncertainty or governmental controls. We purchase these materials 
and energy mainly in the open market. If commodity price changes 
result in unexpected increases in raw materials and energy costs, 
we may not be able to increase our prices to offset these increased 
costs without suffering reduced volume, revenue and operating 
results. In addition, we use derivatives to hedge price risk associated 
with forecasted purchases of certain raw materials. Certain of these 
derivatives that do not qualify for hedge accounting treatment can 

Management’s Discussion and Analysis

result in increased volatility in our net earnings in any given period 
due to changes in the spot prices of the underlying commodities. 
See also “Unfavorable economic conditions may have an adverse 
impact on our business results or financial condition.”, “Changes in 
the legal and regulatory environment could limit our business activi-
ties, increase our operating costs, reduce demand for our products 
or result in litigation.”, “Market Risks” and Note 1 to our consolidated 
financial statements.

Disruption of our supply chain could have an adverse impact on our 

business, financial condition and results of operations.
Our ability, and that of our suppliers, business partners,  including 
our independent bottlers, contract manufacturers, independent 
distributors and retailers, to make, manufacture, distribute and sell 
products is critical to our success. Damage or disruption to our or 
their manufacturing or distribution capabilities due to any of the 
following could impair our ability to make, manufacture, distribute 
or sell our products: adverse weather conditions or natural disaster, 
such as a hurricane, earthquake or flooding; government action; fire; 
terrorism; the outbreak or escalation of armed hostilities; pandemic; 
industrial accidents or other occupational health and safety issues; 
strikes and other labor disputes; or other reasons beyond our con-
trol or the control of our suppliers and business partners. Failure to 
take adequate steps to mitigate the likelihood or potential impact 
of such events, or to effectively manage such events if they occur, 
could adversely affect our business, financial condition and results 
of operations, as well as require additional resources to restore our 
supply chain.

Climate change, or legal, regulatory or market measures to address 

climate change, may negatively affect our business and operations.
There is growing concern that carbon dioxide and other greenhouse 
gases in the atmosphere may have an adverse impact on global 
temperatures, weather patterns and the frequency and severity 
of extreme weather and natural disasters. In the event that such 
climate change has a negative effect on agricultural  productivity, 
we may be subject to decreased availability or less favorable 
 pricing for certain commodities that are necessary for our products, 
such as sugar cane, corn, wheat, rice, oats, potatoes and various 
fruits. We may also be subjected to decreased availability or less 
favorable pricing for water as a result of such change, which could 
impact our manufacturing and distribution operations. In addition, 
natural disasters and extreme weather conditions may disrupt the 
productivity of our facilities or the operation of our supply chain. 
The increasing concern over climate change also may result in 
more regional, federal and/or global legal and regulatory require-
ments to reduce or mitigate the effects of greenhouse gases. In 
the event that such regulation is enacted and is more aggressive 
than the sustainability measures that we are currently undertaking 
to monitor our emissions and improve our energy efficiency, we 
may experience significant increases in our costs of operation and 
delivery. In particular, increasing regulation of fuel emissions could 
substantially increase the distribution and supply chain costs associ-
ated with our products. As a result, climate change could negatively 

31

PepsiCo, Inc. 2011 Annual Report

Management’s Discussion and Analysis

affect our business and operations. See also “Changes in the legal 
and regulatory environment could limit our business activities, 
increase our operating costs, reduce demand for our products or 
result in litigation.” and “Disruption of our supply chain could have 
an adverse impact on our business, financial condition and results 
of operations.”

If we are unable to hire or retain key employees or a highly skilled and 

diverse workforce, it could have a negative impact on our business.
Our continued growth requires us to hire, retain and develop our 
leadership bench and a highly skilled and diverse workforce. We 
compete to hire new employees and then must train them and 
develop their skills and competencies. Any unplanned turnover or 
our failure to develop an adequate succession plan to backfill cur-
rent leadership positions, including our Chief Executive Officer, or to 
hire and retain a diverse workforce could deplete our institutional 
knowledge base and erode our competitive advantage. In addition,  
our operating results could be adversely affected by increased costs 
due to increased competition for employees, higher employee 
 turnover or increased employee benefit costs.

A portion of our workforce belongs to unions. Failure to successfully 

renew collective bargaining agreements, or strikes or work stoppages 

could cause our business to suffer.
Many of our employees are covered by collective bargaining agree-
ments. These agreements expire on various dates. Strikes or work 
stoppages and interruptions could occur if we are unable to renew 
these agreements on satisfactory terms, which could adversely 
impact our operating results. The terms and conditions of existing or 
renegotiated agreements could also increase our costs or otherwise 
affect our ability to fully implement future operational changes to 
enhance our efficiency.

Failure to successfully complete or integrate acquisitions and joint 

ventures into our existing operations, or to complete divestitures, 

could have an adverse impact on our business, financial condition 

and results of operations.
We regularly evaluate potential acquisitions, joint ventures and 
divestitures. Potential issues associated with these activities could 
include, among other things, our ability to realize the full extent of 
the benefits or cost savings that we expect to realize as a result of 
the completion of an acquisition or the formation of a joint venture 
within the anticipated time frame, or at all; receipt of necessary 
consents, clearances and approvals in connection with an acquisi-
tion or joint venture; and diversion of management’s attention 
from base strategies and objectives. In 2011, we acquired Wimm-
Bill-Dann Foods OJSC (WBD), a Russian company. We continue to 
assess WBD’s business practices, policies and procedures as well as 
its compliance with our Worldwide Code of Conduct and applicable 
laws and, as described under Management’s Report on Internal 
Control Over Financial Reporting, we are in the process of integrat-
ing WBD into our overall internal control over financial reporting 
processes. With respect to acquisitions, including but not limited to 
the acquisition of WBD, the following also pose potential risks: our 

ability to successfully combine our businesses with the business of 
the acquired company, including integrating the manufacturing, 
distribution, sales and administrative support activities and informa-
tion technology systems among our Company and the acquired 
company and successfully operating in new categories; motivating, 
recruiting and retaining executives and key employees; conform-
ing standards, controls (including internal control over financial 
reporting), procedures and policies, business cultures and compen-
sation structures among our Company and the acquired company; 
consolidating and streamlining corporate and administrative infra-
structures; consolidating sales and marketing operations; retaining 
existing customers and attracting new customers; identifying and 
eliminating redundant and underperforming operations and assets; 
coordinating geographically dispersed organizations; and managing 
tax costs or inefficiencies associated with integrating our opera-
tions following completion of the acquisitions. With respect to joint 
ventures, we share ownership and management responsibility of 
a company with one or more parties who may or may not have the 
same goals, strategies, priorities or resources as we do and joint ven-
tures are intended to be operated for the benefit of all co- owners, 
rather than for our exclusive benefit. In addition, acquisitions and 
joint ventures outside of the United States increase our exposure to 
risks associated with operations outside of the United States, includ-
ing fluctuations in exchange rates and compliance with laws and 
regulations outside the United States. With respect to divestitures, 
we may not be able to complete proposed divestitures on terms 
commercially favorable to us. If an acquisition or joint venture is not 
successfully completed or integrated into our existing operations, or 
if a divestiture is not successfully completed, our business, financial 
condition and results of operations could be adversely impacted.

Failure to successfully implement our global operating model could 

have an adverse impact on our business, financial condition and results 

of operations.
We recently created the Global Beverages Group and the Global 
Snacks Group, both of which are focused on innovation, research 
and development, brand management and best- practice sharing 
around the world, as well as collaborating with our Global Nutrition 
Group to grow our nutrition portfolio. If we are unable to success-
fully implement our global operating model, including retention 
of key employees, our business, financial condition and results of 
operations could be adversely impacted.

Failure to realize anticipated benefits from our productivity plan could 

have an adverse impact on our business, financial condition and results 

of operations.
We are implementing a strategic plan that we believe will position 
our business for future success and growth, to allow us to achieve 
a lower cost structure and operate efficiently in the highly com-
petitive food, snack and beverage industries. In order to capitalize 
on our cost reduction efforts, it will be necessary to make certain 
investments in our business, which may be limited due to capital 
constraints. In addition, it is critical that we have the appropriate 
personnel in place to continue to lead and execute our plan. Our 

32

PepsiCo, Inc. 2011 Annual Report

future success and earnings growth depends in part on our ability 
to reduce costs and improve efficiencies. If we are unable to suc-
cessfully implement our productivity plan or fail to implement it as 
timely as we anticipate, our business, financial condition and results 
of operations could be adversely impacted.

Our borrowing costs and access to capital and credit markets may be 

adversely affected by a downgrade or potential downgrade of our 

credit ratings.
Our objective is to maintain credit ratings that provide us with 
ready access to global capital and credit markets. Any downgrade 
of our current credit ratings by a credit rating agency, especially 
any downgrade to below investment grade, could increase our 
future borrowing costs and impair our ability to access capital and 
credit markets on terms commercially acceptable to us or at all. In 
addition, any downgrade of our current short- term credit ratings 
could impair our ability to access the commercial paper market 
with the same flexibility that we have experienced historically, 
and therefore require us to rely more heavily on more expensive 
types of debt financing. Our borrowing costs and access to the 
commercial paper market could also be adversely affected if a 
credit rating agency announces that our ratings are under review 
for a potential downgrade.

Our intellectual property rights could be infringed or challenged and 

reduce the value of our products and brands and have an adverse 

impact on our business, financial condition and results of operations.
We possess intellectual property rights that are important to our 
business. These intellectual property rights include ingredient 
formulas, trademarks, copyrights, patents, business processes and 
other trade secrets which are important to our business and relate 
to some of our products, their packaging, the processes for their 
production and the design and operation of various equipment 
used in our businesses. We protect our intellectual property rights 
globally through a combination of trademark, copyright, patent and 
trade secret laws, third- party assignment and nondisclosure agree-
ments and monitoring of third- party misuses of our intellectual 
property. If we fail to obtain or adequately protect our ingredient 
formulas, trademarks, copyrights, patents, business processes 
and other trade secrets, or if there is a change in law that limits or 
removes the current legal protections of our intellectual property, 
the value of our products and brands could be reduced and there 
could be an adverse impact on our business, financial condition and 
results of operations. See also “Changes in the legal and regulatory 
environment could limit our business activities, increase our operat-
ing costs, reduce demand for our products or result in litigation.”

Market Risks
We are exposed to market risks arising from adverse changes in:
(cid:116)(cid:1) (cid:68)(cid:80)(cid:78)(cid:78)(cid:80)(cid:69)(cid:74)(cid:85)(cid:90)(cid:1)(cid:81)(cid:83)(cid:74)(cid:68)(cid:70)(cid:84)(cid:13)(cid:1)(cid:66)(cid:242)(cid:70)(cid:68)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:83)(cid:66)(cid:88)(cid:1)(cid:78)(cid:66)(cid:85)(cid:70)(cid:83)(cid:74)(cid:66)(cid:77)(cid:84)(cid:1)

and energy;

(cid:116)(cid:1) (cid:71)(cid:80)(cid:83)(cid:70)(cid:74)(cid:72)(cid:79)(cid:1)(cid:70)(cid:89)(cid:68)(cid:73)(cid:66)(cid:79)(cid:72)(cid:70)(cid:1)(cid:83)(cid:66)(cid:85)(cid:70)(cid:84)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69)
(cid:116)(cid:1)

(cid:74)(cid:79)(cid:85)(cid:70)(cid:83)(cid:70)(cid:84)(cid:85)(cid:1)(cid:83)(cid:66)(cid:85)(cid:70)(cid:84)(cid:15)

Management’s Discussion and Analysis

In the normal course of business, we manage these risks through 
a variety of strategies, including productivity initiatives, global pur-
chasing programs and hedging strategies. Ongoing productivity 
initiatives involve the identification and effective implementa-
tion of meaningful cost- saving opportunities or efficiencies. Our 
global purchasing programs include fixed- price purchase orders 
and pricing agreements. See Note 9 for further information on our 
non- cancelable purchasing commitments. Our hedging strategies 
include the use of derivatives. Certain derivatives are designated 
as either cash flow or fair value hedges and qualify for hedge 
accounting treatment, while others do not qualify and are marked 
to market through earnings. Cash flows from derivatives used to 
manage  commodity, foreign exchange or interest risks are classi-
fied as operating activities. We do not use derivative instruments 
for trading or speculative purposes. We perform assessments of 
our counterparty credit risk regularly, including a review of credit 
 ratings, credit default swap rates and potential nonperformance of 
the counterparty. Based on our most recent assessment of our coun-
terparty credit risk, we consider this risk to be low. In addition, we 
enter into derivative contracts with a variety of financial institutions 
that we believe are creditworthy in order to reduce our concentra-
tion of credit risk. See “Unfavorable economic conditions may have 
an adverse impact on our business results or financial condition.”

The fair value of our derivatives fluctuates based on market rates 
and prices. The sensitivity of our derivatives to these market fluctua-
tions is discussed below. See Note 10 for further discussion of these 
derivatives and our hedging policies. See “Our Critical Accounting 
Policies” for a discussion of the exposure of our pension plan 
assets and pension and retiree medical liabilities to risks related to 
market fluctuations.

Inflationary, deflationary and recessionary conditions impact-
ing these market risks also impact the demand for and pricing of 
our products.

Commodity Prices
We expect to be able to reduce the impact of volatility in our raw 
material and energy costs through our hedging strategies and 
ongoing sourcing initiatives. We use derivatives, with terms of no 
more than three years, to economically hedge price fluctuations 
related to a portion of our anticipated commodity purchases, 
 primarily for metals, energy and agricultural products.

Our open commodity derivative contracts that qualify for hedge 
accounting had a face value of $598 million as of December 31, 2011 
and $590 million as of December 25, 2010. At the end of 2011, the 
potential change in fair value of commodity derivative instruments, 
assuming a 10% decrease in the underlying commodity price, would 
have increased our net unrealized losses in 2011 by $52 million.

Our open commodity derivative contracts that do not qualify 

for hedge accounting had a face value of $630 million as of 
December 31, 2011 and $266 million as of December 25, 2010. At 
the end of 2011, the potential change in fair value of commodity 
derivative instruments, assuming a 10% decrease in the underlying 
commodity price, would have increased our net losses in 2011 by 
$58 million.

33

PepsiCo, Inc. 2011 Annual Report

Management’s Discussion and Analysis

Foreign Exchange
Financial statements of foreign subsidiaries are translated into U.S. 
dollars using period- end exchange rates for assets and liabilities 
and weighted- average exchange rates for revenues and expenses. 
Adjustments resulting from translating net assets are reported 
as a separate component of accumulated other comprehensive 
loss within shareholders’ equity under the caption currency 
translation adjustment.

Our operations outside of the U.S. generate approximately 50% 

of our net revenue, with Russia, Mexico, Canada and the United 
Kingdom comprising approximately 23% of our net revenue. 
As a result, we are exposed to foreign currency risks. During 2011, 
favorable foreign currency contributed 1 percentage point to net 
revenue growth, primarily due to appreciation of the euro, Canadian 
dollar and Mexican peso. Currency declines against the U.S. dollar 
which are not offset could adversely impact our future results.

In addition, we continue to use the official exchange rate to trans-
late the financial statements of our snack and beverage businesses in 
Venezuela. We use the official rate as we currently intend to remit div-
idends solely through the government- operated Foreign Exchange 
Administration Board (CADIVI). As of the beginning of our 2010 fiscal 
year, the results of our Venezuelan businesses were reported under 
hyperinflationary accounting. Consequently, the functional currency 
of our Venezuelan entities was changed from the bolivar fuerte 
(bolivar) to the U.S. dollar. Effective January 11, 2010, the Venezuelan 
government devalued the bolivar by resetting the official exchange 
rate from 2.15 bolivars per dollar to 4.3 bolivars per dollar; however, 
certain activities were permitted to access an exchange rate of 
2.6 bolivars per dollar. We continue to use all available options to 
obtain U.S. dollars to meet our operational needs. In 2011 and 2010, 
the majority of our transactions were remeasured at the 4.3 exchange 
rate, and as a result of the change to hyper inflationary account-
ing and the devaluation of the bolivar, we recorded a one- time net 
charge of $120 million in the first quarter of 2010. In 2011 and 2010, 
our operations in Venezuela comprised 8% and 4% of our cash and 
cash equivalents balance, respectively, and generated less than 1% of 
our net revenue. As of January 1, 2011, the Venezuelan government 
unified the country’s two official exchange rates (4.3 and 2.6 bolivars 
per dollar) by eliminating the 2.6 bolivars per dollar rate, which was 
previously permitted for certain activities. This change did not have a 
material impact on our financial statements.

Exchange rate gains or losses related to foreign currency 
 transactions are recognized as transaction gains or losses in our 
income statement as incurred. We may enter into derivatives, 
 primarily forward contracts with terms of no more than two  
years, to manage our exposure to foreign currency transaction risk. 
Our foreign currency derivatives had a total face value of $2.3 billion 
as of December 31, 2011 and $1.7 billion as of December 25, 2010.  
At the end of 2011, we estimate that an unfavorable 10% change  
in the exchange rates would have decreased our net unrealized 
gains by $105 million. For foreign currency derivatives that do not 
qualify for hedge accounting treatment, all losses and gains were 
offset by changes in the underlying hedged items, resulting in no 
net material impact on earnings.

Interest Rates
We centrally manage our debt and investment portfolios consid-
ering investment opportunities and risks, tax consequences and 
overall financing strategies. We use various interest rate deriva-
tive instruments including, but not limited to, interest rate swaps, 
cross- currency interest rate swaps, Treasury locks and swap locks 
to manage our overall interest expense and foreign exchange risk. 
These instruments effectively change the interest rate and currency 
of specific debt issuances. Certain of our fixed rate indebtedness 
has been swapped to floating rates. The notional amount, interest 
payment and maturity date of the interest rate and cross- currency 
swaps match the principal, interest payment and maturity date of 
the related debt. Our Treasury locks and swap locks are entered 
into to protect against unfavorable interest rate changes relating 
to forecasted debt transactions.

Assuming year- end 2011 variable rate debt and investment levels, 
a 1-percentage- point increase in interest rates would have increased 
net interest expense by $55 million in 2011.

Risk Management Framework
The achievement of our strategic and operating objectives neces-
sarily involves taking risks. Our risk management process is intended 
to ensure that risks are taken knowingly and purposefully. As such, 
we leverage an integrated risk management framework to identify, 
assess, prioritize, address, manage, monitor and communicate risks 
across the Company. This framework includes:
(cid:116)(cid:1) (cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:8)(cid:84)(cid:1)(cid:35)(cid:80)(cid:66)(cid:83)(cid:69)(cid:1)(cid:80)(cid:71)(cid:1)(cid:37)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:80)(cid:83)(cid:84)(cid:13)(cid:1)(cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1)(cid:74)(cid:84)(cid:1)(cid:83)(cid:70)(cid:84)(cid:81)(cid:80)(cid:79)(cid:84)(cid:74)(cid:67)(cid:77)(cid:70)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:80)(cid:87)(cid:70)(cid:83)(cid:1)(cid:84)(cid:70)(cid:70)(cid:74)(cid:79)(cid:72)(cid:1)
the Company’s risk assessment and mitigation, receives updates 
on key risks throughout the year. The Audit Committee of the 
Board of Directors helps define PepsiCo’s risk management 
processes and assists the Board in its oversight of strategic, 
financial, operating, business, compliance, safety, reputational 
and other risks facing PepsiCo. The Compensation Committee 
of the Board of Directors assists the Board in overseeing 
potential risks that may be associated with the Company’s 
 compensation programs;

(cid:116)(cid:1) (cid:53)(cid:73)(cid:70)(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)(cid:51)(cid:74)(cid:84)(cid:76)(cid:1)(cid:36)(cid:80)(cid:78)(cid:78)(cid:74)(cid:85)(cid:85)(cid:70)(cid:70)(cid:1)(cid:9)(cid:49)(cid:51)(cid:36)(cid:10)(cid:13)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:83)(cid:74)(cid:84)(cid:70)(cid:69)(cid:1)(cid:80)(cid:71)(cid:1)(cid:66)(cid:1)(cid:68)(cid:83)(cid:80)(cid:84)(cid:84)(cid:14)(cid:1)

functional, geographically diverse, senior management group 
which meets regularly to identify, assess, prioritize and address 
our key risks;

(cid:116)(cid:1) (cid:37)(cid:74)(cid:87)(cid:74)(cid:84)(cid:74)(cid:80)(cid:79)(cid:1)(cid:51)(cid:74)(cid:84)(cid:76)(cid:1)(cid:36)(cid:80)(cid:78)(cid:78)(cid:74)(cid:85)(cid:85)(cid:70)(cid:70)(cid:84)(cid:1)(cid:9)(cid:37)(cid:51)(cid:36)(cid:84)(cid:10)(cid:13)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:83)(cid:74)(cid:84)(cid:70)(cid:69)(cid:1)(cid:80)(cid:71)(cid:1)(cid:68)(cid:83)(cid:80)(cid:84)(cid:84)(cid:14)(cid:1)(cid:71)(cid:86)(cid:79)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:66)(cid:77)(cid:1)
senior management teams which meet regularly to identify, 
assess, prioritize and address division- specific business risks;

(cid:116)(cid:1) (cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:8)(cid:84)(cid:1)(cid:51)(cid:74)(cid:84)(cid:76)(cid:1)(cid:46)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:48)(cid:243)(cid:68)(cid:70)(cid:13)(cid:1)(cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1)(cid:78)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:80)(cid:87)(cid:70)(cid:83)(cid:66)(cid:77)(cid:77)(cid:1)(cid:83)(cid:74)(cid:84)(cid:76)(cid:1)
management process, provides ongoing guidance, tools and ana-
lytical support to the PRC and the DRCs, identifies and assesses 
potential risks and facilitates ongoing communication between 
the parties, as well as with PepsiCo’s Audit Committee and Board 
of Directors;

(cid:116)(cid:1) (cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)(cid:36)(cid:80)(cid:83)(cid:81)(cid:80)(cid:83)(cid:66)(cid:85)(cid:70)(cid:1)(cid:34)(cid:86)(cid:69)(cid:74)(cid:85)(cid:13)(cid:1)(cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1)(cid:70)(cid:87)(cid:66)(cid:77)(cid:86)(cid:66)(cid:85)(cid:70)(cid:84)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:80)(cid:79)(cid:72)(cid:80)(cid:74)(cid:79)(cid:72)(cid:1)(cid:70)(cid:242)(cid:70)(cid:68)-

tiveness of our key internal controls through periodic audit and 
review procedures; and

(cid:116)(cid:1) (cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:8)(cid:84)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:77)(cid:74)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:37)(cid:70)(cid:81)(cid:66)(cid:83)(cid:85)(cid:78)(cid:70)(cid:79)(cid:85)(cid:13)(cid:1)(cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1)(cid:77)(cid:70)(cid:66)(cid:69)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:68)(cid:80)(cid:80)(cid:83)(cid:69)(cid:74)(cid:79)(cid:66)(cid:85)(cid:70)(cid:84)(cid:1)

our compliance policies and practices.

34

PepsiCo, Inc. 2011 Annual Report

Our Critical Accounting Policies

An appreciation of our critical accounting policies is necessary 
to understand our financial results. These policies may require 
management to make difficult and subjective judgments regard-
ing uncertainties, and as a result, such estimates may significantly 
impact our financial results. The precision of these estimates and 
the likelihood of future changes depend on a number of underlying 
variables and a range of possible outcomes. Other than our account-
ing for pension plans, our critical accounting policies do not involve 
a choice between alternative methods of accounting. We applied 
our critical accounting policies and estimation methods consistently 
in all material respects, and for all periods presented, and have 
 discussed these policies with our Audit Committee.

Our critical accounting policies arise in conjunction with 

the following:
(cid:116)(cid:1) (cid:83)(cid:70)(cid:87)(cid:70)(cid:79)(cid:86)(cid:70)(cid:1)(cid:83)(cid:70)(cid:68)(cid:80)(cid:72)(cid:79)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:28)
(cid:116)(cid:1) (cid:72)(cid:80)(cid:80)(cid:69)(cid:88)(cid:74)(cid:77)(cid:77)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:80)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)(cid:74)(cid:79)(cid:85)(cid:66)(cid:79)(cid:72)(cid:74)(cid:67)(cid:77)(cid:70)(cid:1)(cid:66)(cid:84)(cid:84)(cid:70)(cid:85)(cid:84)(cid:28)
(cid:116)(cid:1)
(cid:74)(cid:79)(cid:68)(cid:80)(cid:78)(cid:70)(cid:1)(cid:85)(cid:66)(cid:89)(cid:1)(cid:70)(cid:89)(cid:81)(cid:70)(cid:79)(cid:84)(cid:70)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:66)(cid:68)(cid:68)(cid:83)(cid:86)(cid:66)(cid:77)(cid:84)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69)
(cid:116)(cid:1) (cid:81)(cid:70)(cid:79)(cid:84)(cid:74)(cid:80)(cid:79)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:83)(cid:70)(cid:85)(cid:74)(cid:83)(cid:70)(cid:70)(cid:1)(cid:78)(cid:70)(cid:69)(cid:74)(cid:68)(cid:66)(cid:77)(cid:1)(cid:81)(cid:77)(cid:66)(cid:79)(cid:84)(cid:15)

Revenue Recognition
Our products are sold for cash or on credit terms. Our credit terms, 
which are established in accordance with local and industry prac-
tices, typically require payment within 30 days of delivery in the 
U.S., and generally within 30 to 90 days internationally, and may 
allow discounts for early payment. We recognize revenue upon 
shipment or delivery to our customers based on written sales terms 
that do not allow for a right of return. However, our policy for DSD 
and certain chilled products is to remove and replace damaged and 
out- of-date products from store shelves to ensure that consumers 
receive the product quality and freshness they expect. Similarly, 
our policy for certain warehouse- distributed products is to replace 
 damaged and out- of-date products. Based on our experience with  
this practice, we have reserved for anticipated damaged and 
out- of-date products.

Our policy is to provide customers with product when needed. 
In fact, our commitment to freshness and product dating serves to 
regulate the quantity of product shipped or delivered. In addition, 
DSD products are placed on the shelf by our employees with cus-
tomer shelf space and storerooms limiting the quantity of product. 
For product delivered through our other distribution networks, we 
monitor customer inventory levels.

As discussed in “Our Customers,” we offer sales incentives and 
discounts through various programs to customers and consumers. 
Sales incentives and discounts are accounted for as a reduction of 
revenue and totaled $34.6 billion in 2011, $29.1 billion in 2010 and 
$12.9 billion in 2009. Sales incentives include payments to custom-
ers for performing merchandising activities on our behalf, such as 
payments for in- store displays, payments to gain distribution of 
new products, payments for shelf space and discounts to promote 
lower retail prices. A number of our sales incentives, such as bottler 
funding to independent bottlers and customer volume rebates, are 
based on annual targets, and accruals are established during the 

Management’s Discussion and Analysis

year for the expected payout. These accruals are based on contract 
terms and our historical experience with similar programs and 
require management judgment with respect to estimating cus-
tomer participation and performance levels. Differences between 
estimated expense and actual incentive costs are normally insignifi-
cant and are recognized in earnings in the period such differences 
are determined. The terms of most of our incentive arrangements 
do not exceed a year, and therefore do not require highly uncer-
tain long- term estimates. Certain arrangements, such as fountain 
pouring rights and sponsorship contracts, may extend beyond one 
year. Payments made to obtain these rights are recognized over the 
shorter of the economic or contractual life, as a reduction of rev-
enue, and the remaining balances of $288 million as of December 31, 
2011 and $296 million as of December 25, 2010 are included in cur-
rent assets and other assets on our balance sheet.

For interim reporting, our policy is to allocate our forecasted full-
year sales incentives for most of our programs to each of our interim 
reporting periods in the same year that benefits from the programs. 
The allocation methodology is based on our forecasted sales incen-
tives for the full year and the proportion of each interim period’s 
actual gross revenue to our forecasted annual gross revenue. Based 
on our review of the forecasts at each interim period, any changes 
in estimates and the related allocation of sales incentives are rec-
ognized in the interim period as they are identified. In addition, 
we apply a similar allocation methodology for interim reporting 
purposes for other marketplace spending, which includes the costs 
of advertising and other marketing activities. See Note 2 for addi-
tional information on our sales incentives and other marketplace 
spending. Our annual financial statements are not impacted by this 
interim allocation methodology.

We estimate and reserve for our bad debt exposure based on 
our experience with past due accounts and collectibility, the aging 
of accounts receivable and our analysis of customer data. Bad 
debt expense is classified within selling, general and administrative 
expenses in our income statement.

Goodwill and Other Intangible Assets
We sell products under a number of brand names, many of which 
were developed by us. The brand development costs are expensed 
as incurred. We also purchase brands in acquisitions. In a business 
combination, the consideration is first assigned to identifiable assets 
and liabilities, including brands, based on estimated fair values, with 
any excess recorded as goodwill. Determining fair value requires 
significant estimates and assumptions based on an evaluation of 
a number of factors, such as marketplace participants, product life 
cycles, market share, consumer awareness, brand history and future 
expansion expectations, amount and timing of future cash flows 
and the discount rate applied to the cash flows.

We believe that a brand has an indefinite life if it has a history 
of strong revenue and cash flow performance, and we have the 
intent and ability to support the brand with marketplace spending 
for the foreseeable future. If these perpetual brand criteria are not 
met, brands are amortized over their expected useful lives, which 
generally range from five to 40 years. Determining the expected 

35

PepsiCo, Inc. 2011 Annual Report

Management’s Discussion and Analysis

life of a brand requires management judgment and is based on an 
evaluation of a number of factors, including market share, consumer 
awareness, brand history and future expansion expectations, as well 
as the macroeconomic environment of the countries in which the 
brand is sold.

Perpetual brands and goodwill are not amortized and are 
assessed for impairment at least annually. If the carrying amount 
of a perpetual brand exceeds its fair value, as determined by its 
discounted cash flows, an impairment loss is recognized in an 
amount equal to that excess. Goodwill is evaluated using a two- step 
impairment test at the reporting unit level. A reporting unit can be 
a division or business within a division. The first step compares the 
book value of a reporting unit, including goodwill, with its fair value, 
as determined by its discounted cash flows. If the book value of a 
reporting unit exceeds its fair value, we complete the second step to 
determine the amount of goodwill impairment loss that we should 
record, if any. In the second step, we determine an implied fair value 
of the reporting unit’s goodwill by allocating the fair value of the 
reporting unit to all of the assets and liabilities other than good-
will (including any unrecognized intangible assets). The amount 
of impairment loss is equal to the excess of the book value of the 
goodwill over the implied fair value of that goodwill.

Amortizable brands are only evaluated for impairment upon a 
significant change in the operating or macroeconomic environment. 
If an evaluation of the undiscounted future cash flows indicates 
impairment, the asset is written down to its estimated fair value, 
which is based on its discounted future cash flows.

In connection with our acquisitions of PBG and PAS, we reac-
quired certain franchise rights which provided PBG and PAS with 
the exclusive and perpetual rights to manufacture and/or distribute 
beverages for sale in specified territories. In determining the useful 
life of these reacquired franchise rights, we considered many factors, 
including the pre- existing perpetual bottling arrangements, the 
indefinite period expected for the reacquired rights to contribute 
to our future cash flows, as well as the lack of any factors that would 
limit the useful life of the reacquired rights to us, including legal, 
regulatory, contractual, competitive, economic or other factors. 
Therefore, certain reacquired franchise rights, as well as perpetual 
brands and goodwill, are not amortized, but instead are tested for 
impairment at least annually. Certain reacquired and acquired fran-
chise rights are amortized over the remaining contractual period of 
the contract in which the right was granted.

On December 7, 2009, we reached an agreement with DPSG to  

manufacture and distribute Dr Pepper and certain other DPSG 
products in the territories where they were previously sold by PBG 
and PAS. Under the terms of the agreement, we made an upfront 
payment of $900 million to DPSG on February 26, 2010. Based upon 
the terms of the agreement with DPSG, the amount of the upfront 
payment was capitalized and is not amortized, but instead is tested 
for impairment at least annually.

on the best available market information and are consistent with 
our internal forecasts and operating plans. These assumptions could 
be adversely impacted by certain of the risks discussed in “Our 
Business Risks.”

We did not recognize any impairment charges for goodwill in 
the years presented. In addition, as of December 31, 2011, we did 
not have any reporting units that were at risk of failing the first 
step of the goodwill impairment test. In connection with the merger 
and integration of WBD in 2011, we recorded a $14 million impair-
ment charge for discontinued brands. We did not recognize any 
impairment charges for other nonamortizable intangible assets 
in 2010 and 2009. As of December 31, 2011, we had $31.4 billion 
of goodwill and other nonamortizable intangible assets, of which 
approximately 70% related to the acquisitions of PBG, PAS and WBD.

Income Tax Expense and Accruals
Our annual tax rate is based on our income, statutory tax rates and 
tax planning opportunities available to us in the various jurisdic-
tions in which we operate. Significant judgment is required in 
determining our annual tax rate and in evaluating our tax positions. 
We establish reserves when, despite our belief that our tax return 
positions are fully supportable, we believe that certain positions are 
subject to challenge and that we may not succeed. We adjust these 
reserves, as well as the related interest, in light of changing facts and 
circumstances, such as the progress of a tax audit.

An estimated effective tax rate for a year is applied to our quar-
terly operating results. In the event there is a significant or unusual 
item recognized in our quarterly operating results, the tax attribut-
able to that item is separately calculated and recorded at the same 
time as that item. We consider the tax adjustments from the resolu-
tion of prior year tax matters to be among such items.

Tax law requires items to be included in our tax returns  
at different times than the items are reflected in our financial 
 statements. As a result, our annual tax rate reflected in our finan-
cial statements is different than that reported in our tax returns 
(our cash tax rate). Some of these differences are permanent, such 
as expenses that are not deductible in our tax return, and some 
differences reverse over time, such as depreciation expense. These 
temporary differences create deferred tax assets and liabilities. 
Deferred tax assets generally represent items that can be used as a  
tax deduction or credit in our tax returns in future years for which 
we have already recorded the tax benefit in our income statement. 
We establish valuation allowances for our deferred tax assets if, 
based on the available evidence, it is more likely than not that 
some portion or all of the deferred tax assets will not be realized. 
Deferred tax liabilities generally represent tax expense recog-
nized in our financial statements for which payment has been 
deferred, or expense for which we have already taken a deduction 
in our tax return but have not yet recognized as expense in our 
 financial statements.

Significant management judgment is necessary to evaluate the 
impact of operating and macroeconomic changes and to estimate 
future cash flows. Assumptions used in our impairment evaluations,  
such as forecasted growth rates and our cost of capital, are based 

In 2011, our annual tax rate was 26.8% compared to 23.0% in  

2010, as discussed in “Other Consolidated Results.” The tax  
rate in 2011 increased 3.8 percentage points primarily reflect-
ing the prior year non- taxable gain and reversal of deferred taxes 

36

PepsiCo, Inc. 2011 Annual Report

Management’s Discussion and Analysis

attributable to our previously held equity interests in connection 
with our acquisitions of PBG and PAS.

Curve includes bonds that closely match the timing and amount of 
our expected benefit payments.

Pension and Retiree Medical Plans
Our pension plans cover certain full- time employees in the U.S. and 
certain international employees. Benefits are determined based on 
either years of service or a combination of years of service and earn-
ings. Certain U.S. and Canada retirees are also eligible for medical 
and life insurance benefits (retiree medical) if they meet age and 
service requirements. Generally, our share of retiree medical costs is 
capped at specified dollar amounts which vary based upon years of 
service, with retirees contributing the remainder of the cost.

As of February 2012, certain U.S. employees earning a  benefit 

under one of our defined benefit pension plans will no longer 
be eligible for Company matching contributions on their 
401(k) contributions.

See Note 7 for information about certain changes to our U.S. pen-
sion and retiree medical plans and changes in connection with our 
acquisitions of PBG and PAS.

Our Assumptions
The determination of pension and retiree medical plan obligations 
and related expenses requires the use of assumptions to estimate 
the amount of benefits that employees earn while working, as well 
as the present value of those benefits. Annual pension and retiree 
medical expense amounts are principally based on four compo-
nents: (1) the value of benefits earned by employees for working 
during the year (service cost), (2) the increase in the liability due to 
the passage of time (interest cost), and (3) other gains and losses as 
discussed below, reduced by (4) the expected return on plan assets 
for our funded plans.

Significant assumptions used to measure our annual pension and 

retiree medical expense include:
(cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:74)(cid:79)(cid:85)(cid:70)(cid:83)(cid:70)(cid:84)(cid:85)(cid:1)(cid:83)(cid:66)(cid:85)(cid:70)(cid:1)(cid:86)(cid:84)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:69)(cid:70)(cid:85)(cid:70)(cid:83)(cid:78)(cid:74)(cid:79)(cid:70)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:81)(cid:83)(cid:70)(cid:84)(cid:70)(cid:79)(cid:85)(cid:1)(cid:87)(cid:66)(cid:77)(cid:86)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:77)(cid:74)(cid:66)(cid:67)(cid:74)(cid:77)(cid:74)(cid:85)(cid:74)(cid:70)(cid:84)(cid:1)

(discount rate);

The expected return on pension plan assets is based on our 
pension plan investment strategy, our expectations for long- term 
rates of return by asset class, taking into account volatility and 
 correlation among asset classes and our historical experience. We 
also review current levels of interest rates and inflation to assess the 
reasonableness of the long- term rates. We evaluate our expected 
return assumptions annually to ensure that they are reasonable. 
Our pension plan investment strategy includes the use of actively 
managed securities and is reviewed periodically in conjunction with 
plan liabilities, an evaluation of market conditions, tolerance for risk 
and cash requirements for benefit payments. Our investment objec-
tive is to ensure that funds are available to meet the plans’ benefit 
obligations when they become due. Our overall investment strategy 
is to prudently invest plan assets in a well- diversified portfolio of 
equity and high- quality debt securities to achieve our long- term 
return expectations. Our investment policy also permits the use of 
derivative instruments which are primarily used to reduce risk. Our 
expected long- term rate of return on U.S. plan assets is 7.8%. Our 
2011 target investment allocation was 40% for U.S. equity, 20% for 
international equity and 40% for fixed income. For 2012, our target 
allocations are as follows: 40% for fixed income, 33% for U.S. equity, 
22% for international equity and 5% for real estate. The change 
to the 2012 target asset allocations was made to increase diversi-
fication. Actual investment allocations may vary from our target 
investment allocations due to prevailing market conditions. We 
regularly review our actual investment allocations and periodically 
rebalance our investments to our target allocations. To calculate 
the expected return on pension plan assets, our market- related 
value of assets for fixed income is the actual fair value. For all other 
asset categories, we use a method that recognizes investment gains 
or losses (the difference between the expected and actual return 
based on the market- related value of assets) over a five- year period. 
This has the effect of reducing year- to-year volatility.

(cid:116)(cid:1) (cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:70)(cid:78)(cid:81)(cid:77)(cid:80)(cid:90)(cid:70)(cid:70)(cid:14)(cid:1)(cid:83)(cid:70)(cid:77)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:71)(cid:66)(cid:68)(cid:85)(cid:80)(cid:83)(cid:84)(cid:13)(cid:1)(cid:84)(cid:86)(cid:68)(cid:73)(cid:1)(cid:66)(cid:84)(cid:1)(cid:85)(cid:86)(cid:83)(cid:79)(cid:80)(cid:87)(cid:70)(cid:83)(cid:13)(cid:1)(cid:83)(cid:70)(cid:85)(cid:74)(cid:83)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:66)(cid:72)(cid:70)(cid:1)

The difference between the actual return on plan assets  

and mortality;

(cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:70)(cid:89)(cid:81)(cid:70)(cid:68)(cid:85)(cid:70)(cid:69)(cid:1)(cid:83)(cid:70)(cid:85)(cid:86)(cid:83)(cid:79)(cid:1)(cid:80)(cid:79)(cid:1)(cid:66)(cid:84)(cid:84)(cid:70)(cid:85)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:71)(cid:86)(cid:79)(cid:69)(cid:70)(cid:69)(cid:1)(cid:81)(cid:77)(cid:66)(cid:79)(cid:84)(cid:28)
(cid:116)(cid:1) (cid:71)(cid:80)(cid:83)(cid:1)(cid:81)(cid:70)(cid:79)(cid:84)(cid:74)(cid:80)(cid:79)(cid:1)(cid:70)(cid:89)(cid:81)(cid:70)(cid:79)(cid:84)(cid:70)(cid:13)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:83)(cid:66)(cid:85)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:84)(cid:66)(cid:77)(cid:66)(cid:83)(cid:90)(cid:1)(cid:74)(cid:79)(cid:68)(cid:83)(cid:70)(cid:66)(cid:84)(cid:70)(cid:84)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:81)(cid:77)(cid:66)(cid:79)(cid:84)(cid:1)(cid:88)(cid:73)(cid:70)(cid:83)(cid:70)(cid:1)

benefits are based on earnings; and

(cid:116)(cid:1) (cid:71)(cid:80)(cid:83)(cid:1)(cid:83)(cid:70)(cid:85)(cid:74)(cid:83)(cid:70)(cid:70)(cid:1)(cid:78)(cid:70)(cid:69)(cid:74)(cid:68)(cid:66)(cid:77)(cid:1)(cid:70)(cid:89)(cid:81)(cid:70)(cid:79)(cid:84)(cid:70)(cid:13)(cid:1)(cid:73)(cid:70)(cid:66)(cid:77)(cid:85)(cid:73)(cid:1)(cid:68)(cid:66)(cid:83)(cid:70)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:1)(cid:85)(cid:83)(cid:70)(cid:79)(cid:69)(cid:1)(cid:83)(cid:66)(cid:85)(cid:70)(cid:84)(cid:15)

Our assumptions reflect our historical experience and manage-
ment’s best judgment regarding future expectations. Due to the 
significant management judgment involved, our assumptions could 
have a material impact on the measurement of our pension and 
retiree medical benefit expenses and obligations.

At each measurement date, the discount rates are based on inter-
est rates for high- quality, long- term corporate debt securities with 
maturities comparable to those of our liabilities. Our U.S. discount 
rate is determined using the Mercer Pension Discount Yield Curve 
(Mercer Yield Curve). The Mercer Yield Curve uses a portfolio of 
high- quality bonds rated Aa or higher by Moody’s. The Mercer Yield 

and the expected return on plan assets is added to, or subtracted 
from, other gains and losses resulting from actual experience dif-
fering from our assumptions and from changes in our assumptions 
determined at each measurement date. If this net accumulated 
gain or loss exceeds 10% of the greater of the market- related value 
of plan assets or plan liabilities, a portion of the net gain or loss is 
included in expense for the following year based upon the aver-
age remaining service period of active plan participants, which is 
approximately 10 years for pension expense and approximately 
8 years for retiree medical expense. The cost or benefit of plan 
changes that increase or decrease benefits for prior employee 
service (prior service cost/(credit)) is included in earnings on a 
straight- line basis over the average remaining service period of 
active plan participants.

The health care trend rate used to determine our retiree  medical 

plan’s liability and expense is reviewed annually. Our review is 
based on our claim experience, information provided by our health 
plans and actuaries, and our knowledge of the health care industry. 

37

PepsiCo, Inc. 2011 Annual Report

Management’s Discussion and Analysis

Our review of the trend rate considers factors such as demo-
graphics, plan design, new medical technologies and changes in 
 medical carriers.

Weighted- average assumptions for pension and retiree medical 

expense are as follows:

Our Financial Results

Items Affecting Comparability
The year- over-year comparisons of our financial results are affected 
by the following items:

2012

2011

2010

2011

2010

2009

Pension

Expense discount rate
Expected rate of return on plan assets
Expected rate of salary increases

Retiree medical

Expense discount rate
Expected rate of return on plan assets
Current health care cost trend rate

4.6%    
7.6%    
3.8%    

4.4%    
7.8%    
6.8%    

5.6%    
7.6%    
4.1%    

5.2%    
7.8%    
7.0%    

6.0%
7.6%
4.4%

5.8%
–
7.5%

Based on our assumptions, we expect our pension and retiree 

medical expenses to increase in 2012 primarily driven by lower 
discount rates, partially offset by expected asset returns on contri-
butions and changes to other actuarial assumptions.

Sensitivity of Assumptions
A decrease in the discount rate or in the expected rate of return 
assumptions would increase pension expense. The estimated 
impact of a 25-basis- point decrease in the discount rate on 2012 
pension expense is an increase of approximately $62 million. The 
estimated impact on 2012 pension expense of a 25-basis- point 
decrease in the expected rate of return is an increase of approxi-
mately $31 million.

See Note 7 for information about the sensitivity of our retiree 

medical cost assumptions.

Funding
We make contributions to pension trusts maintained to provide 
plan benefits for certain pension plans. These contributions are 
made in accordance with applicable tax regulations that provide 
for current tax deductions for our contributions and taxation to the 
employee only upon receipt of plan benefits. Generally, we do not 
fund our pension plans when our contributions would not be cur-
rently tax deductible. As our retiree medical plans are not subject 
to regulatory funding requirements, we generally fund these plans 
on a pay- as-you- go basis, although we periodically review available 
options to make additional contributions toward these benefits.

Our pension contributions for 2011 were $239 million, of which 
$61 million was discretionary. Our retiree medical contributions for 
2011 were $110 million, none of which was discretionary.

In 2012, we expect to make pension and retiree medical con-
tributions of approximately $1.3 billion, with up to approximately 
$1 billion expected to be discretionary. Our cash payments for 
retiree medical benefits are estimated to be approximately $124 mil-
lion in 2012. Our pension and retiree medical contributions are 
subject to change as a result of many factors, such as changes in 
interest rates, deviations between actual and expected asset returns 
and changes in tax or other benefit laws. For estimated future bene-
fit payments, including our pay- as-you- go payments as well as those 
from trusts, see Note 7.

Net revenue
53rd week
Operating profit
53rd week
Mark- to-market net impact (losses)/gains
Restructuring and impairment charges
Merger and integration charges
Inventory fair value adjustments
Venezuela currency devaluation
Asset write- off
Foundation contribution

Bottling equity income

  $  623

–

–

  $  109
  $ (102)
  $ (383)
  $ (313)
  $  (46)
–
–
–

–
  $  91
–
  $ (769)
  $ (398)
  $ (120)
  $ (145)
  $ (100)

–
  $  274
  $  (36)
  $  (50)
–
–
–
–

Gain on previously held equity interests
Merger and integration charges

–
–

  $  735
(9)
  $ 

–
  $  (11)

Interest expense
53rd week
Merger and integration charges
Debt repurchase

Net income attributable to PepsiCo

53rd week
Mark- to-market net impact (losses)/gains
Restructuring and impairment charges
Gain on previously held equity interests
Merger and integration charges
Inventory fair value adjustments
Venezuela currency devaluation
Asset write- off
Foundation contribution
Debt repurchase

Net income attributable to PepsiCo 
per common share —  diluted
53rd week
Mark- to-market net impact (losses)/gains
Restructuring and impairment charges
Gain on previously held equity interests
Merger and integration charges
Inventory fair value adjustments
Venezuela currency devaluation
Asset write- off
Foundation contribution
Debt repurchase

  $  (16)
  $  (16)
–

–
  $  (30)
  $ (178)

–
–
–

  $  64
  $  (71)
  $ (286)
–
  $ (271)
  $  (28)
–
–
–
–

  $  0.04
  $ (0.04)
  $ (0.18)
–
  $ (0.17)
  $ (0.02)
–
–
–
–

–
  $  58
–
  $  958
  $ (648)
  $ (333)
  $ (120)
  $  (92)
  $  (64)
  $ (114)

–
  $  0.04
–
  $  0.60
  $ (0.40)
  $ (0.21)
  $ (0.07)
  $ (0.06)
  $ (0.04)
  $ (0.07)

–
  $  173
  $  (29)
–
  $  (44)
–
–
–
–
–

–
  $  0.11
  $ (0.02)
–
  $ (0.03)
–
–
–
–
–

53rd Week
In 2011, we had an additional week of results (53rd week). Our fiscal 
year ends on the last Saturday of each December, resulting in an 
additional week of results every five or six years. The 53rd week 
increased 2011 net revenue by $623 million and operating profit by 
$109 million ($64 million after- tax or $0.04 per share).

38

PepsiCo, Inc. 2011 Annual Report

   
   
   
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mark- to-Market Net Impact
We centrally manage commodity derivatives on behalf of our divi-
sions. These commodity derivatives include metals, energy and 
agricultural products. Certain of these commodity derivatives do not 
qualify for hedge accounting treatment and are marked to market 
with the resulting gains and losses recognized in corporate unal-
located expenses. These gains and losses are subsequently reflected 
in division results when the divisions take delivery of the underlying 
commodity. Therefore, the divisions realize the economic effects of 
the derivative without experiencing any resulting mark- to-market 
volatility, which remains in corporate unallocated expenses.

In 2011, we recognized $102 million ($71 million after- tax or 

$0.04 per share) of mark- to-market net losses on commodity hedges 
in corporate unallocated expenses.

In 2010, we recognized $91 million ($58 million after- tax or 

$0.04 per share) of mark- to-market net gains on commodity hedges 
in corporate unallocated expenses.

In 2009, we recognized $274 million ($173 million after- tax or 
$0.11 per share) of mark- to-market net gains on commodity hedges 
in corporate unallocated expenses.

Restructuring and Impairment Charges
In 2011, we incurred restructuring charges of $383 million ($286 mil-
lion after- tax or $0.18 per share) in conjunction with our multi- year 
productivity plan (Productivity Plan), including $76 million recorded 
in the FLNA segment, $18 million recorded in the QFNA segment, 
$48 million recorded in the LAF segment, $81 million recorded in  
the PAB segment, $77 million recorded in the Europe  segment, 
$9 million recorded in the AMEA segment and $74 million recorded  
in corporate unallocated expenses. The Productivity Plan includes 
actions in every aspect of our business that we believe will 
strengthen our complementary food, snack and beverage busi-
nesses by leveraging new technologies and processes across 
PepsiCo’s operations, go- to-market and information systems; 
heightening the focus on best practice sharing across the globe; 
consolidating manufacturing, warehouse and sales facilities; and 
implementing simplified organization structures, with wider spans 
of control and fewer layers of management. The Productivity Plan 
is expected to enhance PepsiCo’s cost- competitiveness, provide a 
source of funding for future brand- building and innovation initia-
tives, and serve as a financial cushion for potential macroeconomic 
uncertainty beyond 2012. As a result, we expect to incur pre- tax 
charges of approximately $910 million, $383 million of which was 
reflected in our 2011 results, approximately $425 million of which 
will be reflected in our 2012 results and the balance of which will 
be reflected in our 2013, 2014 and 2015 results. These charges 
will be comprised of approximately $500 million of severance and 
other employee- related costs; approximately $325 million for other 
costs, including consulting- related costs and the termination of 
leases and other contracts; and approximately $85 million for asset 
impairments (all non- cash) resulting from plant closures and related 
actions. These charges resulted in cash expenditures of $30 million 

Management’s Discussion and Analysis

in 2011, and we anticipate approximately $550 million of related 
cash expenditures during 2012, with the balance of approximately 
$175 million of related cash expenditures in 2013 through 2015. The 
Productivity Plan will be substantially completed by the end of 2012 
with incremental productivity initiatives continuing through the end 
of 2015.

In 2009, we incurred charges of $36 million ($29 million after- tax 
or $0.02 per share) in conjunction with our Productivity for Growth 
program that began in 2008. The program included actions in 
all divisions of the business, including the closure of six plants, to 
increase cost competitiveness across the supply chain, upgrade 
and streamline our product portfolio, and simplify the organization 
for more effective and timely decision- making. This program was 
 completed in the second quarter of 2009.

Gain on Previously Held Equity Interests
In 2010, in connection with our acquisitions of PBG and PAS, 
we recorded a gain on our previously held equity interests of 
$958 million ($0.60 per share), comprising $735 million which was 
non- taxable and recorded in bottling equity income and $223 mil-
lion related to the reversal of deferred tax liabilities associated with 
these previously held equity interests.

Merger and Integration Charges
In 2011, we incurred merger and integration charges of $329 million 
($271 million after- tax or $0.17 per share) related to our acquisitions 
of PBG, PAS and WBD, including $112 million recorded in the PAB 
segment, $123 million recorded in the Europe segment, $78 mil-
lion recorded in corporate unallocated expenses and $16 million 
recorded in interest expense. These charges also include closing 
costs and advisory fees related to our acquisition of WBD.

In 2010, we incurred merger and integration charges of $799 mil-
lion related to our acquisitions of PBG and PAS, as well as advisory 
fees in connection with our acquisition of WBD. $467 million of these 
charges were recorded in the PAB segment, $111 million recorded 
in the Europe segment, $191 million recorded in corporate unal-
located expenses and $30 million recorded in interest expense. The 
merger and integration charges related to our acquisitions of PBG 
and PAS were incurred to help create a more fully integrated supply 
chain and go- to-market business model, to improve the effective-
ness and efficiency of the distribution of our brands and to enhance 
our revenue growth. These charges also include closing costs, one- 
time financing costs and advisory fees related to our acquisitions of 
PBG and PAS. In addition, we recorded $9 million of merger- related 
charges, representing our share of the respective merger costs of 
PBG and PAS, in bottling equity income. In total, the above charges 
had an after- tax impact of $648 million or $0.40 per share.

In 2009, we incurred $50 million of merger- related charges, as well 
as an additional $11 million of merger- related charges, representing 
our share of the respective merger costs of PBG and PAS, recorded 
in bottling equity income. In total, these charges had an after- tax 
impact of $44 million or $0.03 per share.

39

PepsiCo, Inc. 2011 Annual Report

Management’s Discussion and Analysis

Inventory Fair Value Adjustments
In 2011, we recorded $46 million ($28 million after- tax or $0.02 per 
share) of incremental costs in cost of sales related to fair value 
adjustments to the acquired inventory included in WBD’s balance 
sheet at the acquisition date and hedging contracts included in 
PBG’s and PAS’s balance sheets at the acquisition date.

In 2010, we recorded $398 million ($333 million after- tax or 
$0.21 per share) of incremental costs related to fair value adjust-
ments to the acquired inventory and other related hedging 
contracts included in PBG’s and PAS’s balance sheets at the acqui-
sition date. Substantially all of these costs were recorded in cost 
of sales.

Venezuela Currency Devaluation
As of the beginning of our 2010 fiscal year, we recorded a one- time 
$120 million net charge related to our change to hyperinflationary 
accounting for our Venezuelan businesses and the related devalu-
ation of the bolivar. $129 million of this net charge was recorded in 
corporate unallocated expenses, with the balance (income of $9 mil-
lion) recorded in our PAB segment. In total, this net charge had an 
after- tax impact of $120 million or $0.07 per share.

Asset Write- Off
In 2010, we recorded a $145 million charge ($92 million after- tax or 
$0.06 per share) related to a change in scope of one release in our 
ongoing migration to SAP software. This change was driven, in part, 
by a review of our North America systems strategy following our 
acquisitions of PBG and PAS. This change does not impact our over-
all commitment to continue our implementation of SAP across our 
global operations over the next few years.

Foundation Contribution
In 2010, we made a $100 million ($64 million after- tax or $0.04 per 
share) contribution to The PepsiCo Foundation, Inc., in order to fund 
charitable and social programs over the next several years. This con-
tribution was recorded in corporate unallocated expenses.

Debt Repurchase
In 2010, we paid $672 million in a cash tender offer to repurchase 
$500 million (aggregate principal amount) of our 7.90% senior 
 unsecured notes maturing in 2018. As a result of this debt repur-
chase, we recorded a $178 million charge to interest expense 
($114 million after- tax or $0.07 per share), primarily representing 
the premium paid in the tender offer.

Non- GAAP Measures
Certain measures contained in this Annual Report are financial mea-
sures that are adjusted for items affecting comparability (see “Items 
Affecting Comparability” for a detailed list and description of each 
of these items), as well as, in certain instances, adjusted for foreign 
currency. These measures are not in accordance with Generally 
Accepted Accounting Principles (GAAP). Items adjusted for cur-
rency assume foreign currency exchange rates used for translation 
based on the rates in effect for the comparable prior- year period. 
In order to compute our constant currency results, we multiply or 
divide, as appropriate, our current year U.S. dollar results by the 
current year average foreign exchange rates and then multiply or 
divide, as appropriate, those amounts by the prior year average 
foreign exchange rates. We believe investors should consider these 
non- GAAP measures in evaluating our results as they are more 
indicative of our ongoing performance and with how manage-
ment evaluates our operational results and trends. These measures 
are not, and should not be viewed as, a substitute for U.S. GAAP 
 reporting measures.

Results of Operations(cid:3)—(cid:3) Consolidated Review
In the discussions of net revenue and operating profit below, 
 effective net pricing reflects the year- over-year impact of discrete 
pricing actions, sales incentive activities and mix resulting from 
selling varying products in different package sizes and in different 
countries. Additionally, acquisitions and divestitures reflect all merg-
ers and acquisitions activity, including the impact of acquisitions, 
divestitures and changes in ownership or control in consolidated 
subsidiaries and nonconsolidated equity investees.

Servings
Since our divisions each use different measures of physical unit 
volume (i.e., kilos, gallons, pounds and case sales), a common serv-
ings metric is necessary to reflect our consolidated physical unit 
volume. Our divisions’ physical volume measures are converted into 
servings based on U.S. Food and Drug Administration guidelines for 
single- serving sizes of our products.

In 2011, total servings increased 6% compared to 2010. Excluding 
the impact of the 53rd week, total servings increased 5% compared 
to 2010. In 2010, total servings increased 7% compared to 2009. 2011 
servings growth reflects an adjustment to the base year (2010) for 
divestitures that occurred in 2011, as applicable.

40

PepsiCo, Inc. 2011 Annual Report

Total Net Revenue and Operating Profit

Total net revenue
Operating profit

FLNA
QFNA
LAF
PAB
Europe
AMEA
Corporate Unallocated

53rd week
Mark- to-market net impact (losses)/gains
Restructuring and impairment charges
Merger and integration charges
Venezuela currency devaluation
Asset write- off
Foundation contribution
Other

Total operating profit
Total operating profit margin

n/m represents year- over-year changes that are not meaningful.

Management’s Discussion and Analysis

2011
$ 66,504

$  3,621
797
  1,078
  3,273
  1,210
887

(18)
(102)
(74)
(78)
–
–
–
(961)
$  9,633

2010
$ 57,838

$  3,376
741
  1,004
  2,776
  1,054
708

–
91
–
(191)
(129)
(145)
(100)
(853)
$  8,332

2009
$ 43,232

$  3,105
781
904
  2,172
948
700

–
274
–
(49)
–
–
–
(791)
$  8,044

  14.5%  

  14.4%  

  18.6%    

Change

2011

15%    

2010

34%

7%    
8%    
7%    
18%    
15%    
25%    

n/m    
n/m    
n/m    
(59)%    
n/m    
n/m    
n/m    
13%    
16%    
0.1

9%
(5)%
11%
28%
11%
1%

–
(67)%
–
284%
n/m
n/m
n/m

8%
4%

(4.2)

2011
On a reported basis, total operating profit increased 16% and oper-
ating margin increased 0.1 percentage points. Operating profit 
growth was primarily driven by the net revenue growth, partially 
offset by higher commodity costs. Items affecting comparability (see 
“Items Affecting Comparability”) contributed 10 percentage points 
to the total operating profit growth and 1.2 percentage points to the 
total operating margin increase.

2010
On a reported basis, total operating profit increased 4% and oper-
ating margin decreased 4.2 percentage points. Operating profit 
performance was impacted by items affecting comparability (see 
“Items Affecting Comparability”), which reduced operating profit by 
21 percentage points and contributed 2.9 percentage points to the 
total operating margin decline. Operating profit performance also 
reflects the incremental operating results from our acquisitions of 
PBG and PAS.

Other Consolidated Results

Bottling equity income
Interest expense, net
Annual tax rate
Net income attributable to PepsiCo
Net income attributable to PepsiCo per common share —  diluted

53rd week
Mark- to-market net impact losses/(gains)
Restructuring and impairment charges
Gain on previously held equity interests
Merger and integration charges
Inventory fair value adjustments
Venezuela currency devaluation
Asset write- off
Foundation contribution
Debt repurchase

Net income attributable to PepsiCo per common share —  diluted, excluding above items*  
Impact of foreign currency translation
Growth in net income attributable to PepsiCo per common share —  diluted, excluding 

above items, on a constant currency basis*

*  See “Non- GAAP Measures”
**  Does not sum due to rounding

2011
−
$  (799)

2010
$  735
$  (835)

2009
$  365
$  (330)

  26.8%  

  23.0%  

  26.0%

$ 6,443
$  4.03
 (0.04)
  0.04
  0.18
−
  0.17
  0.02
−
−
−
−
$  4.40

$ 6,320
$  3.91
−
 (0.04)
−
 (0.60)
  0.40
  0.21
  0.07
  0.06
  0.04
  0.07

$  4.13**  

$ 5,946
$  3.77
−
 (0.11)
  0.02
−
  0.03
−
−
−
−
−
$  3.71

Change

2011
$ (735)
$  36

2010
$  370
$ (505)

2%  
3%  

6%
4%

7%  
(1)

  12%
1

5%** 

  12%**

41

PepsiCo, Inc. 2011 Annual Report

 
 
 
   
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management’s Discussion and Analysis

Prior to our acquisitions of PBG and PAS on February 26, 2010, 
we had noncontrolling interests in each of these bottlers and con-
sequently included our share of their net income in bottling equity 
income. Upon consummation of the acquisitions in the first quarter 
of 2010, we began to consolidate the results of these bottlers and 
recorded a $735 million gain in bottling equity income associated 
with revaluing our previously held equity interests in PBG and PAS 
to fair value.

2011
Bottling equity income decreased $735 million, reflecting the gain in 
the prior year on our previously held equity interests in connection 
with our acquisitions of PBG and PAS.

Net interest expense decreased $36 million, primarily reflecting 
interest expense in the prior year in connection with our cash tender 
offer to repurchase debt in 2010, partially offset by higher average 
debt balances in 2011.

The reported tax rate increased 3.8 percentage points compared 

to 2010, primarily reflecting the prior year non- taxable gain and 
reversal of deferred taxes attributable to our previously held equity 
interests in connection with our acquisitions of PBG and PAS.

Net income attributable to PepsiCo increased 2% and net income 

attributable to PepsiCo per common share increased 3%. Items 
affecting comparability (see “Items Affecting Comparability”) 
decreased net income attributable to PepsiCo by 3 percentage 

points and net income attributable to PepsiCo per common share 
by 3.5 percentage points.

2010
Bottling equity income increased $370 million, primarily reflecting 
the gain on our previously held equity interests in connection with 
our acquisitions of PBG and PAS, partially offset by the consolidation 
of the related financial results of the acquired bottlers.

Net interest expense increased $505 million, primarily reflecting 
higher average debt balances, interest expense incurred in connec-
tion with our cash tender offer to repurchase debt, and bridge and  
term financing costs in connection with our acquisitions of PBG 
and PAS. These increases were partially offset by lower average 
rates on our debt balances.

The reported tax rate decreased 3.0 percentage points com-

pared to the prior year, primarily reflecting the impact of our 
acquisitions of PBG and PAS, which includes the reversal of deferred 
taxes attributable to our previously held equity interests in PBG 
and PAS, as well as the favorable resolution of certain tax matters 
in 2010.

Net income attributable to PepsiCo increased 6% and net income 

attributable to PepsiCo per common share increased 4%. Items 
affecting comparability (see “Items Affecting Comparability”) 
decreased net income attributable to PepsiCo and net income 
attributable to PepsiCo per common share by 8 percentage points.

Results of Operations(cid:3)—(cid:3) Division Review
The results and discussions below are based on how our Chief Executive Officer monitors the performance of our divisions. Accordingly, 
2011 volume growth measures reflect an adjustment to the base year (2010) for divestitures that occurred in 2011. See “Items Affecting 
Comparability” for a discussion of items to consider when evaluating our results and related information regarding non- GAAP measures.

Net Revenue, 2011
Net Revenue, 2010
% Impact of:
Volume(a)
Effective net pricing(b)
Foreign exchange
Acquisitions and divestitures

% Change(c)

Net Revenue, 2010
Net Revenue, 2009
% Impact of:
Volume(a)
Effective net pricing(b)
Foreign exchange
Acquisitions and divestitures

% Change(c)

FLNA
$ 13,322
$ 12,573

QFNA
$ 2,656
$ 2,656

LAF
$ 7,156
$ 6,315

PAB
$ 22,418
$ 20,401

Europe
$ 13,560
$  9,602

AMEA
$ 7,392
$ 6,291

Total
$ 66,504
$ 57,838

2%  
3
–
–
6%  

(5)%  
4
1
–
–%  

  3.5%

8
2
–
13%  

*
*
1
*

*
*
3
*

10%  

41%  

10%
6
2
–
17%  

*
*
1
*
15%

FLNA
$ 12,573
$ 12,421

QFNA
$ 2,656
$ 2,687

LAF
$ 6,315
$ 5,703

PAB
$ 20,401
$ 10,116

Europe
$  9,602
$  7,028

AMEA
$ 6,291
$ 5,277

Total
$ 57,838
$ 43,232

–%  
–
1
–
1%  

–%  
(2)
1
–
(1)%  

3%
6
1
–
11%  

*
*
–
*
102%  

*
*
(1)
*

37%  

12%
3
3
1
19%  

*
*
1
*
34%

(a) Excludes the impact of acquisitions and divestitures. In certain instances, volume growth varies from the amounts disclosed in the following divisional discussions due to nonconsolidated 
joint venture volume, and, for our beverage businesses, temporary timing differences between BCS and CSE. Our net revenue excludes nonconsolidated joint venture volume, and, for our 
beverage businesses, is based on CSE.

(b) Includes the year- over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries.
(c) Amounts may not sum due to rounding.
*  It is impractical to separately determine and quantify the impact of our acquisitions of PBG and PAS from changes in our pre- existing beverage business since we now manage these 

businesses as an integrated system.

42

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Frito- Lay North America

Net revenue
53rd week
Net revenue excluding above item*
Impact of foreign currency translation
Net revenue growth excluding above item, on a constant currency basis*

Operating profit
53rd week
Restructuring and impairment charges
Operating profit excluding above items*
Impact of foreign currency translation
Operating profit growth excluding above items, on a constant currency basis*

*  See “Non- GAAP Measures”
**  Does not sum due to rounding

Management’s Discussion and Analysis

2011
$ 13,322
(260)
$ 13,062

2010
$ 12,573
–
$ 12,573

$  3,621
(72)
76
$  3,625

$  3,376
–
–
$  3,376

2009
$ 12,421
–
$ 12,421

$  3,105
–
1
$  3,106

% Change

2011
6

4
–

3.5**    

7

7
–
7

2010
1

1
(1)
–

9

9
(1)
8

2011
Net revenue increased 6% and pound volume grew 3%. The volume 
growth primarily reflects double- digit growth in our Sabra joint 
venture and in variety packs, as well as mid- single-digit growth in 
trademark Doritos, Cheetos and Ruffles. These gains were partially 
offset by a double- digit decline in trademark SunChips. Net rev-
enue growth also benefited from effective net pricing. The 53rd 
week contributed 2 percentage points to both net revenue and 
volume growth.

Operating profit grew 7%, primarily reflecting the net revenue 
growth. Restructuring charges reduced operating profit growth 
by 2 percentage points and were offset by the 53rd week, which 
 contributed 2 percentage points to operating profit growth.

2010
Pound volume decreased 1%, primarily due to the overlap of the 
2009 “20% More Free” promotion, as well as a double- digit decline 
in SunChips, partially offset by mid- single-digit growth in trademark 
Lay’s. Net revenue grew 1%, primarily reflecting mid- single-digit 
revenue growth in trademark Lay’s, double- digit revenue growth 
in variety packs and high- single-digit revenue growth in trademark 
Ruffles. These gains were partially offset by a double- digit revenue 
decline in SunChips and a mid- single-digit revenue decline in 
Tostitos. Foreign currency contributed 1 percentage point to the net 
revenue growth.

Operating profit grew 9%, reflecting lower commodity costs, 

 primarily cooking oil.

Quaker Foods North America

Net revenue
53rd week
Net revenue excluding above item*
Impact of foreign currency translation
Net revenue growth excluding above item, on a constant currency basis*

Operating profit
53rd week
Restructuring and impairment charges
Operating profit excluding above items*
Impact of foreign currency translation
Operating profit growth excluding above items, on a constant currency basis*

*  See “Non- GAAP Measures”
**  Does not sum due to rounding

2011
$ 2,656
(42)
$ 2,614

$  797
(12)
18
$  803

2010
$ 2,656
–
$ 2,656

$  741
–
–
$  741

2009
$ 2,687
–
$ 2,687

$  781
–
2
$  783

% Change

2011
–

2010
(1)

(2)
(1)
(2)**    

8

8
(0.5)

8**    

(1)
(1)
(2)

(5)

(5)
(1)
(6)

2011
Net revenue was flat and volume declined 5%. The volume decline 
primarily reflects double- digit volume declines in ready- to-eat 
 cereals and Chewy granola bars, as well as a mid- single-digit decline 
in Aunt Jemima syrup and mix. The impact of positive net pric-
ing, driven primarily by price increases taken in the fourth quarter 
of 2010, was partially offset by negative mix. Favorable foreign 

currency contributed nearly 1 percentage point to the net revenue 
performance. The 53rd week positively contributed almost 2 per-
centage points to both the net revenue and volume performance.
Operating profit grew 8%, primarily reflecting the favorable 
effective net pricing, partially offset by the volume declines. Gains 
on the divestiture of a business and the sale of a distribution 
center increased operating profit growth by 4 percentage points, 

43

PepsiCo, Inc. 2011 Annual Report

 
 
 
   
   
 
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
Management’s Discussion and Analysis

and a change in accounting methodology for inventory contrib-
uted 2 percentage points to operating profit growth (see Note 1). 
Restructuring charges reduced operating profit growth by over 
2 percentage points and were mostly offset by the 53rd week, which 
contributed 2 percentage points to operating profit growth.

2010
Net revenue declined 1% and volume was flat. Low- single-digit 
volume declines in Oatmeal and ready- to-eat cereals were 

mostly offset by high- single-digit growth in Chewy granola bars. 
Unfavorable mix and net pricing contributed to the net revenue 
decline. Favorable foreign currency positively contributed  
1 percentage point to net revenue performance.

Operating profit declined 5%, primarily reflecting the net 
revenue performance, as well as insurance settlement recover-
ies recorded in the prior year related to the Cedar Rapids flood, 
which negatively impacted operating profit performance by over 
2  percentage points.

Latin America Foods

Net revenue
Impact of foreign currency translation
Net revenue growth, on a constant currency basis*

Operating profit
Restructuring and impairment charges
Operating profit excluding above item*
Impact of foreign currency translation
Operating profit growth excluding above item, on a constant currency basis*

*  See “Non- GAAP Measures”

2011
Volume increased 5%, primarily reflecting mid- single-digit 
increases in Brazil (excluding the impact of an acquisition in the 
fourth quarter) and at Gamesa in Mexico. Additionally, Sabritas 
in Mexico was up slightly. Acquisitions contributed 1 percentage 
point to the volume growth.

Net revenue increased 13%, primarily reflecting effective net 
 pricing and the volume growth. Favorable foreign currency contrib-
uted 2 percentage points to net revenue growth. Acquisitions and 
divestitures had a nominal impact on the net revenue growth rate.
Operating profit grew 7%, driven by the net revenue growth, 

partially offset by higher commodity costs. Acquisitions and 
 divestitures, which included a gain from the sale of a fish business 
in Brazil, contributed nearly 4 percentage points to operating profit 
growth. Restructuring charges reduced operating profit growth 
by 5 percentage points.

2011
$ 7,156

2010
$ 6,315

2009
$ 5,703

$ 1,078
48
$ 1,126

$ 1,004
–
$ 1,004

$  904
3
$  907

% Change

2011
13
(2)
11

7

12
(1)
11

2010
11
(1)
10

11

11
–
11

2010
Volume increased 4%, reflecting mid- single-digit increases at 
Sabritas in Mexico and Brazil. Additionally, Gamesa in Mexico grew 
at a low- single-digit rate.

Net revenue increased 11%, primarily reflecting favorable effective 

net pricing and the volume growth. Net revenue growth reflected 
1 percentage point of favorable foreign currency, which was net of a 
6-percentage- point unfavorable impact from Venezuela.

Operating profit grew 11%, primarily reflecting the net revenue 

growth. Unfavorable foreign currency reduced operating profit 
growth slightly, as an 8-percentage- point unfavorable impact from 
Venezuela was offset by favorable foreign currency in other markets.

44

PepsiCo, Inc. 2011 Annual Report

 
 
 
   
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
PepsiCo Americas Beverages

Net revenue
53rd week
Net revenue excluding above item*
Impact of foreign currency translation
Net revenue growth excluding above item, on a constant currency basis*

Operating profit
53rd week
Restructuring and impairment charges
Merger and integration costs
Inventory fair value adjustments
Venezuela currency devaluation
Operating profit excluding above items*
Impact of foreign currency translation
Operating profit growth excluding above items, on a constant currency basis*

*  See “Non- GAAP Measures”
**  Does not sum due to rounding

2011
Volume increased 2%, primarily reflecting a 3% increase in Latin 
America volume, as well as volume from incremental brands related 
to our DPSG manufacturing and distribution agreement, which 
contributed 1 percentage point to volume growth. North America 
volume, excluding the impact of the incremental DPSG volume, 
increased slightly, as a 4% increase in non- carbonated beverage 
volume was partially offset by a 2% decline in CSD volume. The 
non- carbonated beverage volume growth primarily reflected a 
double- digit increase in Gatorade sports drinks. The 53rd week 
 contributed 1 percentage point to volume growth.

Net revenue increased 10%, primarily reflecting the incremental 
finished goods revenue related to our acquisitions of PBG and PAS. 
Favorable foreign currency contributed nearly 1 percentage point to 
net revenue growth and the 53rd week contributed over 1 percent-
age point to net revenue growth.

Reported operating profit increased 18%, primarily reflecting 
the items affecting comparability in the above table (see “Items 
Affecting Comparability”). Excluding these items, operating profit 
decreased 4%, mainly driven by higher commodity costs and  
higher selling and distribution costs, partially offset by the net 
 revenue growth. Operating profit performance also benefited from 
the impact of certain insurance adjustments and more- favorable 
settlements of promotional spending accruals in the current year, 
which collectively contributed 2 percentage points to the reported 
operating profit growth. The net impact of the divestiture of our 
Mexico beverage business in the fourth quarter contributed 1 per-
centage point to reported operating profit growth and included a 

Management’s Discussion and Analysis

2011
$ 22,418
(288)
$ 22,130

2010
$ 20,401
–
$ 20,401

$  3,273
(35)
81
112
21
–
$  3,452

$  2,776
–
–
467
358
(9)
$  3,592

2009
$ 10,116
–
$ 10,116

$  2,172
–
16
–
–
–
$  2,188

% Change

2011
10

8
(1)
8**    

18

2010
102

102
–
102

28

(4)
(0.5)

(4)**    

64
4
68

one- time gain associated with the contribution of this business to 
form a joint venture with both Grupo Embotelladoras Unidas S.A.B. 
de C.V. and Empresas Polar.

2010
Volume increased 10%, primarily reflecting volume from incremen-
tal brands related to our acquisition of PBG’s operations in Mexico, 
which contributed over 6 percentage points to volume growth, as 
well as incremental volume related to our DPSG manufacturing and 
distribution agreement, entered into in connection with our acquisi-
tions of PBG and PAS, which contributed over 5 percentage points 
to volume growth. North America volume, excluding the impact of 
the incremental DPSG volume, declined 1%, driven by a 3% decline 
in CSD volume, partially offset by a 1% increase in non- carbonated 
beverage volume. The non- carbonated beverage volume growth 
primarily reflected a mid- single-digit increase in Gatorade sports 
drinks and a high- single-digit increase in Lipton ready- to-drink 
teas, mostly offset by mid- single-digit declines in our base Aquafina 
water and Tropicana businesses.

Net revenue increased 102%, primarily reflecting the incremental 

finished goods revenue related to our acquisitions of PBG and PAS.
Reported operating profit increased 28%, primarily reflecting  

the incremental operating results from our acquisitions of  
PBG and PAS, partially offset by the items affecting comparability  
in the above table (see “Items Affecting Comparability”). Excluding 
the items affecting comparability, operating profit increased 64%. 
Unfavorable foreign currency reduced operating profit performance 
by 4 percentage points, driven primarily by a 6-percentage- point 
unfavorable impact from Venezuela.

45

PepsiCo, Inc. 2011 Annual Report

 
 
 
   
   
 
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
Management’s Discussion and Analysis

Europe

Net revenue
53rd week
Net revenue excluding above item*
Impact of foreign currency translation
Net revenue growth excluding above item, on a constant currency basis*

Operating profit
53rd week
Restructuring and impairment charges
Merger and integration costs
Inventory fair value adjustments
Operating profit excluding above items*
Impact of foreign currency translation
Operating profit growth excluding above items, on a constant currency basis*

*  See “Non- GAAP Measures”
**  Does not sum due to rounding

2011
$ 13,560
(33)
$ 13,527

$  1,210
(8)
77
123
25
$  1,427

2010
$ 9,602
–
$ 9,602

$ 1,054
–
–
  111
40
$ 1,205

2009
$ 7,028
–
$ 7,028

$  948
–
2
1
–
$  951

% Change

2011
41

41
(3)
38

15

18
(4)
14

2010
37

37
1
38

11

27
1
27**

2011
Snacks volume grew 35%, primarily reflecting our acquisition 
of WBD, which contributed 31 percentage points to volume 
growth. Double- digit growth in Turkey and South Africa and 
high-single-digit growth in Russia (ex- WBD) was partially offset 
by a mid- single-digit decline in Spain. Additionally, Walkers in the 
United Kingdom experienced low- single-digit growth.

Beverage volume increased 21%, primarily reflecting our acquisi-

tion of WBD, which contributed 20 percentage points to volume 
growth, and incremental brands related to our acquisitions of PBG 
and PAS, which contributed nearly 1 percentage point to volume 
growth. A double- digit increase in Turkey and mid- single-digit 
increases in the United Kingdom and France were offset by a 
high-single-digit decline in Russia (ex- WBD).

2010
Snacks volume increased 2%, reflecting high- single-digit growth 
in South Africa and Quaker in the United Kingdom, a double- digit 
increase in France and mid- single-digit increases in Russia and 
Turkey. These gains were partially offset by a double- digit decline 
in Romania and a low- single-digit decline in Spain. Additionally, 
Walkers in the United Kingdom experienced low- single-digit growth.
Beverage volume increased 10%, reflecting double- digit increases 

in Russia and Turkey, high- single-digit growth in Poland and France 
and a mid- single-digit increase in the United Kingdom. These 
gains were partially offset by a double- digit decline in Romania. 
Additionally, incremental brands related to our acquisitions of 
PBG and PAS contributed 5 percentage points to the beverage 
volume growth.

Net revenue grew 41%, primarily reflecting our acquisition of 

Net revenue grew 37%, primarily reflecting the incremental fin-

WBD, which contributed 29 percentage points to net revenue 
growth, and the incremental finished goods revenue related to our 
acquisitions of PBG and PAS. Favorable foreign currency contributed 
3 percentage points to net revenue growth.

Reported operating profit increased 15%, primarily reflecting 

the net revenue growth, partially offset by higher commodity 
costs. Our acquisition of WBD contributed 19 percentage points to 
the reported operating profit growth and reflected net charges of 
$56 million included in items affecting comparability in the above 
table (see “Items Affecting Comparability”). Excluding the items 
affecting comparability, operating profit increased 18%. Favorable 
foreign currency contributed 4 percentage points to operating 
profit growth.

ished goods revenue related to our acquisitions of PBG and PAS. 
Unfavorable foreign currency reduced net revenue growth by over 
1 percentage point.

Operating profit grew 11%, primarily reflecting incremental oper-
ating results from our acquisitions of PBG and PAS. Operating profit 
growth was also adversely impacted by the items affecting com-
parability in the above table (see “Items Affecting Comparability”). 
Excluding these items, operating profit increased 27%. Unfavorable 
foreign currency reduced operating profit growth by 1 percent-
age point.

46

PepsiCo, Inc. 2011 Annual Report

 
 
 
   
   
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
Asia, Middle East & Africa

Net revenue
Impact of foreign currency translation
Net revenue growth, on a constant currency basis*

Operating profit
Restructuring and impairment charges
Operating profit excluding above item*
Impact of foreign currency translation
Operating profit growth excluding above item, on a constant currency basis*

*  See “Non- GAAP Measures”
**  Does not sum due to rounding

2011
Snacks volume grew 15%, reflecting broad- based increases driven 
by double- digit growth in India, China and the Middle East.

Beverage volume grew 5%, driven by double- digit growth in 
India and mid- single-digit growth in China and the Middle East. 
Acquisitions had a nominal impact on the beverage volume 
growth rate.

Net revenue grew 17%, reflecting the volume growth and 

favorable effective net pricing. Foreign currency contributed 2 per-
centage points to net revenue growth. Acquisitions had a nominal 
impact on net revenue growth.

Operating profit grew 25%, driven primarily by the net revenue 
growth, partially offset by higher commodity costs. Acquisitions and 
divestitures increased operating profit growth by 16 percentage 
points, primarily as a result of a one- time gain associated with the 
sale of our investment in our franchise bottler in Thailand. Favorable 
foreign currency contributed 2.5 percentage points to the operating 
profit growth.

2010
Snacks volume grew 16%, reflecting broad- based increases driven 
by double- digit growth in India, the Middle East and China, partially 
offset by a low- single-digit decline in Australia. Acquisitions contrib-
uted nearly 3 percentage points to the snacks volume growth.

Beverage volume grew 7%, driven by double- digit growth in India 
and China, partially offset by a low- single-digit decline in the Middle 
East. Acquisitions had a nominal impact on the beverage volume 
growth rate.

Net revenue grew 19%, reflecting the volume growth and 
favorable effective net pricing. Foreign currency contributed 
3 percentage points to the net revenue growth. The net impact of 
acquisitions and divestitures contributed 1 percentage point to the 
net revenue growth.

Operating profit grew 1%, driven primarily by the net revenue 
growth, partially offset by higher commodity costs and increased 
investments in strategic markets. The net impact of acquisitions 

Management’s Discussion and Analysis

2011
$ 7,392

2010
$ 6,291

2009
$ 5,277

$  887
9
$  896

$  708
–
$  708

$  700
12
$  712

% Change

2011
17
(2)
16**    

25

27
(2.5)
24**    

2010
19
(3)
16

1

(1)
(3)
(4)

and divestitures reduced operating profit growth by 10 percentage 
points, primarily as a result of a one- time gain in the prior year asso-
ciated with the contribution of our snacks business in Japan to form 
a joint venture with Calbee Foods Company. Favorable foreign cur-
rency contributed over 3 percentage points to the operating profit 
growth and the absence of restructuring and impairment charges in 
the current year contributed 2 percentage points.

Our Liquidity and Capital Resources
We believe that our cash generating capability and financial condi-
tion, together with our revolving credit facilities and other available 
methods of debt financing (including long- term debt financing 
which, depending upon market conditions, we may use to replace 
a portion of our commercial paper borrowings), will be adequate to 
meet our operating, investing and financing needs. However, there 
can be no assurance that volatility in the global capital and credit 
markets will not impair our ability to access these markets on terms 
commercially acceptable to us or at all. See Note 9 for a description 
of our credit facilities. See also “Unfavorable economic conditions 
may have an adverse impact on our business results or financial con-
dition.” in “Our Business Risks.”

In addition, currency restrictions enacted by the government in 
Venezuela have impacted our ability to pay dividends outside of the 
country from our snack and beverage operations in Venezuela. As 
of December 31, 2011, our operations in Venezuela comprised 8% of 
our cash and cash equivalents balance.

Furthermore, our cash provided from operating activities is some-
what impacted by seasonality. Working capital needs are impacted 
by weekly sales, which are generally highest in the third quarter due 
to seasonal and holiday- related sales patterns, and generally lowest 
in the first quarter. On a continuing basis, we consider various trans-
actions to increase shareholder value and enhance our business 
results, including acquisitions, divestitures, joint ventures and share 
repurchases. These transactions may result in future cash proceeds 
or payments.

47

PepsiCo, Inc. 2011 Annual Report

 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
 
   
   
   
   
   
Management’s Discussion and Analysis

The table below summarizes our cash activity:

Net cash provided by operating 

activities

Net cash used for investing activities
Net cash (used for)/provided by 

2011

2010

2009

  $ 8,944
  $ (5,618)

  $ 8,448
  $ (7,668)

  $ 6,796
  $ (2,401)

financing activities

  $ (5,135)

  $ 1,386

  $ (2,497)

Operating Activities
During 2011, net cash provided by operating activities was $8.9 bil-
lion, compared to net cash provided of $8.4 billion in the prior year. 
The increase over the prior year primarily reflects the overlap of 
discretionary pension contributions of $1.3 billion ($1.0 billion after- 
tax) in the prior year, partially offset by unfavorable working capital 
comparisons to the prior year.

During 2010, net cash provided by operating activities was 
$8.4 billion, compared to net cash provided of $6.8 billion in the 
prior year. The increase over the prior year primarily reflects the 
incremental operating results from our acquisitions of PBG and PAS, 
as well as favorable working capital comparisons to the prior year.
Also see “Management Operating Cash Flow” below for certain 

other items impacting net cash provided by operating activities.

Investing Activities
During 2011, net cash used for investing activities was $5.6  billion, 
primarily reflecting $3.3 billion for net capital spending and 
$2.4  billion of cash paid, net of cash and cash equivalents acquired, 
in connection with our acquisition of WBD.

During 2010, net cash used for investing activities was $7.7 bil-

lion, primarily reflecting $3.2 billion for net capital spending, 
$2.8 billion of net cash paid in connection with our acquisitions of 
PBG and PAS, and $0.9 billion of cash paid in connection with our 
manufacturing and distribution agreement with DPSG. We also paid 
$0.5 billion to acquire WBD American Depositary Shares (ADS) in 
the open market.

We anticipate capital spending in 2012 of approximately 

$3.0 billion.

Financing Activities
During 2011, net cash used for financing activities was $5.1 bil-
lion, primarily reflecting the return of operating cash flow to our 
shareholders through share repurchases and dividend payments of 
$5.6 billion, our purchase of an additional $1.4 billion of WBD ordi-
nary shares (including shares underlying ADSs) and our repurchase 
of certain WBD debt obligations of $0.8 billion, partially offset by 
net proceeds from long- term debt of $1.4 billion and stock option 
 proceeds of $0.9 billion.

During 2010, net cash provided by financing activities was $1.4 bil-
lion, primarily reflecting proceeds from issuances of long- term debt 
of $6.5 billion, mostly in connection with our acquisitions of PBG and 
PAS, and net proceeds from short- term borrowings of $2.5 billion. 
These increases were largely offset by the return of operating cash 
flow to our shareholders through share repurchases and dividend 
payments of $8.0 billion.

We annually review our capital structure with our Board, including 
our dividend policy and share repurchase activity. In the first quarter 
of 2012, our Board of Directors approved a 4% dividend increase, 
raising the dividend payable on our common stock, effective with 
the dividend payable in June 2012, to $2.15 per share. We expect to 
repurchase approximately $3.0 billion of our common stock in 2012.

Management Operating Cash Flow
We focus on management operating cash flow as a key element in 
achieving maximum shareholder value, and it is the primary mea-
sure we use to monitor cash flow performance. However, it is not a 
measure provided by accounting principles generally accepted in 
the U.S. Therefore, this measure is not, and should not be viewed 
as, a substitute for U.S. GAAP cash flow measures. Since net capital 
spending is essential to our product innovation initiatives and main-
taining our operational capabilities, we believe that it is a recurring 
and necessary use of cash. As such, we believe investors should also 
consider net capital spending when evaluating our cash from oper-
ating activities. Additionally, we consider certain items (included in 
the table below), in evaluating management operating cash flow. 
We believe investors should consider these items in evaluating our 
management operating cash flow results.

The table below reconciles net cash provided by operating activi-

ties, as reflected in our cash flow statement, to our management 
operating cash flow excluding the impact of the items below.

Net cash provided by operating activities

Capital spending
Sales of property, plant and equipment  

Management operating cash flow

Discretionary pension and retiree 

medical contributions (after- tax)
Payments related to restructuring 

charges (after- tax)

Merger and integration payments 

(after- tax)

Foundation contribution (after- tax)
Debt repurchase (after- tax)
Capital investments related to the 

PBG/PAS integration
Management operating cash flow 

excluding above items

2011
  $ 8,944
 (3,339)
84
 5,689

44

21

  283
–
–

2010
  $ 8,448
 (3,253)
81
 5,276

2009
  $ 6,796
 (2,128)
58
 4,726

  983

  640

20

  168

  299
64
  112

49
–
–

–

  108

  138

  $ 6,145

  $ 6,892

  $ 5,583

48

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management’s Discussion and Analysis

In 2011 and 2010, management operating cash flow was used 
primarily to repurchase shares and pay dividends. In 2009, manage-
ment operating cash flow was used primarily to pay dividends. We 
expect to continue to return management operating cash flow to 
our shareholders through dividends and share repurchases while 
maintaining credit ratings that provide us with ready access to 
global and capital credit markets. However, see “Our borrowing 
costs and access to capital and credit markets may be adversely 
affected by a downgrade or potential downgrade of our credit rat-
ings.” in “Our Business Risks” for certain factors that may impact our 
operating cash flows.

Any downgrade of our credit ratings by a credit rating agency, 

especially any downgrade to below investment grade, could 
increase our future borrowing costs or impair our ability to access 
capital and credit markets on terms commercially acceptable to 
us, or at all. In addition, any downgrade of our current short- term 
credit ratings could impair our ability to access the commercial 

paper market with the same flexibility that we have experienced 
historically, and therefore require us to rely more heavily on more 
expensive types of debt financing. See “Our borrowing costs and 
access to capital and credit markets may be adversely affected by 
a downgrade or potential downgrade of our credit ratings.” in “Our 
Business Risks” and Note 9.

Credit Facilities and Long- Term Contractual Commitments
See Note 9 for a description of our credit facilities and long- term 
contractual commitments.

Off- Balance-Sheet Arrangements
It is not our business practice to enter into off- balance-sheet 
arrangements, other than in the normal course of business. 
Additionally, we do not enter into off- balance-sheet transactions 
specifically structured to provide income or tax benefits or to avoid 
recognizing or disclosing assets or liabilities. See Note 9.

49

PepsiCo, Inc. 2011 Annual Report

Consolidated Statement of Income 

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 31, 2011, December 25, 2010 and December 26, 2009 
(in millions except per share amounts)
Net Revenue
Cost of sales
Selling, general and administrative expenses
Amortization of intangible assets
Operating Profit
Bottling equity income
Interest expense
Interest income and other
Income before income taxes
Provision for income taxes
Net income
Less: Net income attributable to noncontrolling interests
Net Income Attributable to PepsiCo
Net Income Attributable to PepsiCo per Common Share
  Basic
  Diluted
Weighted- average common shares outstanding
  Basic
  Diluted
Cash dividends declared per common share

See accompanying notes to consolidated financial statements.

2011
$ 66,504
 31,593
 25,145
133
  9,633
–
(856)
57
  8,834
  2,372
  6,462
19
$  6,443

$  4.08
$  4.03

  1,576
  1,597
$  2.025

2010
$ 57,838
 26,575
 22,814
117
  8,332
735
(903)
68
  8,232
  1,894
  6,338
18
$  6,320

$  3.97
$  3.91

  1,590
  1,614
$  1.89

2009
$ 43,232
 20,099
 15,026
63
  8,044
365
(397)
67
  8,079
  2,100
  5,979
33
$  5,946

$  3.81
$  3.77

  1,558
  1,577
$  1.775

50

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Cash Flows 

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 31, 2011, December 25, 2010 and December 26, 2009 
(in millions)
Operating Activities
Net income
Depreciation and amortization
Stock- based compensation expense
Restructuring and impairment charges
Cash payments for restructuring charges
Merger and integration costs
Cash payments for merger and integration costs
Gain on previously held equity interests in PBG and PAS
Asset write- off
Non- cash foreign exchange loss related to Venezuela devaluation
Excess tax benefits from share- based payment arrangements
Pension and retiree medical plan contributions
Pension and retiree medical plan expenses
Bottling equity income, net of dividends
Deferred income taxes and other tax charges and credits
Change in accounts and notes receivable
Change in inventories
Change in prepaid expenses and other current assets
Change in accounts payable and other current liabilities
Change in income taxes payable
Other, net
Net Cash Provided by Operating Activities
Investing Activities
Capital spending
Sales of property, plant and equipment
Acquisitions of PBG and PAS, net of cash and cash equivalents acquired
Acquisition of manufacturing and distribution rights from DPSG
Acquisition of WBD, net of cash and cash equivalents acquired
Investment in WBD
Other acquisitions and investments in noncontrolled affiliates
Divestitures
Cash restricted for pending acquisitions
Short- term investments, by original maturity
More than three months —  purchases
More than three months —  maturities
Three months or less, net

Other investing, net
Net Cash Used for Investing Activities

(Continued on following page)

2011

2010

2009

$ 6,462
 2,737
  326
  383
(31)
  329
  (377)
–
–
–
(70)
  (349)
  571
–
  495
  (666)
  (331)
(27)
  520
  (340)
  (688)
 8,944

 (3,339)
84
–
–
 (2,428)
  (164)
  (601)
  780
–

–
21
45
(16)
 (5,618)

$ 6,338
 2,327
  299
–
(31)
  808
  (385)
  (958)
  145
  120
  (107)
 (1,734)
  453
42
  500
  (268)
  276
  144
  488
  123
  (132)
 8,448

 (3,253)
81
 (2,833)
  (900)
–
  (463)
(83)
12
–

(12)
29
  (229)
(17)
 (7,668)

$ 5,979
 1,635
  227
36
  (196)
50
(49)
–
–
–
(42)
 (1,299)
  423
  (235)
  284
  188
17
  (127)
  (133)
  319
  (281)
 6,796

 (2,128)
58
–
–
–
–
  (500)
99
15

(29)
71
13
–
 (2,401)

51

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Cash Flows 
(continued)

Fiscal years ended December 31, 2011, December 25, 2010 and December 26, 2009 
(in millions)
Financing Activities
Proceeds from issuances of long- term debt
Payments of long- term debt
Debt repurchase
Short- term borrowings, by original maturity
More than three months —  proceeds
More than three months —  payments
Three months or less, net

Cash dividends paid
Share repurchases —  common
Share repurchases —  preferred
Proceeds from exercises of stock options
Excess tax benefits from share- based payment arrangements
Acquisition of noncontrolling interests
Other financing
Net Cash (Used for)/Provided by Financing Activities
Effect of exchange rate changes on cash and cash equivalents
Net (Decrease)/Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
Non- cash activity:
Issuance of common stock and equity awards in connection with our acquisitions of PBG and PAS, as reflected in 

investing and financing activities

See accompanying notes to consolidated financial statements.

PepsiCo, Inc. and Subsidiaries

2011

2010

2009

$ 3,000
 (1,596)
  (771)

  523
  (559)
  339
 (3,157)
 (2,489)
(7)
  945
70
 (1,406)
(27)
 (5,135)
(67)
 (1,876)
 5,943
$ 4,067

$ 6,451
(59)
  (500)

  227
(96)
 2,351
 (2,978)
 (4,978)
(5)
 1,038
  107
  (159)
(13)
 1,386
  (166)
 2,000
 3,943
$ 5,943

$ 1,057
  (226)
–

26
(81)
  (963)
 (2,732)
–
(7)
  413
42
–
(26)
 (2,497)
(19)
 1,879
 2,064
$ 3,943

–

$ 4,451

–

52

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Balance Sheet 

PepsiCo, Inc. and Subsidiaries

December 31, 2011 and December 25, 2010 
(in millions except per share amounts)
ASSETS
Current Assets
Cash and cash equivalents
Short- term investments
Accounts and notes receivable, net
Inventories
Prepaid expenses and other current assets
  Total Current Assets
Property, Plant and Equipment, net
Amortizable Intangible Assets, net
Goodwill
Other nonamortizable intangible assets
  Nonamortizable Intangible Assets
Investments in Noncontrolled Affiliates
Other Assets

  Total Assets

LIABILITIES AND EQUITY
Current Liabilities
Short- term obligations
Accounts payable and other current liabilities
Income taxes payable
  Total Current Liabilities
Long- Term Debt Obligations
Other Liabilities
Deferred Income Taxes
  Total Liabilities
Commitments and Contingencies
Preferred Stock, no par value
Repurchased Preferred Stock
PepsiCo Common Shareholders’ Equity
Common stock, par value 12 ⁄ 3¢ per share (authorized 3,600 shares, issued 1,865 shares)
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Repurchased common stock, at cost (301 and 284 shares, respectively)
  Total PepsiCo Common Shareholders’ Equity
Noncontrolling interests
  Total Equity

  Total Liabilities and Equity

See accompanying notes to consolidated financial statements.

2011

2010

  $  4,067
358
  6,912
  3,827
  2,277
  17,441
  19,698
  1,888
  16,800
  14,557
  31,357
  1,477
  1,021
  $  72,882

  $  6,205
  11,757
192
  18,154
  20,568
  8,266
  4,995
  51,983

  $  5,943
426
  6,323
  3,372
  1,505
  17,569
  19,058
  2,025
  14,661
  11,783
  26,444
  1,368
  1,689
  $  68,153

  $  4,898
  10,923
71
  15,892
  19,999
  6,729
  4,057
  46,677

41
(157)

41
(150)

31
  4,461
  40,316
  (6,229)
 (17,875)
  20,704
311
  20,899
  $  72,882

31
  4,527
  37,090
  (3,630)
 (16,745)
  21,273
312
  21,476
  $  68,153

53

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Equity 

PepsiCo, Inc. and Subsidiaries

Fiscal years ended December 31, 2011, December 25, 2010 and December 26, 2009 
(in millions)

Preferred Stock
Repurchased Preferred Stock
Balance, beginning of year
Redemptions
Balance, end of year

Common Stock

Balance, beginning of year
Shares issued in connection with our acquisitions of PBG and PAS
Balance, end of year

Capital in Excess of Par Value
Balance, beginning of year
Stock- based compensation expense
Stock option exercises/RSUs converted(a)
Withholding tax on RSUs converted
Equity issued in connection with our acquisitions of PBG and PAS
Other
Balance, end of year

Retained Earnings

Balance, beginning of year
Net income attributable to PepsiCo
Cash dividends declared —  common
Cash dividends declared —  preferred
Cash dividends declared —  RSUs
Other
Balance, end of year

Accumulated Other Comprehensive Loss

Balance, beginning of year
Currency translation adjustment
Cash flow hedges, net of tax:
Net derivative losses
Reclassification of net losses to net income

Pension and retiree medical, net of tax:

Net pension and retiree medical (losses)/gains
Reclassification of net losses to net income
Unrealized (losses)/gains on securities, net of tax
Other
Balance, end of year

Repurchased Common Stock
Balance, beginning of year
Share repurchases
Stock option exercises
Other
Balance, end of year

Total Common Shareholders’ Equity
Noncontrolling Interests

Balance, beginning of year
Net income attributable to noncontrolling interests
Distributions to noncontrolling interests, net
Currency translation adjustment
Acquisitions and divestitures
Other, net
Balance, end of year

Total Equity

2011

2010

2009

Shares
0.8

Amount
41

  $ 

Shares
0.8

Amount
41

  $ 

Shares
0.8

Amount
41

  $ 

(0.6)
(−)
(0.6)

  1,865
–
  1,865

(284)
(39)
20
2
(301)

(150)
(7)
(157)

31
–
31

  4,527
326
(361)
(56)
–
25
  4,461

  37,090
  6,443
  (3,192)
(1)
(24)
–
  40,316

  (3,630)
  (1,529)

(83)
14

  (1,110)
133
(8)
(16)
  (6,229)

 (16,745)
  (2,489)
  1,251
108
 (17,875)
  20,704

(0.6)
(−)
(0.6)

  1,782
83
  1,865

(217)
(76)
24
(15)
(284)

(145)
(5)
(150)

30
1
31

250
299
(500)
(68)
  4,451
95
  4,527

  33,805
  6,320
  (3,028)
(1)
(12)
6
  37,090

  (3,794)
312

(111)
53

(280)
166
23
1
  (3,630)

 (13,383)
  (4,978)
  1,487
129
 (16,745)
  21,273

(0.5)
(0.1)
(0.6)

  1,782
−
  1,782

(229)
−
11
1
(217)

(138)
(7)
(145)

30
−
30

351
227
(292)
(36)
−
−
250

  30,638
  5,946
  (2,768)
(2)
(9)
−
  33,805

  (4,694)
800

(55)
28

21
86
20
−
  (3,794)

 (14,122)
−
649
90
 (13,383)
  16,908

312
19
(24)
65
(57)
(4)
311
  $  20,899

638
18
(6)
(13)
(326)
1
312
  $  21,476

476
33
−
(12)
150
(9)
638
  $  17,442

(a)  Includes total tax benefits of $43 million in 2011, $75 million in 2010 and $31 million in 2009.

(Continued on following page)

54

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Equity 
(continued)

Fiscal years ended December 31, 2011, December 25, 2010 and December 26, 2009 
(in millions)
Comprehensive Income

Net income

Other comprehensive (loss)/income
  Currency translation adjustment
  Cash flow hedges, net of tax
  Pension and retiree medical, net of tax:

  Net prior service (cost)/credit
  Net (losses)/gains

  Unrealized (losses)/gains on securities, net of tax
  Other

Comprehensive income

Comprehensive income attributable to noncontrolling interests

Comprehensive Income Attributable to PepsiCo

See accompanying notes to consolidated financial statements.

PepsiCo, Inc. and Subsidiaries

2010

$ 6,338

  299
(58)

22
  (136)
23
1
  151
 6,489
(5)
$ 6,484

2009

$ 5,979

  788
(27)

(3)
  110
20
−
  888
 6,867
(21)
$ 6,846

2011

$  6,462

 (1,464)
(69)

(10)
(967)
(8)
(16)
 (2,534)
  3,928
(84)
$  3,844

55

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

Note 1
Basis of Presentation and Our Divisions

Basis of Presentation
Our financial statements include the consolidated accounts of 
PepsiCo, Inc. and the affiliates that we control. In addition, we 
include our share of the results of certain other affiliates using the 
equity method based on our economic ownership interest, our abil-
ity to exercise significant influence over the operating or financial 
decisions of these affiliates or our ability to direct their economic 
resources. We do not control these other affiliates, as our ownership 
in these other affiliates is generally less than 50%. Intercompany bal-
ances and transactions are eliminated. Our fiscal year ends on the 
last Saturday of each December, resulting in an additional week of 
results every five or six years. In 2011, we had an additional week 
of results (53rd week).

On February 26, 2010, we completed our acquisitions of The Pepsi 

Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS). The results 
of the acquired companies in the U.S. and Canada are reflected in 
our consolidated results as of the acquisition date, and the interna-
tional results of the acquired companies have been reported as of 
the beginning of our second quarter of 2010, consistent with our 
monthly international reporting calendar. The results of the acquired 
companies in the U.S., Canada and Mexico are reported within 
our PAB segment, and the results of the acquired companies in 
Europe, including Russia, are reported within our Europe segment. 
Prior to our acquisitions of PBG and PAS, we recorded our share 
of equity income or loss from the acquired companies in  bottling 
equity income in our income statement. Our share of income or 
loss from other noncontrolled affiliates is reflected as a component 
of selling, general and administrative expenses. Additionally, in the 
first quarter of 2010, in connection with our acquisitions of PBG and 
PAS, we recorded a gain on our previously held equity interests of 
$958 million, comprising $735 million which was non- taxable and 
recorded in bottling equity income and $223 million related to 
the reversal of deferred tax liabilities associated with these previ-
ously held equity interests. See Notes 8 and 15 and for additional 
unaudited information on items affecting the comparability of 
our consolidated results, see “Items Affecting Comparability” in 
Management’s Discussion and Analysis.

As of the beginning of our 2010 fiscal year, the results of our 

Venezuelan businesses are reported under hyperinflation-
ary accounting. See “Our Business Risks” and “Items Affecting 
Comparability” in Management’s Discussion and Analysis.

In the first quarter of 2011, Quaker Foods North America (QFNA) 
changed its method of accounting for certain U.S. inventories from 
the last- in, first- out (LIFO) method to the average cost method. This 
change is considered preferable by management as we believe that 
the average cost method of accounting for all U.S. foods inventories 
will improve our financial reporting by better matching revenues 
and expenses and better reflecting the current value of inventory. 
In addition, the change from the LIFO method to the average cost 

method will enhance the comparability of QFNA’s financial results 
with our other food businesses, as well as with peer companies 
where the average cost method is widely used. The impact of this 
change on consolidated net income in the first quarter of 2011 was 
approximately $9 million (or less than a penny per share). Prior peri-
ods were not restated as the impact of the change on previously 
issued financial statements was not considered material.

Raw materials, direct labor and plant overhead, as well as pur-
chasing and receiving costs, costs directly related to production 
planning, inspection costs and raw material handling facilities, are 
included in cost of sales. The costs of moving, storing and delivering 
finished product are included in selling, general and administra-
tive expenses.

The preparation of our consolidated financial statements in 
 conformity with generally accepted accounting principles requires 
us to make estimates and assumptions that affect reported amounts 
of assets, liabilities, revenues, expenses and disclosure of contingent 
assets and liabilities. Estimates are used in determining, among 
other items, sales incentives accruals, tax reserves, stock- based 
compensation, pension and retiree medical accruals, useful lives for 
intangible assets, and future cash flows associated with impairment 
testing for perpetual brands, goodwill and other long- lived assets. 
We evaluate our estimates on an ongoing basis using our historical 
experience, as well as other factors we believe appropriate under 
the circumstances, such as current economic conditions, and adjust 
or revise our estimates as circumstances change. As future events 
and their effect cannot be determined with precision, actual results 
could differ significantly from these estimates.

While our North America results are reported on a weekly calen-
dar basis, most of our international operations report on a monthly 
calendar basis. The following chart details our quarterly reporting 
schedule in 2011, reflecting the extra week in the fourth quarter 
this year:

Quarter
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

U.S. and Canada
12 weeks
12 weeks
12 weeks
17 weeks

International
January, February
March, April and May
June, July and August
September, October, 
November and December

See “Our Divisions” below and for additional unaudited informa-
tion on items affecting the comparability of our consolidated results, 
see “Items Affecting Comparability” in Management’s Discussion 
and Analysis.

Tabular dollars are in millions, except per share amounts. All per 
share amounts reflect common per share amounts, assume dilution 
unless noted, and are based on unrounded amounts. Certain reclas-
sifications were made to prior years’ amounts to conform to the 
2011 presentation.

Our Divisions
We manufacture or use contract manufacturers, market and sell 
a variety of salty, convenient, sweet and grain- based snacks, 

56

PepsiCo, Inc. 2011 Annual Report

carbonated and non- carbonated beverages, dairy products and 
other foods in over 200 countries and territories with our largest 
operations in North America (United States and Canada), Russia, 
Mexico and the United Kingdom. Division results are based on 
how our Chief Executive Officer assesses the performance of and 
allocates resources to our divisions. For additional unaudited infor-
mation on our divisions, see “Our Operations” in Management’s 
Discussion and Analysis. The accounting policies for the divisions 
are the same as those described in Note 2, except for the following 
allocation methodologies:
(cid:116)(cid:1) (cid:84)(cid:85)(cid:80)(cid:68)(cid:76)(cid:14)(cid:1)(cid:67)(cid:66)(cid:84)(cid:70)(cid:69)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:70)(cid:79)(cid:84)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:70)(cid:89)(cid:81)(cid:70)(cid:79)(cid:84)(cid:70)(cid:28)
(cid:116)(cid:1) (cid:81)(cid:70)(cid:79)(cid:84)(cid:74)(cid:80)(cid:79)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:83)(cid:70)(cid:85)(cid:74)(cid:83)(cid:70)(cid:70)(cid:1)(cid:78)(cid:70)(cid:69)(cid:74)(cid:68)(cid:66)(cid:77)(cid:1)(cid:70)(cid:89)(cid:81)(cid:70)(cid:79)(cid:84)(cid:70)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69)
(cid:116)(cid:1) (cid:69)(cid:70)(cid:83)(cid:74)(cid:87)(cid:66)(cid:85)(cid:74)(cid:87)(cid:70)(cid:84)(cid:15)

Stock- Based Compensation Expense
Our divisions are held accountable for stock- based compensation 
expense and, therefore, this expense is allocated to our divisions 
as an incremental employee compensation cost. The allocation of 
stock- based compensation expense in 2011 was approximately 15% 
to FLNA, 2% to QFNA, 4% to LAF, 31% to PAB, 12% to Europe, 9% to 
AMEA and 27% to corporate unallocated expenses. We had similar 
allocations of stock- based compensation expense to our divisions in 
2010 and 2009. The expense allocated to our divisions excludes any 
impact of changes in our assumptions during the year which reflect 
market conditions over which division management has no control. 
Therefore, any variances between allocated expense and our actual 
expense are recognized in corporate unallocated expenses.

Notes to Consolidated Financial Statements

Pension and Retiree Medical Expense
Pension and retiree medical service costs measured at a fixed 
discount rate, as well as amortization of costs related to certain 
pension plan amendments and gains and losses due to demograph-
ics, including salary experience, are reflected in division results for 
North American employees. Division results also include interest 
costs, measured at a fixed discount rate, for retiree medical plans. 
Interest costs for the pension plans, pension asset returns and the 
impact of pension funding, and gains and losses other than those 
due to demographics, are all reflected in corporate unallocated 
expenses. In addition, corporate unallocated expenses include the 
difference between the service costs measured at a fixed discount 
rate (included in division results as noted above) and the total ser-
vice costs determined using the plans’ discount rates as disclosed 
in Note 7.

Derivatives
We centrally manage commodity derivatives on behalf of our divi-
sions. These commodity derivatives include metals, energy and 
agricultural products. Certain of these commodity derivatives do 
not qualify for hedge accounting treatment and are marked to 
market with the resulting gains and losses recognized in corporate 
unallocated expenses. These gains and losses are subsequently 
reflected in division results when the divisions take delivery of the 
underlying commodity. Therefore, the divisions realize the eco-
nomic effects of the derivative without experiencing any resulting 
mark- to-market volatility, which remains in corporate unallocated 
expenses. These derivatives hedge underlying commodity price risk 
and were not entered into for speculative purposes.

Net Revenue

Operating Profit(a)

2011
$ 13,322
  2,656
  7,156
 22,418
 13,560
  7,392
 66,504

2010
$ 12,573
  2,656
  6,315
 20,401
  9,602
  6,291
 57,838

2009
$ 12,421
  2,687
  5,703
 10,116
  7,028
  5,277
 43,232

FLNA
QFNA
LAF
PAB
Europe(b)
AMEA
Total division
Corporate Unallocated

53rd week
Net impact of mark- to-market on commodity hedges
Merger and integration costs
Restructuring and impairment charges
Venezuela currency devaluation
Asset write- off
Foundation contribution
Other

(a)  For information on the impact of restructuring, impairment and integration charges on our divisions, see Note 3.
(b) Change in net revenue in 2011 relates primarily to our acquisition of WBD.

$ 66,504

$ 57,838

$ 43,232

2011
$  3,621
797
  1,078
  3,273
  1,210
887
 10,866

(18)
(102)
(78)
(74)
–
–
–
(961)
$  9,633

2010
$ 3,376
  741
 1,004
 2,776
 1,054
  708
 9,659

–
91
  (191)
–
  (129)
  (145)
  (100)
  (853)
$ 8,332

2009
$ 3,105
  781
  904
 2,172
  948
  700
 8,610

–
  274
(49)
–
–
–
–
  (791)
$ 8,044

57

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

Net Revenue

AMEA

FLNA

11%

20%

Europe

20%

QFNA 4%

11%

LAF

34%

PAB

Division Operating Profit

AMEA

Europe

8%

FLNA

11%

30%

PAB

33%

8%

10%

QFNA

LAF

Corporate
Corporate includes costs of our corporate headquarters, centrally managed initiatives, such as our ongoing global business transformation 
initiative and research and development projects, unallocated insurance and benefit programs, foreign exchange transaction gains and 
losses, certain commodity derivative gains and losses and certain other items.

Other Division Information

FLNA
QFNA
LAF
PAB
Europe(a)
AMEA
Total division
Corporate(b)
Investments in bottling affiliates

Total Assets

Capital Spending

2011
$  6,120
  1,174
  4,731
 31,187
 18,479
  6,048
 67,739
  5,143
–
$ 72,882

2010
$  6,027
  1,217
  4,053
 31,622
 13,032
  5,569
 61,520
  6,394
239
$ 68,153

2009
$  6,093
  1,241
  3,575
  7,670
  9,471
  4,787
 32,837
  3,933
  3,078
$ 39,848

2011
$  439
43
  413
 1,006
  588
  693
 3,182
  157
–
$ 3,339

2010
$  515
48
  370
  973
  517
  610
 3,033
  220
–
$ 3,253

2009
$  478
45
  310
  182
  370
  572
 1,957
  171
–
$ 2,128

(a)  Changes in total assets in 2011 relate primarily to our acquisition of WBD.
(b) Corporate assets consist principally of cash and cash equivalents, short- term investments, derivative instruments and property, plant and equipment.

Total Assets

Corporate

FLNA

AMEA

7% 8%

8%

7%

QFNA 2%

LAF

Europe

25%

43%

PAB

Capital Spending

Corporate 5%

FLNA

AMEA

Europe

21%

18%

13%

QFNA 1%

LAF

12%

30%

PAB

Amortization of Intangible Assets

Depreciation and Other Amortization

FLNA
QFNA
LAF
PAB

Europe
AMEA
Total division
Corporate

2010
$  7
  –
  6
  56

  35
  13
 117
  –
$ 117

2009
$  7
  –
  5
 18

 22
 11
 63
  –
$ 63

2011
$  458
54
  238
  865

  522
  350
 2,487
  117
$ 2,604

2010
$  448
52
  213
  749

  355
  294
 2,111
99
$ 2,210

2009
$  428
48
  189
  345

  236
  239
 1,485
87
$ 1,572

2011
$  7
  –
  10
  65

  39
  12
 133
  –
$ 133

58

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.
Russia(b)
Mexico
Canada
United Kingdom
All other countries

Notes to Consolidated Financial Statements

Net Revenue

Long- Lived Assets(a)

2011
$ 33,053
  4,954
  4,782
  3,364
  2,075
 18,276
$ 66,504

2010
$ 30,618
  1,890
  4,531
  3,081
  1,888
 15,830
$ 57,838

2009
$ 22,446
  1,006
  3,210
  1,996
  1,826
 12,748
$ 43,232

2011
$ 28,999
  8,236
  1,027
  3,097
  1,011
 12,050
$ 54,420

2010
$ 28,631
  2,744
  1,671
  3,133
  1,019
 11,697
$ 48,895

2009
$ 12,496
  2,094
  1,044
688
  1,358
  8,632
$ 26,312

(a)  Long- lived assets represent property, plant and equipment, nonamortizable intangible assets, amortizable intangible assets and investments in noncontrolled affiliates. These assets are 

reported in the country where they are primarily used.
(b) Changes in 2011 relate primarily to our acquisition of WBD.

Net Revenue

Other

28%

Long-Lived Assets

Other

22%

50%

United States

United Kingdom 2%

53%

United States

United Kingdom 3%

Russia
Canada 5%

7%

7%

Mexico

Russia

15%

6%

Canada

Mexico 2%

Note 2
Our Significant Accounting Policies

Revenue Recognition
We recognize revenue upon shipment or delivery to our customers 
based on written sales terms that do not allow for a right of return. 
However, our policy for DSD and certain chilled products is to 
remove and replace damaged and out- of-date products from store 
shelves to ensure that our consumers receive the product qual-
ity and freshness that they expect. Similarly, our policy for certain 
warehouse- distributed products is to replace damaged and out- of-
date products. Based on our experience with this practice, we have 
reserved for anticipated damaged and out- of-date products. For 
additional unaudited information on our revenue recognition and 
related policies, including our policy on bad debts, see “Our Critical 
Accounting Policies” in Management’s Discussion and Analysis. 
We are exposed to concentration of credit risk by our customers, 
including Wal- Mart. In 2011, Wal- Mart (including Sam’s) represented 
approximately 11% of our total net revenue, including concentrate 
sales to our independent bottlers which are used in finished goods 
sold by them to Wal- Mart. We have not experienced credit issues 
with these customers.

Sales Incentives and Other Marketplace Spending
We offer sales incentives and discounts through various programs 
to our customers and consumers. Sales incentives and discounts are 
accounted for as a reduction of revenue and totaled $34.6 billion 
in 2011, $29.1 billion in 2010 and $12.9 billion in 2009. While most of 
these incentive arrangements have terms of no more than one year, 
certain arrangements, such as fountain pouring rights, may extend 
beyond one year. Costs incurred to obtain these arrangements are 

recognized over the shorter of the economic or contractual life, as 
a reduction of revenue, and the remaining balances of $288 mil-
lion as of December 31, 2011 and $296 million as of December 25, 
2010, are included in current assets and other assets on our balance 
sheet. For additional unaudited information on our sales incentives, 
see “Our Critical Accounting Policies” in Management’s Discussion 
and Analysis.

Other marketplace spending, which includes the costs of adver-

tising and other marketing activities, totaled $3.5 billion in 2011, 
$3.4 billion in 2010 and $2.8 billion in 2009 and is reported as selling, 
general and administrative expenses. Included in these amounts 
were advertising expenses of $1.9 billion in 2011 and 2010 and 
$1.7 billion in 2009. Deferred advertising costs are not expensed 
until the year first used and consist of:
(cid:116)(cid:1) (cid:78)(cid:70)(cid:69)(cid:74)(cid:66)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:81)(cid:70)(cid:83)(cid:84)(cid:80)(cid:79)(cid:66)(cid:77)(cid:1)(cid:84)(cid:70)(cid:83)(cid:87)(cid:74)(cid:68)(cid:70)(cid:1)(cid:81)(cid:83)(cid:70)(cid:81)(cid:66)(cid:90)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:28)
(cid:116)(cid:1) (cid:81)(cid:83)(cid:80)(cid:78)(cid:80)(cid:85)(cid:74)(cid:80)(cid:79)(cid:66)(cid:77)(cid:1)(cid:78)(cid:66)(cid:85)(cid:70)(cid:83)(cid:74)(cid:66)(cid:77)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:74)(cid:79)(cid:87)(cid:70)(cid:79)(cid:85)(cid:80)(cid:83)(cid:90)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69)
(cid:116)(cid:1) (cid:81)(cid:83)(cid:80)(cid:69)(cid:86)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:71)(cid:86)(cid:85)(cid:86)(cid:83)(cid:70)(cid:1)(cid:78)(cid:70)(cid:69)(cid:74)(cid:66)(cid:1)(cid:66)(cid:69)(cid:87)(cid:70)(cid:83)(cid:85)(cid:74)(cid:84)(cid:74)(cid:79)(cid:72)(cid:15)

Deferred advertising costs of $163 million and $158 million at 

year- end 2011 and 2010, respectively, are classified as prepaid 
expenses on our balance sheet.

Distribution Costs
Distribution costs, including the costs of shipping and handling 
activities, are reported as selling, general and administrative 
expenses. Shipping and handling expenses were $9.2 billion in 2011, 
$7.7 billion in 2010 and $5.6 billion in 2009.

Cash Equivalents
Cash equivalents are investments with original maturities of three 
months or less.

59

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

Software Costs
We capitalize certain computer software and software develop-
ment costs incurred in connection with developing or obtaining 
computer software for internal use when both the preliminary 
project stage is completed and it is probable that the software will 
be used as intended. Capitalized software costs include only (i) 
external direct costs of materials and services utilized in developing 
or obtaining computer software, (ii) compensation and related ben-
efits for employees who are directly associated with the software 
project and (iii) interest costs incurred while developing internal- 
use computer software. Capitalized software costs are included in 
property, plant and equipment on our balance sheet and amortized 
on a straight- line basis when placed into service over the estimated 
useful lives of the software, which approximate five to 10 years. 
Software amortization totaled $156 million in 2011, $137 million in 
2010 and $119 million in 2009. Net capitalized software and develop-
ment costs were $1.3 billion as of December 31, 2011 and $1.1 billion 
as of December 25, 2010.

Commitments and Contingencies
We are subject to various claims and contingencies related to 
lawsuits, certain taxes and environmental matters, as well as com-
mitments under contractual and other commercial obligations. We 
recognize liabilities for contingencies and commitments when a loss 
is probable and estimable. For additional information on our com-
mitments, see Note 9.

Research and Development
We engage in a variety of research and development activities 
and continue to invest to accelerate growth in these activities and 
to drive innovation globally. These activities principally involve 
the development of new products, improvement in the quality of 
existing products, improvement and modernization of produc-
tion processes, and the development and implementation of new 
technologies to enhance the quality and value of both current 
and proposed product lines. Consumer research is excluded from 
research and development costs and included in other marketing 
costs. Research and development costs were $525 million in 2011, 
$488 million in 2010 and $414 million in 2009 and are reported 
within selling, general and administrative expenses.

Other Significant Accounting Policies
Our other significant accounting policies are disclosed as follows:
(cid:116)(cid:1) Property, Plant and Equipment and Intangible Assets —  Note 4, 
and for additional unaudited information on goodwill and 
other intangible assets, see “Our Critical Accounting Policies” in 
Management’s Discussion and Analysis.
Income Taxes —  Note 5, and for additional unaudited information, 
see “Our Critical Accounting Policies” in Management’s Discussion 
and Analysis.

(cid:116)(cid:1)

(cid:116)(cid:1) Stock- Based Compensation —  Note 6.
(cid:116)(cid:1) Pension, Retiree Medical and Savings Plans —  Note 7, and for 

additional unaudited information, see “Our Critical Accounting 
Policies” in Management’s Discussion and Analysis.

(cid:116)(cid:1) Financial Instruments —  Note 10, and for additional unaudited 

information, see “Our Business Risks” in Management’s Discussion 
and Analysis.

Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) 
amended its accounting guidance on the consolidation of vari-
able interest entities (VIE). Among other things, the new guidance 
requires a qualitative rather than a quantitative assessment to deter-
mine the primary beneficiary of a VIE based on whether the entity 
(1) has the power to direct matters that most significantly impact 
the activities of the VIE and (2) has the obligation to absorb losses 
or the right to receive benefits of the VIE that could potentially be 
significant to the VIE. In addition, the amended guidance requires an 
ongoing reconsideration of the primary beneficiary. The provisions 
of this guidance were effective as of the beginning of our 2010 fiscal 
year, and the adoption did not have a material impact on our finan-
cial statements.

In the second quarter of 2010, the Patient Protection and 
Affordable Care Act (PPACA) was signed into law. The PPACA 
changes the tax treatment related to an existing retiree drug sub-
sidy (RDS) available to sponsors of retiree health benefit plans that 
provide a benefit that is at least actuarially equivalent to the benefits 
under Medicare Part D. As a result of the PPACA, RDS payments 
will effectively become taxable in tax years beginning in 2013, by 
requiring the amount of the subsidy received to be offset against 
our deduction for health care expenses. The provisions of the PPACA 
required us to record the effect of this tax law change beginning in 
our second quarter of 2010, and consequently we recorded a one- 
time related tax charge of $41 million in the second quarter of 2010. 
We continue to evaluate the longer- term impacts of this legislation.
In June 2011, the FASB amended its accounting guidance on the 

presentation of comprehensive income in financial statements 
to improve the comparability, consistency and transparency of 
financial reporting and to increase the prominence of items that 
are recorded in other comprehensive income. The new accounting 
guidance requires entities to report components of comprehen-
sive income in either (1) a continuous statement of  comprehensive 
income or (2) two separate but consecutive statements. In 
December 2011, the FASB approved a deferral of the effective 
date of certain requirements related to the presentation and dis-
closure of reclassification adjustments from other comprehensive 
income to net income. The provisions of the retained guidance 
are effective as of the beginning of our 2012 fiscal year. We do not 
expect the adoption of this guidance to have a material impact on 
our financial statements.

In September 2011, the FASB issued new accounting guidance 
that permits an entity to first assess qualitative factors of whether it 
is more likely than not that a reporting unit’s fair value is less than its 
carrying amount before applying the two- step goodwill impairment 
test. An entity would continue to perform the historical first step of 
the impairment test if it fails the qualitative assessment, while no 
further analysis would be required if it passes. The provisions of the 
new guidance are effective for our 2012 goodwill impairment test. 

60

PepsiCo, Inc. 2011 Annual Report

We are currently evaluating the impact of the new guidance on our 
financial statements.

In September 2011, the FASB amended its guidance regard-
ing the disclosure requirements for employers participating in 
multiemployer pension and other postretirement benefit plans 
(multiemployer plans) to improve transparency and increase aware-
ness of the commitments and risks involved with participation 
in multiemployer plans. The new accounting guidance requires 
employers participating in multiemployer plans to provide addi-
tional quantitative and qualitative disclosures to provide users 
with more detailed information regarding an employer’s involve-
ment in multiemployer plans. The provisions of this new guidance 
were effective as of the beginning of our 2011 fiscal year. We have 
reviewed our level of participation in multiemployer plans and 
determined that the impact of adopting this new guidance did not 
have a material impact on our financial statements.

In December 2011, the FASB issued new disclosure requirements 

that are intended to enhance current disclosures on offsetting 
financial assets and liabilities. The new disclosures require an entity 
to disclose both gross and net information about financial instru-
ments eligible for offset on the balance sheet and instruments and 
transactions subject to an agreement similar to a master netting 
arrangement. The provisions of the new disclosure requirements 
are effective as of the beginning of our 2014 fiscal year. We are 
currently evaluating the impact of the new guidance on our finan-
cial statements.

Note 3
Restructuring, Impairment and  
Integration Charges

In 2011, we incurred restructuring charges of $383 million ($286 mil-
lion after- tax or $0.18 per share) in conjunction with our multi- year 
Productivity Plan. All of these charges were recorded in sell-
ing, general and administrative expenses. The Productivity Plan 
includes actions in every aspect of our business that we believe 
will strengthen our complementary food, snack and beverage 
businesses by leveraging new technologies and processes across 
PepsiCo’s operations, go- to-market and information systems; 
heightening the focus on best practice sharing across the globe; 
consolidating manufacturing, warehouse and sales facilities; and 
implementing simplified organization structures, with wider spans 
of control and fewer layers of management. The Productivity Plan 
is expected to enhance PepsiCo’s cost- competitiveness, provide a 
source of funding for future brand- building and innovation initia-
tives, and serve as a financial cushion for potential macroeconomic 
uncertainty beyond 2012.

Notes to Consolidated Financial Statements

A summary of our Productivity Plan charges in 2011 is as follows:

FLNA
QFNA
LAF
PAB
Europe
AMEA
Corporate

Severance and Other  
Employee Costs
$  74
  18
  46
  75
  65
  9
  40
$ 327

Other  
Costs
$  2
  –
  2
  6
 12
  –
 34
$ 56

Total
$  76
  18
  48
  81
  77
  9
  74
$ 383

A summary of our Productivity Plan activity in 2011 is as follows:

2011 restructuring charges
Cash payments
Non- cash charges
Liability as of December 31, 2011  

Severance and Other  
Employee Costs
$ 327
(1)
 (25)
$ 301

Other  
Costs
$ 56
 (29)
  –
$  27

Total
$ 383
 (30)
 (25)
$ 328

In 2011, we incurred merger and integration charges of $329 mil-

lion ($271 million after- tax or $0.17 per share) related to our 
acquisitions of PBG, PAS and WBD, including $112 million recorded 
in the PAB segment, $123 million recorded in the Europe  segment, 
$78 million recorded in corporate unallocated expenses and 
$16 million recorded in interest expense. All of these net charges, 
other than the interest expense portion, were recorded in selling, 
general and administrative expenses. These charges also include 
closing costs and advisory fees related to our acquisition of WBD. 
Substantially all cash payments related to the above charges were 
made by the end of 2011.

In 2010, we incurred merger and integration charges of $799 mil-
lion related to our acquisitions of PBG and PAS, as well as advisory 
fees in connection with our acquisition of WBD. $467 million of these 
charges were recorded in the PAB segment, $111 million recorded in 
the Europe segment, $191 million recorded in corporate unallocated 
expenses and $30 million recorded in interest expense. All of these 
charges, other than the interest expense portion, were recorded 
in selling, general and administrative expenses. The merger and 
integration charges related to our acquisitions of PBG and PAS were 
incurred to help create a more fully integrated supply chain and 
go- to-market business model, to improve the effectiveness and effi-
ciency of the distribution of our brands and to enhance our revenue 
growth. These charges also include closing costs, one- time financing 
costs and advisory fees related to our acquisitions of PBG and PAS. 
In addition, we recorded $9 million of merger–related charges, rep-
resenting our share of the respective merger costs of PBG and PAS, 
in bottling equity income. Substantially all cash payments related 
to the above charges were made by the end of 2011. In total, these 
charges had an after- tax impact of $648 million or $0.40 per share.

61

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

A summary of our merger and integration activity is as follows:

Severance  
and Other  
Employee Costs

Asset 
Impairment

2010 merger and  

integration charges

Cash payments
Non- cash charges
Liability as of  

December 25, 2010

2011 merger and  

integration charges

Cash payments
Non- cash charges
Liability as of  

$  396
 (114)
 (103)

  179

  146
 (191)
  (88)

Other 
Costs

$  280
 (271)
  16

Total

$  808
 (385)
 (219)

$  132
–
 (132)

–

  25

  204

  34
–
  (34)

  149
 (186)
  19

  329
 (377)
 (103)

December 31, 2011

$  46

$ 

–

$ 

7

$  53

In 2009, we incurred $50 million of charges related to the merger 
of PBG and PAS, of which substantially all was paid in 2009. In 2009, 
we also incurred charges of $36 million ($29 million after- tax or $0.02 
per share) in conjunction with our Productivity for Growth program 
that began in 2008. The program included actions in all divisions 
of the business, including the closure of six plants, to increase cost 
competitiveness across the supply chain, upgrade and streamline 
our product portfolio, and simplify the organization for more effec-
tive and timely decision- making. These charges were recorded in 
selling, general and administrative expenses. This program was 
completed in the second quarter of 2009 and substantially all cash 
payments related to these charges were made by the end of 2010.
A summary of our Productivity for Growth charges in 2009 is 

as follows:

FLNA
QFNA
LAF
PAB
Europe
AMEA

Severance and Other  
Employee Costs
$  –
  –
  3
  6
  2
  6
$ 17

Other  
Costs
$  1
  2
  –
 10
  –
  6
$ 19

Total
$  1
  2
  3
 16
  2
 12
$ 36

A summary of our Productivity for Growth activity is as follows:

Severance  
and Other  
Employee Costs

Asset 
Impairment

Other 
Costs

Total

$  134

$  –

$ 64

$  198

  17
 (128)
  (14)

9
(6)
(2)
–

  12
  –
 (12)

  –
  –
  –
  –

  7
 (68)
  25

  28
 (25)
  (1)
  (1)

  36
 (196)
(1)

  37
  (31)
(3)
(1)

Liability as of  

December 27, 2008
2009 restructuring and 
impairment charges

Cash payments
Currency translation
Liability as of  

December 26, 2009

Cash payments
Non- cash charges
Currency translation
Liability as of  

December 25, 2010

$ 

1

$  –

$  1

$ 

2

Note 4
Property, Plant and Equipment and  
Intangible Assets

Average  
Useful Life 
(years)

2011

2010

2009

Property, plant and 
equipment, net
Land and improvements
Buildings and improvements
Machinery and equipment, 

10 –  34
15 –  44

  $  1,951   $  1,976
  7,054

  7,565  

including fleet and software

5 –15

Construction in progress

Accumulated depreciation

Depreciation expense
Amortizable intangible 

assets, net

Acquired franchise rights
Reacquired franchise rights
Brands
Other identifiable intangibles

56 –  60
1–14
5 –  40
10 –  24

Accumulated amortization

Amortization expense

  23,798  
  1,826  
  35,140  
 (15,442)  

  22,091
  1,920
  33,041
 (13,983)
  $  19,698   $  19,058
  $  2,476   $  2,124   $ 1,500

  $ 

916   $ 
110  
  1,417  
777  
  3,220  
  (1,332)  

949
110
  1,463
747
  3,269
  (1,244)
  $  1,888   $  2,025
133   $ 
  $ 

117   $ 

63

Property, plant and equipment is recorded at historical cost. 
Depreciation and amortization are recognized on a straight- line 
basis over an asset’s estimated useful life. Land is not depreciated 
and construction in progress is not depreciated until ready for 
service. Amortization of intangible assets for each of the next five 
years, based on existing intangible assets as of December 31, 2011 
and using average 2011 foreign exchange rates, is expected to be 
$122 million in 2012, $113 million in 2013, $98 million in 2014, $89 mil-
lion in 2015 and $81 million in 2016.

Depreciable and amortizable assets are only evaluated for impair-
ment upon a significant change in the operating or macroeconomic 
environment. In these circumstances, if an evaluation of the undis-
counted cash flows indicates impairment, the asset is written down 
to its estimated fair value, which is based on discounted future cash 
flows. Useful lives are periodically evaluated to determine whether 
events or circumstances have occurred which indicate the need 
for revision. For additional unaudited information on our policies 
for amortizable brands, see “Our Critical Accounting Policies” in 
Management’s Discussion and Analysis.

62

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

Nonamortizable Intangible Assets
Perpetual brands and goodwill are assessed for impairment at least annually. If the carrying amount of a perpetual brand exceeds its fair 
value, as determined by its discounted cash flows, an impairment loss is recognized in an amount equal to that excess. We did not recognize 
any impairment charges for goodwill in the years presented. In connection with the merger and integration of WBD in 2011, we recorded a 
$14 million impairment charge for discontinued brands. We did not recognize any impairment charges for other nonamortizable intangible 
assets in 2010. The change in the book value of nonamortizable intangible assets is as follows:

Balance, 
Beginning 
2010

Acquisitions

Translation 
and Other

Balance, 
End of  
2010

Acquisitions/ 
(Divestitures)

Translation 
and Other

Balance, 
End of  
2011

FLNA
Goodwill
Brands

QFNA
Goodwill

LAF
Goodwill
Brands

PAB(a)
Goodwill
Reacquired franchise rights
Acquired franchise rights
Brands
Other

Europe(a) (c)
Goodwill
Reacquired franchise rights
Acquired franchise rights
Brands

AMEA
Goodwill
Brands

Total goodwill
Total reacquired franchise rights
Total acquired franchise rights
Total brands
Total other

$  306
30
  336

  175

  479
  136
  615

 2,431
–
–
  112
–
 2,543

 2,625
–
–
 1,378
 4,003

  518
  126
  644

 6,534
–
–
 1,782
–
$ 8,316

$ 

–
–
–

–

–
–
–

  7,476
  7,229
660
66
10
 15,441

583
810
232
88
  1,713

116
26
142

  8,175
  8,039
892
180
10
$ 17,296

$ 

7
1
8

–

18
7
25

39
54
  905(b)
4
–
 1,002

  (168)
(17)
(5)
(86)
  (276)

56
17
73

(48)
37
  900
(57)
–
$  832

$ 

313
31
344

175

497
143
640

  9,946
  7,283
  1,565
182
10
 18,986

  3,040
793
227
  1,380
  5,440

690
169
859

 14,661
  8,076
  1,792
  1,905
10
$ 26,444

$ 

–
–
–

–

  331
20
  351

(27)
77
(1)
(20)
(9)
20

 2,131
–
–
 3,114
 5,245

–
–
–

 2,435
77
(1)
 3,114
(9)
$ 5,616

$ 

(2)
(1)
(3)

–

  (35)
(6)
  (41)

  13
  (18)
(2)
6
(1)
(2)

 (271)
  (61)
(9)
 (316)
 (657)

(1)
1
–

 (296)
  (79)
  (11)
 (316)
(1)
$ (703)

$ 

311
30
341

175

793
157
950

  9,932
  7,342
  1,562
168
–
 19,004

  4,900
732
218
  4,178
 10,028

689
170
859

 16,800
  8,074
  1,780
  4,703
–
$ 31,357

(a) Net increases in 2010 relate primarily to our acquisitions of PBG and PAS.
(b) Includes $900 million related to our upfront payment to DPSG to manufacture and distribute Dr Pepper and certain other DPSG products.
(c) Net increases in 2011 relate primarily to our acquisition of WBD.

63

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

Note 5
Income Taxes

Income before income taxes
U.S.
Foreign

Provision for income taxes
Current:  U.S. Federal

Foreign
State

Deferred:  U.S. Federal

Foreign
State

Tax rate reconciliation
U.S. Federal statutory tax rate
State income tax, net of U.S. Federal tax 

benefit

Lower taxes on foreign results
Acquisitions of PBG and PAS
Other, net
Annual tax rate
Deferred tax liabilities
Investments in noncontrolled affiliates
Debt guarantee of wholly owned 

subsidiary

Property, plant and equipment
Intangible assets other than 
nondeductible goodwill

Other
Gross deferred tax liabilities
Deferred tax assets
Net carryforwards
Stock- based compensation
Retiree medical benefits
Other employee- related benefits
Pension benefits
Deductible state tax and interest 

benefits

Long- term debt obligations acquired
Other
Gross deferred tax assets
Valuation allowances
Deferred tax assets, net
Net deferred tax liabilities

2011

2010

2009

  $ 3,964
 4,870
  $ 8,834

  $ 4,008
 4,224
  $ 8,232

  $ 4,209
 3,870
  $ 8,079

  $  611
  882
  124
 1,617
  789
(88)
54
  755
  $ 2,372

  $  932
  728
  137
 1,797
78
18
1
97
  $ 1,894

  $ 1,238
  473
  124
 1,835
  223
21
21
  265
  $ 2,100

  35.0%  

  35.0%  

  35.0%

1.3
(8.7)
–
(0.8)
  26.8%  

  1.1
  (9.4)
  (3.1)
  (0.6)
  23.0%  

  1.2
  (7.9)
–
  (2.3)
  26.0%

  $ 

41

  $ 

74

  828
 2,466

 4,297
  184
 7,816

 1,373
  429
  504
  695
  545

  828
 1,984

 3,726
  647
 7,259

 1,264
  455
  579
  527
  291

  339
  223
  822
 4,930
 (1,264)
 3,666
  $ 4,150

  320
  291
  904
 4,631
  (875)
 3,756
  $ 3,503

2011

2010

2009

Deferred taxes included within:
Assets:

Prepaid expenses and other current 

assets

Liabilities:

  $  845

  $  554

Deferred income taxes

  $ 4,995

  $ 4,057

Analysis of valuation allowances
Balance, beginning of year
Provision/(Benefit)
Other (deductions)/additions

Balance, end of year

  $  875
  464
(75)
  $ 1,264

  $  586
75
  214
  $  875

$ 657
 (78)
  7
$ 586

For additional unaudited information on our income tax policies, 
including our reserves for income taxes, see “Our Critical Accounting 
Policies” in Management’s Discussion and Analysis.

Reserves
A number of years may elapse before a particular matter, for which 
we have established a reserve, is audited and finally resolved. The 
number of years with open tax audits varies depending on the tax 
jurisdiction. Our major taxing jurisdictions and the related open 
tax audits are as follows:
(cid:116)(cid:1) (cid:54)(cid:15)(cid:52)(cid:15)(cid:1)(cid:137)(cid:1)(cid:1)(cid:69)(cid:86)(cid:83)(cid:74)(cid:79)(cid:72)(cid:1)(cid:19)(cid:17)(cid:18)(cid:18)(cid:13)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:85)(cid:66)(cid:89)(cid:1)(cid:68)(cid:80)(cid:86)(cid:83)(cid:85)(cid:1)(cid:85)(cid:83)(cid:74)(cid:66)(cid:77)(cid:1)(cid:83)(cid:70)(cid:77)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:68)(cid:77)(cid:66)(cid:84)(cid:84)(cid:74)(cid:246)(cid:68)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)
financial instruments was completed for the 1998–2002 audit 
cycle. We are currently awaiting a decision by the judge. We 
continue to dispute with the IRS Appeals Division three matters 
related to the 2003–2005 audit cycle. During 2011, all but three 
issues, which are currently under review by the IRS Appeals 
Division, were resolved for tax years 2006–2007. We are currently 
under audit for tax years 2008–2009;

(cid:116)(cid:1) (cid:46)(cid:70)(cid:89)(cid:74)(cid:68)(cid:80)(cid:1)(cid:137)(cid:1)(cid:1)(cid:66)(cid:86)(cid:69)(cid:74)(cid:85)(cid:84)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:67)(cid:70)(cid:70)(cid:79)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:77)(cid:70)(cid:85)(cid:70)(cid:69)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:66)(cid:77)(cid:77)(cid:1)(cid:85)(cid:66)(cid:89)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:90)(cid:70)(cid:66)(cid:83)(cid:84)(cid:1)

through 2005. We are currently under audit for 2006;

(cid:116)(cid:1) (cid:54)(cid:79)(cid:74)(cid:85)(cid:70)(cid:69)(cid:1)(cid:44)(cid:74)(cid:79)(cid:72)(cid:69)(cid:80)(cid:78)(cid:1)(cid:137)(cid:1)(cid:1)(cid:66)(cid:86)(cid:69)(cid:74)(cid:85)(cid:84)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:67)(cid:70)(cid:70)(cid:79)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:77)(cid:70)(cid:85)(cid:70)(cid:69)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:66)(cid:77)(cid:77)(cid:1)(cid:85)(cid:66)(cid:89)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)

years through 2007;

(cid:116)(cid:1) (cid:36)(cid:66)(cid:79)(cid:66)(cid:69)(cid:66)(cid:1)(cid:137)(cid:1)(cid:1)(cid:69)(cid:80)(cid:78)(cid:70)(cid:84)(cid:85)(cid:74)(cid:68)(cid:1)(cid:66)(cid:86)(cid:69)(cid:74)(cid:85)(cid:84)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:67)(cid:70)(cid:70)(cid:79)(cid:1)(cid:84)(cid:86)(cid:67)(cid:84)(cid:85)(cid:66)(cid:79)(cid:85)(cid:74)(cid:66)(cid:77)(cid:77)(cid:90)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:77)(cid:70)(cid:85)(cid:70)(cid:69)(cid:1)

for all taxable years through 2007. International audits have been 
completed for all taxable years through 2005; and

(cid:116)(cid:1) (cid:51)(cid:86)(cid:84)(cid:84)(cid:74)(cid:66)(cid:1)(cid:137)(cid:1)(cid:1)(cid:66)(cid:86)(cid:69)(cid:74)(cid:85)(cid:84)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:67)(cid:70)(cid:70)(cid:79)(cid:1)(cid:84)(cid:86)(cid:67)(cid:84)(cid:85)(cid:66)(cid:79)(cid:85)(cid:74)(cid:66)(cid:77)(cid:77)(cid:90)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:77)(cid:70)(cid:85)(cid:70)(cid:69)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:66)(cid:77)(cid:77)(cid:1)(cid:85)(cid:66)(cid:89)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)

years through 2008.

While it is often difficult to predict the final outcome or the 

timing of resolution of any particular tax matter, we believe that our 
reserves reflect the probable outcome of known tax contingencies. 
We adjust these reserves, as well as the related interest, in light of 
changing facts and circumstances. Settlement of any particular issue 
would usually require the use of cash. Favorable resolution would 
be recognized as a reduction to our annual tax rate in the year 
of resolution. For further unaudited information on the impact of 
the resolution of open tax issues, see “Other Consolidated Results.” 
in Management’s Discussion and Analysis.

As of December 31, 2011, the total gross amount of reserves for 
income taxes, reported in other liabilities, was $2,167 million. Any 
prospective adjustments to these reserves will be recorded as an 

64

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
increase or decrease to our provision for income taxes and would 
impact our effective tax rate. In addition, we accrue interest related 
to reserves for income taxes in our provision for income taxes 
and any associated penalties are recorded in selling, general and 
 administrative expenses. The gross amount of interest accrued, 
reported in other liabilities, was $660 million as of December 31, 
2011, of which $90 million was recognized in 2011. The gross amount 
of interest accrued was $570 million as of December 25, 2010, of 
which $135 million was recognized in 2010.

A rollforward of our reserves for all federal, state and foreign tax 

jurisdictions, is as follows:

Balance, beginning of year

Additions for tax positions related to the current year  
Additions for tax positions from prior years
Reductions for tax positions from prior years
Settlement payments
Statute of limitations expiration
Translation and other

Balance, end of year

2011
  $ 2,022
  233
  147
(46)
  (156)
(15)
(18)
  $ 2,167

2010
  $ 1,731
  204
  517
  (391)
(30)
(7)
(2)
  $ 2,022

Carryforwards and Allowances
Operating loss carryforwards totaling $10.0 billion at year- end 2011 
are being carried forward in a number of foreign and state jurisdic-
tions where we are permitted to use tax operating losses from prior 
periods to reduce future taxable income. These operating losses will 
expire as follows: $0.1 billion in 2012, $8.2 billion between 2013 and 
2031 and $1.7 billion may be carried forward indefinitely. We estab-
lish valuation allowances for our deferred tax assets if, based on the 
available evidence, it is more likely than not that some portion or all 
of the deferred tax assets will not be realized.

Undistributed International Earnings
As of December 31, 2011, we had approximately $34.1 billion 
of undistributed international earnings. We intend to continue 
to reinvest earnings outside the U.S. for the foreseeable future 
and, therefore, have not recognized any U.S. tax expense on 
these earnings.

Note 6
Stock- Based Compensation

Our stock- based compensation program is designed to attract and 
retain employees while also aligning employees’ interests with the 
interests of our shareholders. Stock options and restricted stock units 
(RSU) are granted to employees under the shareholder- approved 
2007 Long- Term Incentive Plan (LTIP), the only stock- based plan 
under which we currently grant stock options and RSUs. Stock- based 
compensation expense was $343 million in 2011, $352 million in 2010 
and $227 million in 2009. In 2011, $326 million was recorded as stock- 
based compensation expense, $13 million was included in merger 
and integration charges and $4 million was included in restructur-
ing charges. In 2010, $299 million was recorded as stock- based 

Notes to Consolidated Financial Statements

compensation expense and $53 million was included in merger 
and integration charges. $86 million of the $352 million recorded 
in 2010 was related to the unvested acquisition- related grants 
described below. Income tax benefits related to stock- based com-
pensation expense and recognized in earnings were $101 million in 
2011, $89 million in 2010 and $67 million in 2009. At year- end 2011, 
136 million shares were available for future stock- based compensa-
tion grants.

In connection with our acquisition of PBG in 2010, we issued 

13.4 million stock options and 2.7 million RSUs at weighted- average 
grant prices of $42.89 and $62.30, respectively, to replace previ-
ously held PBG equity awards. In connection with our acquisition 
of PAS in 2010, we issued 0.4 million stock options at a weighted- 
average grant price of $31.72 to replace previously held PAS equity 
awards. Our equity issuances included 8.3 million stock options 
and 0.6 million RSUs which were vested at the acquisition date and 
were included in the purchase price. The remaining 5.5 million stock 
options and 2.1 million RSUs issued were unvested at the issuance 
date and are being amortized over their remaining vesting period, 
up to three years from the issuance date.

As a result of our annual benefits review in 2010, the Company 

approved certain changes to our benefits programs to remain 
market competitive relative to other leading global companies. 
These changes included ending the Company’s broad- based 
SharePower stock option program. Consequently, beginning in 
2011, no new awards were granted under the SharePower program. 
Outstanding SharePower awards from 2010 and earlier continue to 
vest and are exercisable according to the terms and conditions of 
the program. See Note 7 for additional information regarding other 
related changes.

Method of Accounting and Our Assumptions
We account for our employee stock options under the fair value 
method of accounting using a Black- Scholes valuation model to 
measure stock option expense at the date of grant. All stock option 
grants have an exercise price equal to the fair market value of our 
common stock on the date of grant and generally have a 10-year 
term. We do not backdate, reprice or grant stock- based compen-
sation awards retroactively. Repricing of awards would require 
shareholder approval under the LTIP.

The fair value of stock option grants is amortized to expense 
over the vesting period, generally three years. Executives who are 
awarded long- term incentives based on their performance are 
generally offered the choice of stock options or RSUs. Executives 
who elect RSUs receive one RSU for every four stock options that 
would have otherwise been granted. Senior officers do not have a 
choice and, through 2011, are granted 50% stock options and 50% 
performance- based RSUs.

Beginning in 2012, senior officers will be granted 60% market 
stock units and 40% long- term cash awards, each of which will be 
subject to pre- established performance targets. Vesting of RSU 
awards for senior officers is contingent upon the achievement of pre- 
established performance targets approved by the Compensation 
Committee of the Board of Directors. RSU expense is based on the 

65

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

fair value of PepsiCo stock on the date of grant and is amortized over 
the vesting period, generally three years. Each RSU is settled in a 
share of our stock after the vesting period.

Our weighted- average Black- Scholes fair value assumptions are 

as follows:

Expected life
Risk- free interest rate
Expected volatility
Expected dividend yield

2011
6 yrs.

2010
5 yrs.

2.5%    
16%    
2.9%    

2.3%    
17%    
2.8%    

2009
6 yrs.

2.8%
17%
3.0%

The expected life is the period over which our employee groups 
are expected to hold their options. It is based on our historical expe-
rience with similar grants. The risk- free interest rate is based on the 
expected U.S. Treasury rate over the expected life. Volatility reflects 
movements in our stock price over the most recent historical period 
equivalent to the expected life. Dividend yield is estimated over the 
expected life based on our stated dividend policy and forecasts of 
net income, share repurchases and stock price.

A summary of our stock- based compensation activity for the year 

ended December 31, 2011 is presented below:

Our Stock Option Activity

Options(a)

Average 

Price(b)

Average 
Life 
(years)(c)

Aggregate 
Intrinsic 

Value(d)

Outstanding at 

December 25, 2010
Granted
Exercised
Forfeited/expired

Outstanding at 

   106,203
    7,150
    (19,980)
(2,298)

  $ 54.03
  $ 64.31
  $ 47.74
  $ 65.73

December 31, 2011

    91,075

  $ 55.92

5.07

  $ 932,748

Exercisable at 

December 31, 2011

    58,708

  $ 53.86

4.94

  $ 725,781

(a) Options are in thousands and include options previously granted under PBG, PAS and 

Quaker legacy plans. No additional options or shares may be granted under the PBG, PAS 
and Quaker plans.

(b) Weighted- average exercise price.
(c) Weighted- average contractual life remaining.
(d) In thousands.

Our RSU Activity

Average 
Intrinsic 

RSUs(a)

Value(b)

Average 
Life 
(years)(c)

Aggregate 
Intrinsic 

Value(d)

Outstanding at 

December 25, 2010
Granted
Converted
Forfeited/expired

Outstanding at 

    10,662
    5,333
(2,610)
(1,045)

  $ 63.27
  $ 63.87
  $ 65.81
  $ 63.71

December 31, 2011

    12,340

  $ 62.96

1.57

  $ 818,776

(a) RSUs are in thousands and include RSUs previously granted under a PBG plan. No 

additional RSUs or shares may be granted under the PBG plan.

(b) Weighted- average intrinsic value at grant date.
(c) Weighted- average contractual life remaining.
(d) In thousands.

Other Stock- Based Compensation Data

Stock Options
Weighted- average fair value of options 

granted

 $ 

7.79

 $  13.93

 $ 

7.02

2011

2010

2009

Total intrinsic value of options 

exercised(a)

RSUs
Total number of RSUs granted(a)
Weighted- average intrinsic value of 

RSUs granted

Total intrinsic value of RSUs converted(a)

(a)  In thousands.

 $ 385,678

 $ 502,354

 $ 194,545

  5,333

  8,326

  2,653

 $  63.87
 $ 173,433

 $  65.01
 $ 202,717

 $  53.22
 $ 124,193

As of December 31, 2011, there was $436 million of total unrec-

ognized compensation cost related to nonvested share- based 
compensation grants. This unrecognized compensation is expected 
to be recognized over a weighted- average period of two years.

Note 7
Pension, Retiree Medical and Savings Plans

Our pension plans cover certain full- time employees in the U.S. and 
certain international employees. Benefits are determined based on 
either years of service or a combination of years of service and earn-
ings. Certain U.S. and Canada retirees are also eligible for medical 
and life insurance benefits (retiree medical) if they meet age and 
service requirements. Generally, our share of retiree medical costs is 
capped at specified dollar amounts, which vary based upon years of 
service, with retirees contributing the remainder of the costs.

Gains and losses resulting from actual experience differing from 
our assumptions, including the difference between the actual return 
on plan assets and the expected return on plan assets, and from 
changes in our assumptions are determined at each measurement 
date. If this net accumulated gain or loss exceeds 10% of the greater 
of the market- related value of plan assets or plan liabilities, a por-
tion of the net gain or loss is included in expense for the following 
year based upon the average remaining service period of active plan 
participants, which is approximately 10 years for pension expense 
and approximately 8 years for retiree medical expense. The cost or 
benefit of plan changes that increase or decrease benefits for prior 
employee service (prior service cost/(credit)) is included in earnings 
on a straight- line basis over the average remaining service period of 
active plan participants.

In connection with our acquisitions of PBG and PAS, we assumed 

sponsorship of pension and retiree medical plans that provide 
benefits to certain U.S. and international employees. Subsequently, 
during the third quarter of 2010, we merged the pension plan assets 
of the legacy PBG and PAS U.S. pension plans with those of PepsiCo 
into one master trust.

During 2010, the Compensation Committee of PepsiCo’s Board 

of Directors approved certain changes to the U.S. pension and 
retiree medical plans, effective January 1, 2011. Pension plan design 
changes included implementing a new employer contribution 

66

PepsiCo, Inc. 2011 Annual Report

   
   
   
   
   
   
   
   
   
   
   
   
 
 
 
Notes to Consolidated Financial Statements

to the 401(k) savings plan for all future salaried new hires of the 
Company, as salaried new hires are no longer eligible to participate 
in the defined benefit pension plan, as well as implementing a new 
defined benefit pension formula for certain hourly new hires of the 
Company. Pension plan design changes also included implementing 
a new employer contribution to the 401(k) savings plan for certain 
legacy PBG and PAS salaried employees (as such employees are also 
not eligible to participate in the defined benefit pension plan), as 
well as implementing a new defined benefit pension formula for 
certain legacy PBG and PAS hourly employees. The retiree medical 

plan design change included phasing out Company subsidies of 
retiree medical benefits.

As a result of these changes, we remeasured our pension and 
retiree medical expenses and liabilities in the third quarter of 2010, 
which resulted in a one- time pre- tax curtailment gain of $62 million 
included in retiree medical expenses.

The provisions of both the PPACA and the Health Care and 
Education Reconciliation Act are reflected in our retiree medical 
expenses and liabilities and were not material to our finan-
cial statements.

Selected financial information for our pension and retiree medical plans is as follows:

Change in projected benefit liability
Liability at beginning of year
Acquisitions/(divestitures)
Service cost
Interest cost
Plan amendments
Participant contributions
Experience loss/(gain)
Benefit payments
Settlement/curtailment gain
Special termination benefits
Foreign currency adjustment
Other
Liability at end of year
Change in fair value of plan assets
Fair value at beginning of year
Acquisitions/(divestitures)
Actual return on plan assets
Employer contributions/funding
Participant contributions
Benefit payments
Settlement
Foreign currency adjustment
Fair value at end of year
Funded status

Pension

Retiree Medical

U.S.

International

2011

2010

2011

2010

2011

2010

$  9,851
11
350
547
21
–
  1,484
(414)
(20)
71
–
–
$ 11,901

$  8,870
11
542
63
–
(414)
–
–
$  9,072
$ (2,829)

$ 6,606
 2,161
  299
  506
28
–
  583
  (375)
(2)
45
–
–
$ 9,851

$ 5,420
 1,633
  943
 1,249
–
  (375)
–
–
$ 8,870
$  (981)

$ 2,142
(63)
95
  117
(16)
3
  224
(69)
(15)
1
(41)
3
$ 2,381

$ 1,896
(1)
79
  176
3
(69)
(30)
(23)
$ 2,031
$  (350)

$ 1,709
90
81
  106
–
3
  213
(69)
(3)
3
(18)
27
$ 2,142

$ 1,561
52
  164
  215
3
(69)
(2)
(28)
$ 1,896
$  (246)

$ 1,770
–
51
88
3
–
  (239)
  (110)
–
1
(1)
–
$ 1,563

$  190
–
–
  110
–
  (110)
–
–
$  190
$ (1,373)

$ 1,359
  396
54
93
  (132)
–
95
  (100)
–
3
2
–
$ 1,770

$ 

13
–
7
  270
–
  (100)
–
–
$  190
$ (1,580)

67

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

Amounts recognized
Other assets
Other current liabilities
Other liabilities
Net amount recognized
Amounts included in accumulated other comprehensive loss 

(pre- tax)

Net loss
Prior service cost/(credit)
Total
Components of the increase/(decrease) in net loss
Change in discount rate
Employee-related assumption changes
Liability-related experience different from assumptions
Actual asset return different from expected return
Amortization of losses
Other, including foreign currency adjustments
Total
Liability at end of year for service to date

The components of benefit expense are as follows:

Pension

Retiree Medical

U.S.

International

2011

2010

2011

2010

2011

2010

$ 

–
(91)
 (2,738)
$ (2,829)

$  4,217
122
$  4,339

$  1,710
(140)
(85)
162
(147)
(9)
$  1,491
$ 11,205

$ 

47
(54)
  (974)
$  (981)

$ 2,726
  117
$ 2,843

$  556
4
43
  (300)
  (119)
(21)
$  163
$ 9,163

$ 

55
(1)
  (404)
$  (350)

$  977
(2)
$  975

$  302
(51)
(27)
57
(55)
(16)
$  210
$ 1,921

$ 

66
(10)
  (302)
$  (246)

$  767
17
$  784

$  213
(4)
5
(41)
(24)
(7)
$  142
$ 1,743

$ 

–
  (124)
 (1,249)
$ (1,373)

$ 

32
  (118)
(86)

$ 

$  115
  (125)
  (210)
14
(12)
(20)
$  (238)

$ 

–
  (145)
 (1,435)
$ (1,580)

$  270
  (150)
$  120

$  101
8
(22)
(6)
(9)
8
80

$ 

Components of benefit expense
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost/(credit)
Amortization of net loss

Settlement/curtailment (gain)/loss
Special termination benefits
Total

2011

  $  350
  547
 (704)
  14
  145
  352
(8)
  71
  $  415

U.S.

2010

  $  299
  506
 (643)
  12
  119
  293
(2)
  45
  $  336

Pension

Retiree Medical

International

2009

2011

2010

2009

2011

2010

2009

  $  238
  373
 (462)
  12
  110
  271
  (13)
–
  $  258

  $  95
  117
 (136)
2
  40
  118
  30
1
  $  149

  $  81
  106
 (123)
2
  24
  90
1
3
  $  94

  $  54
  82
 (105)
2
9
  42
3
–
  $  45

$  51
  88
 (14)
 (28)
  12
 109
  –
  1
$ 110

$  54
  93
  (1)
 (22)
  9
 133
 (62)
  3
$  74

$  44
  82
  –
 (17)
  11
 120
  –
  –
$ 120

The estimated amounts to be amortized from accumulated other comprehensive loss into benefit expense in 2012 for our pension and 

retiree medical plans are as follows:

Net loss
Prior service cost/(credit)
Total

Pension

Retiree Medical

U.S.
$ 259
  17
$ 276

International
$ 52
  1
$ 53

$  –
 (26)
$ (26)

68

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

The following table provides the weighted- average assumptions used to determine projected benefit liability and benefit expense for our 

pension and retiree medical plans:

Weighted- average assumptions
Liability discount rate
Expense discount rate
Expected return on plan assets
Liability rate of salary increases
Expense rate of salary increases

2011

U.S.

2010

Pension

Retiree Medical

International

2009

2011

2010

2009

2011

2010

2009

4.6%    
5.7%    
7.8%    
3.7%    
4.1%    

5.7%    
6.0%    
7.8%    
4.1%    
4.4%    

6.1%    
6.2%    
7.8%    
4.4%    
4.4%    

4.8%    
5.5%    
6.7%    
4.1%    
4.1%    

5.5%    
6.0%    
7.1%    
4.1%    
4.1%    

5.9%    
6.3%    
7.1%    
4.1%
4.2%

4.4%    
5.2%    
7.8%    

5.2%    
5.8%    
7.8%    

6.1%
6.2%
–

The following table provides selected information about plans with liability for service to date and total benefit liability in excess of 

plan assets:

Pension

Retiree Medical

U.S.

International

2011

2010

2011

2010

2011

2010

Selected information for plans with liability for service to date in 

excess of plan assets
Liability for service to date
Fair value of plan assets
Selected information for plans with projected benefit liability in 

excess of plan assets

Benefit liability
Fair value of plan assets

  $ (11,205)
  $  9,072

$  (525)
–
$ 

$  (471)
$  344

$  (610)
$  474

  $ (11,901)
  $  9,072

$ (5,806)
$ 4,778

$ (2,191)
$ 1,786

$ (1,949)
$ 1,638

$ (1,563)
$  190

$ (1,770)
$  190

Of the total projected pension benefit liability at year- end 2011, $787 million relates to plans that we do not fund because the funding of 

such plans does not receive favorable tax treatment.

Future Benefit Payments and Funding
Our estimated future benefit payments are as follows:

Pension
Retiree medical(a)

2012
$560
$135

2013
$560
$135

2014
$560
$140

2015
$600
$145

2016
$645
$145

2017–21
$4,050
$   730

(a)  Expected future benefit payments for our retiree medical plans do not reflect any estimated subsidies expected to be received under the 2003 Medicare Act. Subsidies are expected to be 

approximately $13 million for each of the years from 2012 through 2016 and approximately $100 million in total for 2017 through 2021.

These future benefits to beneficiaries include payments from 

both funded and unfunded pension plans.

In 2012, we expect to make pension and retiree medical con-
tributions of approximately $1.3 billion, with up to approximately 
$1 billion expected to be discretionary. Our net cash payments 
for retiree medical are estimated to be approximately $124 million 
in 2012.

Plan Assets

Pension
Our pension plan investment strategy includes the use of actively 
managed securities and is reviewed periodically in conjunction with 
plan liabilities, an evaluation of market conditions, tolerance for risk 
and cash requirements for benefit payments. Our investment objec-
tive is to ensure that funds are available to meet the plans’ benefit 
obligations when they become due. Our overall investment strategy 
is to prudently invest plan assets in a well- diversified portfolio of 

equity and high- quality debt securities to achieve our long- term 
return expectations. Our investment policy also permits the  
use of derivative instruments which are primarily used to reduce  
risk. Our expected long- term rate of return on U.S. plan assets  
is 7.8%. Our 2011 target investment allocation was 40% for U.S. 
equity, 20% for international equity and 40% for fixed income. For 
2012, our target allocations are as follows: 40% for fixed income, 
33% for U.S. equity, 22% for international equity and 5% for real 
estate. The change to the 2012 target asset allocations was made to 
increase diversification. Actual investment allocations may vary from 
our target investment allocations due to prevailing market condi-
tions. We regularly review our actual investment allocations and 
periodically rebalance our investments to our target allocations.

The expected return on pension plan assets is based on our pen-
sion plan investment strategy, our expectations for long- term rates 
of return by asset class taking into account volatility and correlation 
among asset classes and our historical experience. We also review 

69

PepsiCo, Inc. 2011 Annual Report

   
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

current levels of interest rates and inflation to assess the reason-
ableness of the long- term rates. We evaluate our expected return 
assumptions annually to ensure that they are reasonable. To calcu-
late the expected return on pension plan assets, our market- related 
value of assets for fixed income is the actual fair value. For all other 
asset categories, we use a method that recognizes investment gains 
or losses (the difference between the expected and actual return 
based on the market- related value of assets) over a five- year period. 
This has the effect of reducing year- to-year volatility.

Retiree Medical
In 2011 and 2010, we made non- discretionary contributions of 
$110 million and $100 million, respectively, to fund the payment of 

retiree medical claims. In 2010, we made a discretionary contribution 
of $170 million to fund future U.S. retiree medical plan benefits. This 
contribution was invested consistent with the allocation of existing 
assets in the U.S. pension plan.

Fair Value
The guidance on fair value measurements defines fair value, estab-
lishes a framework for measuring fair value, and expands disclosures 
about fair value measurements. The fair value framework requires 
the categorization of assets and liabilities into three levels based 
upon the assumptions (inputs) used to price the assets. Level 1 
provides the most reliable measure of fair value, whereas Level 3 
generally requires significant management judgment.

Plan assets measured at fair value as of fiscal year- end 2011 and 2010 are categorized consistently by level in both years, and are as follows:

U.S. plan assets*
Equity securities:

U.S. common stock(a)
U.S. commingled funds(b)
International common stock(a)
International commingled fund(c)
Preferred stock(d)
Fixed income securities:

Government securities(d)
Corporate bonds(d) (e)
Mortgage- backed securities(d)

Other:

Contracts with insurance companies(f)
Cash and cash equivalents

Subtotal U.S. plan assets

Dividends and interest receivable

Total U.S. plan assets
International plan assets
Equity securities:

U.S. commingled funds(b)
International commingled funds(c)

Fixed income securities:

Government securities(d)
Corporate bonds(d)
Fixed income commingled funds(g)

Other:

Contracts with insurance companies(f)
Currency commingled funds(h)
Other commingled fund(i)
Cash and cash equivalents
Subtotal international plan assets

Dividends and interest receivable

Total international plan assets

Total

Level 1

Level 2

Level 3

2011

$  514
–
 1,089
–
–

–
–
–

–
78
$ 1,681

$ 

$ 

–
–

–
–
–

–
–
–
16
16

$ 

–
 3,003
–
  776
19

 1,032
 2,653
24

–
–
$ 7,507

$  246
  729

  171
  196
  530

–
52
56
–
$ 1,980

$  514
 3,003
 1,089
  776
19

 1,032
 2,653
24

24
78
 9,212
50
$ 9,262

$  246
  729

  171
  196
  530

30
52
56
16
 2,026
5
$ 2,031

$  –
  –
  –
  –
  –

  –
  –
  –

 24
  –
$ 24

$  –
  –

  –
  –
  –

 30
  –
  –
  –
$ 30

2010

Total

$  304
 3,426
  834
  992
4

  950
 2,374
20

28
81
 9,013
47
$ 9,060

$  193
  779

  184
  152
  393

28
42
–
  120
 1,891
5
$ 1,896

(a)  Based on quoted market prices in active markets.
(b) Based on the fair value of the investments owned by these funds that track various U.S. large, mid- cap and small company indices. Includes one large- cap fund that represents 30% and 

32%, respectively, of total U.S. plan assets for 2011 and 2010.

(c) Based on the fair value of the investments owned by these funds that track various non- U.S. equity indices.
(d)  Based on quoted bid prices for comparable securities in the marketplace and broker/dealer quotes that are not observable.
(e)  Corporate bonds of U.S.-based companies represent 24% and 22%, respectively, of total U.S. plan assets for 2011 and 2010.
(f ) Based on the fair value of the contracts as determined by the insurance companies using inputs that are not observable.
(g)  Based on the fair value of the investments owned by these funds that track various government and corporate bond indices.
(h)  Based on the fair value of the investments owned by these funds. Includes managed hedge funds that invest primarily in derivatives to reduce currency exposure.
( i )  Based on the fair value of the investments owned by this fund that tracks various indices.

*  2011 and 2010 amounts include $190 million of retiree medical plan assets that are restricted for purposes of providing health benefits for U.S. retirees and their beneficiaries.

70

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retiree Medical Cost Trend Rates
An average increase of 7% in the cost of covered retiree medical 
benefits is assumed for 2012. This average increase is then projected 
to decline gradually to 5% in 2020 and thereafter. These assumed 
health care cost trend rates have an impact on the retiree medical 
plan expense and liability. However, the cap on our share of retiree 
medical costs limits the impact. In addition, as of January 1, 2011, the 
Company started phasing out Company subsidies of retiree medical 
benefits. A 1-percentage- point change in the assumed health care 
trend rate would have the following effects:

2011 service and interest cost components
2011 benefit liability

1% Increase
$  4
$ 39

1% Decrease
$  (4)
$ (29)

Savings Plan
Certain U.S. employees are eligible to participate in 401(k) savings 
plans, which are voluntary defined contribution plans. The plans 
are designed to help employees accumulate additional savings for 
retirement, and we make Company matching contributions on a 
portion of eligible pay based on years of service.

In 2010, in connection with our acquisitions of PBG and PAS, we 
also made Company retirement contributions for certain employees 
on a portion of eligible pay based on years of service.

As of January 1, 2011, a new employer contribution to the 401(k) 
savings plan became effective for certain eligible legacy PBG and 
PAS salaried employees as well as all eligible salaried new hires of 
PepsiCo who are not eligible to participate in the defined benefit 
pension plan as a result of plan design changes approved during 
2010. In 2011 and 2010, our total Company contributions were 
$144 million and $135 million, respectively.

As of February 2012, certain U.S. employees earning a benefit 

under one of our defined benefit pension plans will no longer 
be eligible for the Company matching contributions on their 
401(k) contributions.

For additional unaudited information on our pension and retiree 

medical plans and related accounting policies and assumptions, 
see “Our Critical Accounting Policies” in Management’s Discussion 
and Analysis.

Note 8
Related Party Transactions

On February 26, 2010, we completed our acquisitions of PBG and 
PAS, at which time we gained control over their operations and 
began to consolidate their results. See Notes 1 and 15. Prior to  
these acquisitions, PBG and PAS represented our most significant 
noncontrolled bottling affiliates. Sales to PBG (prior to the acquisi-
tion date) represented less than 1% of our total net revenue in 2010 
and 6% of our total net revenue in 2009.

Notes to Consolidated Financial Statements

PBG’s and PAS’s summarized income statements for 2009 are 

as follows:

Net revenue
Gross profit
Operating income
Net income attributable to parent

PBG
  $ 13,219
  $  5,840
  $  1,048
612
  $ 

PAS
  $ 4,421
  $ 1,767
  $  381
  $  181

Prior to the completion of our acquisitions of PBG and PAS on 
February 26, 2010, our significant related party transactions were 
primarily with PBG and PAS, as well as with other noncontrolled 
bottling affiliates. Related party transactions in 2011 are not mate-
rial as we now consolidate PBG and PAS. All such transactions were 
settled on terms consistent with other trade receivables and pay-
ables. The transactions primarily consisted of (1) selling concentrate 
to these affiliates, which they use in the production of CSDs and 
non- carbonated beverages, (2) selling certain finished goods to 
these affiliates, (3) receiving royalties for the use of our trademarks 
for certain products and (4) paying these affiliates to act as our 
manufacturing and distribution agent for product associated with 
our national account fountain customers. Sales of concentrate and 
finished goods are reported net of bottler funding. For further 
unaudited information on these bottlers, see “Our Customers” in 
Management’s Discussion and Analysis. These transactions with 
our bottling affiliates are reflected in our consolidated financial 
 statements as follows:

Net revenue
Cost of sales
Selling, general and administrative expenses
Accounts and notes receivable
Accounts payable and other liabilities

2009
  $ 3,922
  $  634
24
  $ 

2010(a)
$ 993
$ 116
$  6
$  27
$  42

(a)  Includes transactions with PBG and PAS in 2010 prior to the date of acquisition. 

2010 balance sheet information for PBG and PAS is not applicable as we consolidated 
their balance sheets at the date of acquisition.

We also coordinate, on an aggregate basis, the contract negotia-
tions of sweeteners and other raw material requirements, including 
aluminum cans and plastic bottles and closures for certain of our 
independent bottlers. Once we have negotiated the contracts, the 
bottlers order and take delivery directly from the supplier and pay 
the suppliers directly. Consequently, these transactions are not 
reflected in our consolidated financial statements. As the contract-
ing party, we could be liable to these suppliers in the event of any 
nonpayment by our bottlers, but we consider this exposure to 
be remote.

In addition, our joint ventures with Unilever (under the Lipton 
brand name) and Starbucks sell finished goods (ready- to-drink teas, 
coffees and water products) to our noncontrolled bottling affiliates. 
Consistent with accounting for equity method investments, our joint 
venture revenue is not included in our consolidated net revenue and 
therefore is not included in the above table.

In 2010, we repurchased $357 million (5.5 million shares) of 

PepsiCo stock from the Master Trust which holds assets of PepsiCo’s 
U.S. qualified pension plans at market value.

71

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

Note 9
Debt Obligations and Commitments

Short- term debt obligations
Current maturities of long- term debt
Commercial paper (0.1% and 0.2%)
Other borrowings (7.6% and 5.3%)

Long- term debt obligations
Notes due 2011 (4.4%)
Notes due 2012 (3.0% and 3.1%)
Notes due 2013 (2.3% and 3.0%)
Notes due 2014 (4.6% and 5.3%)
Notes due 2015 (2.3% and 2.6%)
Notes due 2016 (3.9% and 5.5%)
Notes due 2017–2040 (4.8% and 4.9%)
Other, due 2012–2020 (9.9% and 9.8%)

Less: current maturities of long- term debt obligations
Total

2011

2010

  $  2,549
  2,973
683
  $  6,205

  $  1,626
  2,632
640
  $  4,898

  $ 

–
  2,353
  2,841
  3,335
  1,632
  1,876
 10,806
274
 23,117
 (2,549)
  $ 20,568

  $  1,513
  2,437
  2,110
  2,888
  1,617
875
  9,953
232
 21,625
 (1,626)
  $ 19,999

The interest rates in the above table reflect weighted- average rates at year- end.

In the second quarter of 2011, we issued:
(cid:116)(cid:1) (cid:5)(cid:24)(cid:22)(cid:17)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:248)(cid:80)(cid:66)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:83)(cid:66)(cid:85)(cid:70)(cid:1)(cid:79)(cid:80)(cid:85)(cid:70)(cid:84)(cid:1)(cid:78)(cid:66)(cid:85)(cid:86)(cid:83)(cid:74)(cid:79)(cid:72)(cid:1)(cid:74)(cid:79)(cid:1)(cid:19)(cid:17)(cid:18)(cid:20)(cid:13)(cid:1)(cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1)(cid:67)(cid:70)(cid:66)(cid:83)(cid:1)
interest at a rate equal to the three- month London Inter- Bank 
Offered Rate (LIBOR) plus 8 basis points; and

(cid:116)(cid:1) (cid:5)(cid:18)(cid:15)(cid:17)(cid:835)(cid:67)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:19)(cid:15)(cid:22)(cid:17)(cid:17)(cid:6)(cid:1)(cid:84)(cid:70)(cid:79)(cid:74)(cid:80)(cid:83)(cid:1)(cid:79)(cid:80)(cid:85)(cid:70)(cid:84)(cid:1)(cid:78)(cid:66)(cid:85)(cid:86)(cid:83)(cid:74)(cid:79)(cid:72)(cid:1)(cid:74)(cid:79)(cid:1)(cid:19)(cid:17)(cid:18)(cid:23)(cid:15)

In the third quarter of 2011, we issued:
(cid:116)(cid:1) (cid:5)(cid:22)(cid:17)(cid:17)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:17)(cid:15)(cid:25)(cid:17)(cid:17)(cid:6)(cid:1)(cid:84)(cid:70)(cid:79)(cid:74)(cid:80)(cid:83)(cid:1)(cid:79)(cid:80)(cid:85)(cid:70)(cid:84)(cid:1)(cid:78)(cid:66)(cid:85)(cid:86)(cid:83)(cid:74)(cid:79)(cid:72)(cid:1)(cid:74)(cid:79)(cid:1)(cid:19)(cid:17)(cid:18)(cid:21)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69)
(cid:116)(cid:1) (cid:5)(cid:24)(cid:22)(cid:17)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:20)(cid:15)(cid:17)(cid:17)(cid:17)(cid:6)(cid:1)(cid:84)(cid:70)(cid:79)(cid:74)(cid:80)(cid:83)(cid:1)(cid:79)(cid:80)(cid:85)(cid:70)(cid:84)(cid:1)(cid:78)(cid:66)(cid:85)(cid:86)(cid:83)(cid:74)(cid:79)(cid:72)(cid:1)(cid:74)(cid:79)(cid:1)(cid:19)(cid:17)(cid:19)(cid:18)(cid:15)

The net proceeds from the issuances of all the above notes were 
used for general corporate purposes.

In the third quarter of 2011, we entered into a new four- year unse-

cured revolving credit agreement (Four- Year Credit Agreement) 

Long- Term Contractual Commitments(a)

Long- term debt obligations(b)
Interest on debt obligations(c)
Operating leases
Purchasing commitments
Marketing commitments

which expires in June 2015. Effective August 8, 2011, commitments 
under this agreement were increased to enable us to borrow up to 
$2.925 billion, subject to customary terms and conditions. We may 
request that commitments under this agreement be increased up to 
$3.5 billion. Additionally, we may, once a year, request renewal of the 
agreement for an additional one- year period.

Also, in the third quarter of 2011, we entered into a new 364-day 
unsecured revolving credit agreement (364-Day Credit Agreement) 
which expires in June 2012. Effective August 8, 2011, commitments 
under this agreement were increased to enable us to borrow up to 
$2.925 billion, subject to customary terms and conditions. We may 
request that commitments under this agreement be increased up to 
$3.5 billion. We may request renewal of this facility for an additional 
364-day period or convert any amounts outstanding into a term 
loan for a period of up to one year, which would mature no later 
than June 2013.

The Four- Year Credit Agreement and the 364-Day Credit 

Agreement, together replaced our $2 billion unsecured revolving 
credit agreement, our $2.575 billion 364-day unsecured revolv-
ing credit agreement and our $1.080 billion amended PBG credit 
facility. Funds borrowed under the Four- Year Credit Agreement and 
the 364-Day Credit Agreement may be used for general corporate 
purposes, including but not limited to repayment of outstanding 
commercial paper issued by us and our subsidiaries, working capital, 
capital investments and/or acquisitions.

In the third quarter of 2011, we paid $784 million in a cash tender 

offer to repurchase $766 million (aggregate principal amount) of 
certain WBD debt obligations. As a result of this debt repurchase, 
we recorded a $16 million charge to interest expense (included in 
merger and integration charges) in the third quarter, primarily repre-
senting the premium paid in the tender offer.

In addition, as of December 31, 2011, $848 million of our debt 
related to borrowings from various lines of credit that are primarily 
maintained for our international divisions. These lines of credit are 
subject to normal banking terms and conditions and are fully com-
mitted at least to the extent of our borrowings.

Payments Due by Period

$ 

2012
–
  852
  423
 1,113
  240
$ 2,628

2013–2014
$ 6,084
 1,394
  598
  957
  589
$ 9,622

2015–2016
$ 3,451
 1,091
  337
  302
  535
$ 5,716

2017 and 
beyond
$ 10,203
  4,108
467
62
  1,155
$ 15,995

Total
$ 19,738
  7,445
  1,825
  2,434
  2,519
$ 33,961

(a) Reflects non- cancelable commitments as of December 31, 2011 based on year- end foreign exchange rates and excludes any reserves for uncertain tax positions as we are unable to 

reasonably predict the ultimate amount or timing of settlement.

(b) Excludes $2,549 million related to current maturities of long- term debt, $470 million related to the fair value step- up of debt acquired in connection with our acquisitions of PBG and PAS 

and $360 million related to the increase in carrying value of long- term debt representing the gains on our fair value interest rate swaps.

(c) Interest payments on floating- rate debt are estimated using interest rates effective as of December 31, 2011.

72

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Most long- term contractual commitments, except for our long- 

term debt obligations, are not recorded on our balance sheet. 
Non- cancelable operating leases primarily represent building 
leases. Non- cancelable purchasing commitments are primarily for 
sugar and other sweeteners, packaging materials, oranges and 
orange juice. Non- cancelable marketing commitments are primar-
ily for sports marketing. Bottler funding to independent bottlers 
is not reflected in our long- term contractual commitments as it is 
negotiated on an annual basis. Accrued liabilities for pension and 
retiree medical plans are not reflected in our long- term contractual 
commitments because they do not represent expected future cash 
outflows. See Note 7 for additional information regarding our pen-
sion and retiree medical obligations.

Off- Balance-Sheet Arrangements
It is not our business practice to enter into off- balance-sheet 
arrangements, other than in the normal course of business. See 
Note 8 regarding contracts related to certain of our bottlers.

See “Our Liquidity and Capital Resources” in Management’s 
Discussion and Analysis for further unaudited information on 
our borrowings.

Note 10
Financial Instruments

We are exposed to market risks arising from adverse changes in:
(cid:116)(cid:1) (cid:68)(cid:80)(cid:78)(cid:78)(cid:80)(cid:69)(cid:74)(cid:85)(cid:90)(cid:1)(cid:81)(cid:83)(cid:74)(cid:68)(cid:70)(cid:84)(cid:13)(cid:1)(cid:66)(cid:242)(cid:70)(cid:68)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:83)(cid:66)(cid:88)(cid:1)(cid:78)(cid:66)(cid:85)(cid:70)(cid:83)(cid:74)(cid:66)(cid:77)(cid:84)(cid:1)

and energy,

(cid:116)(cid:1) (cid:71)(cid:80)(cid:83)(cid:70)(cid:74)(cid:72)(cid:79)(cid:1)(cid:70)(cid:89)(cid:68)(cid:73)(cid:66)(cid:79)(cid:72)(cid:70)(cid:1)(cid:83)(cid:74)(cid:84)(cid:76)(cid:84)(cid:13)(cid:1)(cid:66)(cid:79)(cid:69)
(cid:116)(cid:1)

(cid:74)(cid:79)(cid:85)(cid:70)(cid:83)(cid:70)(cid:84)(cid:85)(cid:1)(cid:83)(cid:66)(cid:85)(cid:70)(cid:84)(cid:15)

In the normal course of business, we manage these risks through 
a variety of strategies, including the use of derivatives. Certain deriv-
atives are designated as either cash flow or fair value hedges and 
qualify for hedge accounting treatment, while others do not qualify 
and are marked to market through earnings. Cash flows from deriva-
tives used to manage commodity, foreign exchange or interest 
risks are classified as operating activities. See “Our Business Risks” in 
Management’s Discussion and Analysis for further unaudited infor-
mation on our business risks.

For cash flow hedges, changes in fair value are deferred in 

accumulated other comprehensive loss within common sharehold-
ers’ equity until the underlying hedged item is recognized in net 
income. For fair value hedges, changes in fair value are recognized 
immediately in earnings, consistent with the underlying hedged 
item. Hedging transactions are limited to an underlying exposure. 
As a result, any change in the value of our derivative instruments 
would be substantially offset by an opposite change in the value of 
the underlying hedged items. Hedging ineffectiveness and a net 
earnings impact occur when the change in the value of the hedge 
does not offset the change in the value of the underlying hedged 
item. If the derivative instrument is terminated, we continue to defer 
the related gain or loss and then include it as a component of the 

Notes to Consolidated Financial Statements

cost of the underlying hedged item. Upon determination that the 
underlying hedged item will not be part of an actual transaction, we 
recognize the related gain or loss in net income immediately.

We also use derivatives that do not qualify for hedge accounting 
treatment. We account for such derivatives at market value with the 
resulting gains and losses reflected in our income statement. We do 
not use derivative instruments for trading or speculative purposes. 
We perform assessments of our counterparty credit risk regularly, 
including a review of credit ratings, credit default swap rates and 
potential nonperformance of the counterparty. Based on our most 
recent assessment of our counterparty credit risk, we consider this 
risk to be low. In addition, we enter into derivative contracts with a 
variety of financial institutions that we believe are creditworthy in 
order to reduce our concentration of credit risk.

Commodity Prices
We are subject to commodity price risk because our ability to 
recover increased costs through higher pricing may be limited in the 
competitive environment in which we operate. This risk is managed 
through the use of fixed- price purchase orders, pricing agreements 
and derivatives. In addition, risk to our supplies of certain raw mate-
rials is mitigated through purchases from multiple geographies 
and suppliers. We use derivatives, with terms of no more than three 
years, to economically hedge price fluctuations related to a por-
tion of our anticipated commodity purchases, primarily for metals, 
energy and agricultural products. For those derivatives that qualify 
for hedge accounting, any ineffectiveness is recorded immediately 
in corporate unallocated expenses. We classify both the earnings 
and cash flow impact from these derivatives consistent with the 
underlying hedged item. During the next 12 months, we expect 
to reclassify net losses of $59 million related to these hedges from 
accumulated other comprehensive loss into net income. Derivatives 
used to hedge commodity price risk that do not qualify for hedge 
accounting are marked to market each period and reflected in our 
income statement.

Our open commodity derivative contracts that qualify for hedge 
accounting had a face value of $598 million as of December 31, 2011 
and $590 million as of December 25, 2010. Ineffectiveness for our 
commodity hedges is not material.

Our open commodity derivative contracts that do not qualify 

for hedge accounting had a face value of $630 million as of 
December 31, 2011 and $266 million as of December 25, 2010.

Foreign Exchange
Financial statements of foreign subsidiaries are translated into 
U.S. dollars using period- end exchange rates for assets and liabilities 
and weighted- average exchange rates for revenues and expenses. 
Adjustments resulting from translating net assets are reported 
as a separate component of accumulated other comprehensive 
loss within common shareholders’ equity as currency transla-
tion adjustment.

Our operations outside of the U.S. generate approximately 50% 

of our net revenue, with Russia, Mexico, Canada and the United 
Kingdom comprising approximately 23% of our net revenue. As a 

73

PepsiCo, Inc. 2011 Annual Report

Notes to Consolidated Financial Statements

result, we are exposed to foreign currency risks. We also enter into 
derivatives, primarily forward contracts with terms of no more than 
two years, to manage our exposure to foreign currency transaction 
risk. Exchange rate gains or losses related to foreign currency trans-
actions are recognized as transaction gains or losses in our income 
statement as incurred.

Our foreign currency derivatives had a total face value of $2.3 bil-

lion as of December 31, 2011 and $1.7 billion as of December 25, 
2010. During the next 12 months, we expect to reclassify net gains 
of $20 million related to foreign currency contracts that qualify for 
hedge accounting from accumulated other comprehensive loss into 
net income. Additionally, ineffectiveness for our foreign currency 
hedges is not material. For foreign currency derivatives that do not 
qualify for hedge accounting treatment, all losses and gains were 
offset by changes in the underlying hedged items, resulting in no 
net material impact on earnings.

Interest Rates
We centrally manage our debt and investment portfolios consid-
ering investment opportunities and risks, tax consequences and 
overall financing strategies. We use various interest rate deriva-
tive instruments including, but not limited to, interest rate swaps, 
cross- currency interest rate swaps, Treasury locks and swap locks 

to manage our overall interest expense and foreign exchange risk. 
These instruments effectively change the interest rate and currency 
of specific debt issuances. Certain of our fixed rate indebtedness 
has been swapped to floating rates. The notional amount, interest 
payment and maturity date of the interest rate and cross- currency 
swaps match the principal, interest payment and maturity date of 
the related debt. Our Treasury locks and swap locks are entered into 
to protect against unfavorable interest rate changes relating to fore-
casted debt transactions.

The notional amounts of the interest rate derivative instruments 
outstanding as of December 31, 2011 and December 25, 2010 were 
$8.33 billion and $9.23 billion, respectively. For those interest rate 
derivative instruments that qualify for cash flow hedge accounting, 
any ineffectiveness is recorded immediately. Ineffectiveness for our 
interest rate hedges is not material. We classify both the earnings 
and cash flow impact from these interest rate derivative  instruments 
consistent with the underlying hedged item. During the next 
12 months, we expect to reclassify net losses of $16 million related 
to these hedges from accumulated other comprehensive loss into 
net income.

As of December 31, 2011, approximately 38% of total debt, after 
the impact of the related interest rate derivative instruments, was 
exposed to variable rates, compared to 43% as of December 25, 2010.

Fair Value Measurements
The fair values of our financial assets and liabilities as of December 31, 2011 and December 25, 2010 are categorized as follows:

Available- for-sale securities(b)
Short- term investments —  index funds(c)
Prepaid forward contracts(d)
Deferred compensation(e)
Derivatives designated as fair value hedging instruments:
Interest rate derivatives(f)
Derivatives designated as cash flow hedging instruments:
Forward exchange contracts(g)
Interest rate derivatives(f)
Commodity contracts —  other(h)
Commodity contracts —  futures(i)

Derivatives not designated as hedging instruments:
Forward exchange contracts(g)
Interest rate derivatives(f)
Commodity contracts —  other(h)
Commodity contracts —  futures(i)

Total derivatives at fair value
Total

2011

2010

Assets(a)
$  59
$ 157
$  40
$  –

Liabilities(a)
$  –
$  –
$  –
$ 519

Assets(a)
$  636
$  167
48
$ 
–
$ 

Liabilities(a)
$  –
$  –
$  –
$ 559

$ 300

$  25
  –
  3
  –
$  28

$  17
 107
  10
  –
$ 134
$ 462
$ 718

$  –

$  276

$  5
  69
  77
  1
$ 152

$  20
 141
  51
  11
$ 223
$ 375
$ 894

$ 

$ 

8
8
70
1
87

$ 

1
6
28
–
$ 
35
$  398
$ 1,249

$  7

$  23
  5
  2
  23
$  53

$  7
  45
  1
  1
$  54
$ 114
$ 673

(a)  Financial assets are classified on our balance sheet within prepaid expenses and other current assets and other assets, with the exception of available- for-sale securities and short- term 

investments, which are classified as short- term investments. Financial liabilities are classified on our balance sheet within accounts payable and other current liabilities and other liabilities. 
Unless specifically indicated, all financial assets and liabilities are categorized as Level 2 assets or liabilities.

(b)  Based on the price of common stock. Categorized as a Level 1 asset.
(c)  Based on price changes in index funds used to manage a portion of market risk arising from our deferred compensation liability. Categorized as a Level 1 asset.
(d) Based primarily on the price of our common stock.
(e)  Based on the fair value of investments corresponding to employees’ investment elections. As of December 31, 2011 and December 25, 2010, $44 million and $170 million, respectively, are 

categorized as Level 1 liabilities. The remaining balances are categorized as Level 2 liabilities.

(f ) Based on LIBOR and recently reported transactions in the marketplace.
(g) Based on observable market transactions of spot and forward rates.
(h) Based on recently reported transactions in the marketplace, primarily swap arrangements.
( i )  Based on average prices on futures exchanges. Categorized as a Level 1 asset or liability.

74

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The effective portion of the pre- tax (gains)/losses on our derivative instruments are categorized in the table below.

Notes to Consolidated Financial Statements

Forward exchange contracts
Interest rate derivatives
Commodity contracts
Total

Fair Value/ 
Non-designated Hedges

Losses/(Gains) Recognized  
in Income Statement(a)

2011
$  14
 (113)
  25
$  (74)

$ 

2010
6
 (104)
  (30)
$ (128)

Cash Flow Hedges

(Gains)/Losses Recognized  
in Accumulated Other  
Comprehensive Loss

Losses/(Gains) Reclassified from 
Accumulated Other Comprehensive 
Loss into Income Statement(b)

2011
(9)
$ 
  84
  51
$ 126

2010
$  26
  75
 (32)
$  69

2011
$  26
  15
 (36)
$  5

2010
$ 40
  7
 28
$ 75

(a)  Interest rate derivative gains are primarily from fair value hedges and are included in interest expense. These gains are substantially offset by increases in the value of the underlying debt, 

which is also included in interest expense. All other gains/losses are from non- designated hedges and are included in corporate unallocated expenses.

(b) Interest rate derivative losses are included in interest expense. All other gains/losses are primarily included in cost of sales.

The carrying amounts of our cash and cash equivalents and short- term investments approximate fair value due to the short- term maturity. 
Short- term investments consist principally of short- term time deposits and index funds used to manage a portion of market risk arising from 
our deferred compensation liability. The fair value of our debt obligations as of December 31, 2011 and December 25, 2010 was $29.8 billion 
and $25.9 billion, respectively, based upon prices of similar instruments in the marketplace.

Note 11
Net Income Attributable to PepsiCo per Common Share

Basic net income attributable to PepsiCo per common share is net income available for PepsiCo common shareholders divided by the 
weighted average of common shares outstanding during the period. Diluted net income attributable to PepsiCo per common share is calcu-
lated using the weighted average of common shares outstanding adjusted to include the effect that would occur if in- the-money employee 
stock options were exercised and RSUs and preferred shares were converted into common shares. Options to purchase 25.9 million shares in 
2011, 24.4 million shares in 2010 and 39.0 million shares in 2009 were not included in the calculation of diluted earnings per common share 
because these options were out- of-the- money. Out- of-the- money options had average exercise prices of $66.99 in 2011, $67.26 in 2010 and 
$61.52 in 2009.

The computations of basic and diluted net income attributable to PepsiCo per common share are as follows:

Net income attributable to PepsiCo
Preferred shares:
Dividends
Redemption premium

Net income available for PepsiCo common shareholders
Basic net income attributable to PepsiCo per common share
Net income available for PepsiCo common shareholders
Dilutive securities:

Stock options and RSUs
ESOP convertible preferred stock

Diluted
Diluted net income attributable to PepsiCo per common share

(a)  Weighted- average common shares outstanding (in millions).

2011

2010

2009

Income
$ 6,443

(1)
(6)
$ 6,436
$  4.08
$ 6,436

–
7
$ 6,443
$  4.03

Shares(a)

 1,576

 1,576

20
1
 1,597

Income
$ 6,320

(1)
(5)
$ 6,314
$  3.97
$ 6,314

–
6
$ 6,320
$  3.91

Shares(a)

 1,590

 1,590

23
1
 1,614

Income
$ 5,946

(1)
(5)
$ 5,940
$  3.81
$ 5,940

–
6
$ 5,946
$  3.77

Shares(a)

 1,558

 1,558

17
2
 1,577

75

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

Note 12
Preferred Stock

As of December 31, 2011 and December 25, 2010, there were 3 million shares of convertible preferred stock authorized. The preferred stock 
was issued for an ESOP established by Quaker and these shares are redeemable for common stock by the ESOP participants. The preferred 
stock accrues dividends at an annual rate of $5.46 per share. At year- end 2011 and 2010, there were 803,953 preferred shares issued and 
206,653 and 227,653 shares outstanding, respectively. The outstanding preferred shares had a fair value of $68 million as of December 31, 
2011 and $74 million as of December 25, 2010. Each share is convertible at the option of the holder into 4.9625 shares of common stock. The 
preferred shares may be called by us upon written notice at $78 per share plus accrued and unpaid dividends. Quaker made the final award 
to its ESOP plan in June 2001.

Preferred stock
Repurchased preferred stock
Balance, beginning of year

Redemptions
Balance, end of year

(a)  In millions.

2011

2010

2009

Shares(a)
 0.8

Amount
$  41

Shares(a)
 0.8

Amount
$  41

Shares(a)
 0.8

Amount
$  41

 0.6
  –
 0.6

$ 150
  7
$ 157

 0.6
  –
 0.6

$ 145
  5
$ 150

 0.5
 0.1
 0.6

$ 138
  7
$ 145

Note 13
Accumulated Other Comprehensive Loss 
Attributable to PepsiCo

Comprehensive income is a measure of income which includes 
both net income and other comprehensive income or loss. Other 
comprehensive income or loss results from items deferred from 
recognition into our income statement. Accumulated other compre-
hensive income or loss is separately presented on our balance sheet 
as part of common shareholders’ equity. Other comprehensive 
(loss)/income attributable to PepsiCo was $(2,599) million in 2011, 
$164 million in 2010 and $900 million in 2009. The accumulated bal-
ances for each component of other comprehensive loss attributable 
to PepsiCo were as follows:

Currency translation adjustment
Cash flow hedges, net of tax(a)
Unamortized pension and retiree 

medical, net of tax(b)

Unrealized gain on securities, net of tax
Other
Accumulated other comprehensive loss 

2011
  $ (2,688)
  (169)

2010
  $ (1,159)
  (100)

2009
  $ (1,471)
(42)

 (3,419)
62
(15)

 (2,442)
70
1

 (2,328)
47
–

attributable to PepsiCo

  $ (6,229)

  $ (3,630)

  $ (3,794)

(a)  Includes $23 million after- tax gain in 2009 for our share of our equity investees’ 

accumulated derivative activity.

(b) Net of taxes of $1,831 million in 2011, $1,322 million in 2010 and $1,211 million in 2009.

Note 14
Supplemental Financial Information

Accounts receivable
Trade receivables
Other receivables

Allowance, beginning of year

Net amounts charged to expense
Deductions(a)
Other(b)

Allowance, end of year
Net receivables
Inventories(c)
Raw materials
Work- in-process
Finished goods

2011

2010

2009

$ 70
  40
 (21)
  1
$ 90

  $ 6,036
 1,033
 7,069
  144
30
(41)
24
  157
  $ 6,912

  $ 5,514
  953
 6,467
90
12
(37)
79
  144
  $ 6,323

  $ 1,883
  207
 1,737
  $ 3,827

  $ 1,654
  128
 1,590
  $ 3,372

(a) Includes accounts written off.
(b) Includes adjustments related to acquisitions, currency translation effects and 

other adjustments.

(c) Inventories are valued at the lower of cost or market. Cost is determined using the 

average, first- in, first- out (FIFO) or last- in, first- out (LIFO) methods. Approximately 3% 
in 2011 and 8% in 2010 of the inventory cost was computed using the LIFO method. 
The differences between LIFO and FIFO methods of valuing these inventories were 
not material.

76

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other assets
Noncurrent notes and accounts receivable
Deferred marketplace spending
Pension plans
Other investments
Other

Accounts payable and other current liabilities
Accounts payable
Accrued marketplace spending
Accrued compensation and benefits
Dividends payable
Other current liabilities

2011

2010

  $ 

159
186
65
89
522
  $  1,021

  $  4,083
  1,915
  1,771
813
  3,175
  $ 11,757

  $ 

165
203
121
653
547
  $  1,689

  $  3,865
  1,841
  1,779
766
  2,672
  $ 10,923

Other supplemental information
Rent expense
Interest paid
Income taxes paid, net of refunds

2011

2010

2009

  $  589
  $ 1,039
  $ 2,218

  $  526
  $ 1,043
  $ 1,495

  $  412
  $  456
  $ 1,498

Note 15
Acquisitions

PBG and PAS
On February 26, 2010, we acquired PBG and PAS to create a more 
fully integrated supply chain and go- to-market business model, 
improving the effectiveness and efficiency of the distribution of our 
brands and enhancing our revenue growth. The total purchase price 
was approximately $12.6 billion, which included $8.3 billion of cash 
and equity and the fair value of our previously held equity interests 
in PBG and PAS of $4.3 billion. The acquisitions were accounted for 
as business combinations, and, accordingly, the identifiable assets 
acquired and liabilities assumed were recorded at their estimated 
fair values at the date of acquisition. Our fair market valuations of the 
identifiable assets acquired and liabilities assumed have been com-
pleted and the final valuations did not materially differ from those 
fair values reported as of December 25, 2010.

Notes to Consolidated Financial Statements

The following table presents unaudited consolidated pro forma 
financial information as if the closing of our acquisitions of PBG and 
PAS had occurred on December 27, 2009 for purposes of the finan-
cial information presented for the year ended December 25, 2010; 
and as if the closing of our acquisitions of PBG and PAS had occurred 
on December 28, 2008 for purposes of the financial information pre-
sented for the year ended December 26, 2009.

Net Revenue
Net Income Attributable to PepsiCo
Net Income Attributable to PepsiCo per Common 

Share —  Diluted

2010
  $ 59,582
  $  5,856

2009
  $ 57,471
  $  6,752

  $  3.60

  $  4.09

The unaudited consolidated pro forma financial information was 
prepared in accordance with the acquisition method of accounting 
under existing standards, and the regulations of the U.S. Securities 
and Exchange Commission, and is not necessarily indicative of the 
results of operations that would have occurred if our acquisitions 
of PBG and PAS had been completed on the date indicated, nor is it 
indicative of the future operating results of PepsiCo.

The historical unaudited consolidated financial information has 
been adjusted to give effect to pro forma events that are (1) directly 
attributable to the acquisitions, (2) factually supportable, and (3) 
expected to have a continuing impact on the combined results of 
PepsiCo, PBG and PAS.

The unaudited pro forma results have been adjusted with respect 

to certain aspects of our acquisitions of PBG and PAS to reflect:
(cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:68)(cid:80)(cid:79)(cid:84)(cid:86)(cid:78)(cid:78)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:28)
(cid:116)(cid:1) (cid:68)(cid:80)(cid:79)(cid:84)(cid:80)(cid:77)(cid:74)(cid:69)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:49)(cid:35)(cid:40)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:49)(cid:34)(cid:52)(cid:1)(cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:79)(cid:80)(cid:88)(cid:1)(cid:80)(cid:88)(cid:79)(cid:70)(cid:69)(cid:1)(cid:18)(cid:17)(cid:17)(cid:6)(cid:1)(cid:67)(cid:90)(cid:1)
PepsiCo and the corresponding gain resulting from the remea-
surement of our previously held equity interests in PBG and PAS;

(cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:70)(cid:77)(cid:74)(cid:78)(cid:74)(cid:79)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:83)(cid:70)(cid:77)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:81)(cid:66)(cid:83)(cid:85)(cid:90)(cid:1)(cid:85)(cid:83)(cid:66)(cid:79)(cid:84)(cid:66)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:67)(cid:70)(cid:85)(cid:88)(cid:70)(cid:70)(cid:79)(cid:1)(cid:49)(cid:70)(cid:81)(cid:84)(cid:74)(cid:36)(cid:80)(cid:1)

and PBG, and PepsiCo and PAS;

(cid:116)(cid:1) (cid:68)(cid:73)(cid:66)(cid:79)(cid:72)(cid:70)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:66)(cid:84)(cid:84)(cid:70)(cid:85)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:77)(cid:74)(cid:66)(cid:67)(cid:74)(cid:77)(cid:74)(cid:85)(cid:74)(cid:70)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:83)(cid:70)(cid:68)(cid:80)(cid:83)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:74)(cid:83)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:69)(cid:66)(cid:85)(cid:70)(cid:1)(cid:71)(cid:66)(cid:74)(cid:83)(cid:1)
values and changes in certain expenses resulting therefrom; and
(cid:116)(cid:1) (cid:66)(cid:69)(cid:69)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:66)(cid:77)(cid:1)(cid:74)(cid:79)(cid:69)(cid:70)(cid:67)(cid:85)(cid:70)(cid:69)(cid:79)(cid:70)(cid:84)(cid:84)(cid:13)(cid:1)(cid:74)(cid:79)(cid:68)(cid:77)(cid:86)(cid:69)(cid:74)(cid:79)(cid:72)(cid:13)(cid:1)(cid:67)(cid:86)(cid:85)(cid:1)(cid:79)(cid:80)(cid:85)(cid:1)(cid:77)(cid:74)(cid:78)(cid:74)(cid:85)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:13)(cid:1)(cid:69)(cid:70)(cid:67)(cid:85)(cid:1)(cid:74)(cid:84)(cid:84)(cid:86)-
ance costs and interest expense, incurred in connection with 
the acquisitions.

The unaudited pro forma results do not reflect future events that 
either have occurred or may occur after the acquisitions, including, 
but not limited to, the anticipated realization of ongoing savings 
from operating synergies in subsequent periods. They also do not 
give effect to certain one- time charges we expect to incur in con-
nection with the acquisitions, including, but not limited to, charges 
that are expected to achieve ongoing cost savings and synergies.

77

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements

WBD
On February 3, 2011, we acquired the ordinary shares,  including 
shares underlying ADSs and Global Depositary Shares (GDS), 
of WBD, a company incorporated in the Russian Federation, 
which  represented in the aggregate approximately 66% of WBD’s 
 outstanding ordinary shares, pursuant to the purchase agree-
ment dated December 1, 2010 between PepsiCo and certain 
selling shareholders of WBD for approximately $3.8 billion in cash. 
The acquisition of those shares increased our total ownership to 
 approximately 77%, giving us a controlling interest in WBD. Under 
the guidance on accounting for business combinations, once a 
controlling interest is obtained, we are required to recognize and 
measure 100% of the identifiable assets acquired, liabilities assumed 
and noncontrolling interests at their full fair values.

The following table summarizes the fair value of identifiable 

assets acquired and liabilities assumed in the acquisition of WBD and 
the resulting goodwill as of the acquisition date:

Fair value of total consideration transferred
Payment in cash, for the approximately 66% of outstanding 

ordinary shares of WBD on February 3, 2011, including shares 
underlying ADSs and GDSs (or $2,428, net of cash and cash 
equivalents acquired)

Fair value of our previously held equity interest in WBD prior to 

the acquisition

Total
Acquisition date fair value of identifiable assets acquired 

and liabilities assumed

Inventories
Property, plant and equipment
Amortizable intangible assets, primarily customer relationships
Nonamortizable intangible assets, primarily brands and 

tradename

Other current assets and liabilities(a)
Debt obligations
Other noncurrent assets and liabilities
Deferred income taxes
Total identifiable net assets
Fair value of noncontrolling interest in WBD
Goodwill
Total

  $ 3,827

  644
  $ 4,471

  $  314
  813
46

 3,114
 1,244
 (1,114)
(31)
  (665)
 3,721
 (1,349)
 2,099
  $ 4,471

(a)  Includes cash and cash equivalents, accounts receivable, prepaid expenses and other 

current assets, accounts payable and other current liabilities.

Goodwill is calculated as the excess of the aggregate of the fair 
value of the consideration transferred, any noncontrolling interest 
and any previously held equity interest in the acquiree over the fair 
value of the net assets recognized. The goodwill recorded as part of 
the acquisition of WBD primarily reflects the value of adding econo-
mies of scale from our existing manufacturing and procurement 
operations in Russia and synergies expected to arise from our com-
bined brand portfolios in the nutrition and other categories, as well 
as any intangible assets that do not qualify for separate  recognition. 
Goodwill is not amortizable or deductible for tax purposes. All of 
the goodwill is recorded in our Europe segment.

Under the guidance on accounting for business combinations, 
merger and integration costs are not included as components of 
consideration transferred but are accounted for as expenses in the 
period in which the costs are incurred. See Note 3 for details on the 
expenses incurred during 2011 and 2010.

On March 10, 2011, we commenced our tender offers in 

Russia and the U.S. for all remaining outstanding ordinary shares 
and ADSs of WBD for 3,883.70 Russian rubles per ordinary share and 
970.925 Russian rubles per ADS, respectively. The Russian offer was 
made to all holders of ordinary shares and the U.S. offer was made to 
all holders of ADSs. We completed the Russian offer on May 19, 2011 
and the U.S. offer on May 16, 2011. After completion of the offers, we 
paid approximately $1.3 billion for WBD’s ordinary shares (including 
shares underlying ADSs) and increased our total ownership of WBD 
to approximately 98.6%.

On June 30, 2011, we elected to exercise our squeeze- out rights 

under Russian law with respect to all remaining WBD ordinary 
shares not already owned by us. Therefore, under Russian law, all 
remaining WBD shareholders were required to sell their ordinary 
shares (including those underlying ADSs) to us at the same price 
that was offered to WBD shareholders in the Russian tender offer. 
Accordingly, all registered holders of ordinary shares on August 15, 
2011 (including the ADS depositary) received 3,883.70 Russian 
rubles per ordinary share. After completion of the squeeze- out in 
September 2011 (during our fourth quarter), we paid approximately 
$79 million for WBD’s ordinary shares (including shares underlying 
ADSs) and increased our total ownership to 100% of WBD.

78

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
Management’s Responsibility for Financial Reporting

To Our Shareholders:

At PepsiCo, our actions —  the actions of all our associates —  are 
governed by our Worldwide Code of Conduct. This Code is clearly 
aligned with our stated values —  a commitment to sustained 
growth, through empowered people, operating with responsibility 
and building trust. Both the Code and our core values enable us to 
operate with integrity —  both within the letter and the spirit of the 
law. Our Code of Conduct is reinforced consistently at all levels and 
in all countries. We have maintained strong governance policies and 
practices for many years.

The management of PepsiCo is responsible for the  objectivity 
and integrity of our consolidated financial statements. The Audit 
Committee of the Board of Directors has engaged indepen-
dent  registered public accounting firm, KPMG LLP, to audit our 
consolidated financial statements, and they have expressed an 
unqualified opinion.

We are committed to providing timely, accurate and understand-

able information to investors. Our commitment encompasses 
the following:

Maintaining strong controls over financial reporting.
Our system of internal control is based on the control criteria 
framework of the Committee of Sponsoring Organizations of the 
Treadway Commission published in their report titled Internal 
Control —  Integrated Framework. The system is designed to provide 
reasonable assurance that transactions are executed as authorized 
and accurately recorded; that assets are safeguarded; and that 
accounting records are sufficiently reliable to permit the preparation 
of financial statements that conform in all material respects with 
accounting principles generally accepted in the U.S. We maintain 
disclosure controls and procedures designed to ensure that infor-
mation required to be disclosed in reports under the Securities 
Exchange Act of 1934 is recorded, processed, summarized and 
reported within the specified time periods. We monitor these inter-
nal controls through self- assessments and an ongoing program 
of internal audits. Our internal controls are reinforced through our 
Worldwide Code of Conduct, which sets forth our commitment to 
conduct business with integrity, and within both the letter and the 
spirit of the law.

Exerting rigorous oversight of the business.
We continuously review our business results and strategies. This 
encompasses financial discipline in our strategic and daily business 
decisions. Our Executive Committee is actively involved —  from 
understanding strategies and alternatives to reviewing key initia-
tives and financial performance. The intent is to ensure we remain 
objective in our assessments, constructively challenge our approach 
to potential business opportunities and issues, and monitor results 
and controls.

Engaging strong and effective Corporate Governance
from our Board of Directors.
We have an active, capable and diligent Board that meets 
the required standards for independence, and we welcome the 
Board’s oversight as a representative of our shareholders. Our 
Audit Committee is comprised of independent directors with the 
financial literacy, knowledge and experience to provide appropri-
ate oversight. We review our critical accounting policies, financial 
reporting and internal control matters with them and  encourage 
their direct communication with KPMG LLP, with our General 
Auditor, and with our General Counsel. We also have a Compliance 
Department, led by our Chief Compliance Officer, to coordinate our 
compliance policies and practices.

Providing investors with financial results that are
complete, transparent and understandable.
The consolidated financial statements and financial information 
included in this report are the responsibility of management. 
This includes preparing the financial statements in accordance 
with accounting principles generally accepted in the U.S., which 
require estimates based on management’s best judgment.

PepsiCo has a strong history of doing what’s right.
We realize that great companies are built on trust, strong ethical 
standards and principles. Our financial results are delivered from 
that culture of accountability, and we take responsibility for the 
quality and accuracy of our financial reporting.

February 27, 2012

Marie T. Gallagher
Senior Vice President and Controller

Hugh F. Johnston
Chief Financial Officer

Indra K. Nooyi
Chairman of the Board of Directors and  
Chief Executive Officer

79

PepsiCo, Inc. 2011 Annual Report

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining 
adequate internal control over financial reporting, as such term is 
defined in Rule 13a-15(f) of the Exchange Act. Under the supervi-
sion and with the participation of our management, including our 
Chief Executive Officer and Chief Financial Officer, we conducted an 
evaluation of the effectiveness of our internal control over financial 
reporting based upon the framework in Internal Control —  Integrated 
Framework issued by the Committee of Sponsoring Organizations of 
the Treadway Commission. Based on that evaluation, our manage-
ment concluded that our internal control over financial reporting 
was effective as of December 31, 2011.

The scope of management’s assessment of the effectiveness 
of our internal control over financial reporting included all of our 
consolidated operations except for the operations of Wimm- Bill-
Dann Foods OJSC and its subsidiaries (WBD), which we acquired in 
February 2011. WBD’s operations represented 9% of our consoli-
dated total assets and 4% of our consolidated net revenues as of 
and for the year ended December 31, 2011.

KPMG LLP, an independent registered public accounting firm, 
has audited the consolidated financial statements included in this 
Annual Report and, as part of their audit, has issued their report, 
included herein, on the effectiveness of our internal control over 
financial reporting.

During our fourth fiscal quarter of 2011, we continued migrating 

certain of our financial processing systems to an enterprise- wide 
systems solution. These systems implementations are part of our 
ongoing global business transformation initiative, and we plan to 
continue implementing such systems throughout other parts of our 
businesses over the course of the next few years. In connection with 
these implementations and resulting business process changes, we 

continue to enhance the design and documentation of our internal 
control over financial reporting processes to maintain suitable con-
trols over our financial reporting. Moreover, we are in the process 
of integrating WBD into our overall internal control over financial 
reporting processes.

Except as described above, there were no changes in our internal 

control over financial reporting during our fourth fiscal quarter of 
2011 that have materially affected, or are reasonably likely to materi-
ally affect, our internal control over financial reporting.

February 27, 2012

Marie T. Gallagher
Senior Vice President and Controller

Hugh F. Johnston
Chief Financial Officer

Indra K. Nooyi
Chairman of the Board of Directors and  
Chief Executive Officer

80

PepsiCo, Inc. 2011 Annual Report

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
PepsiCo, Inc.:

We have audited the accompanying Consolidated Balance Sheets 
of PepsiCo, Inc. and subsidiaries (“PepsiCo, Inc.” or “the Company”) 
as of December 31, 2011 and December 25, 2010, and the related 
Consolidated Statements of Income, Cash Flows and Equity for each 
of the fiscal years in the three- year period ended December 31, 2011. 
We also have audited PepsiCo, Inc.’s internal control over financial 
reporting as of December 31, 2011, based on criteria established in 
Internal Control —  Integrated Framework issued by the Committee 
of Sponsoring Organizations of the Treadway Commission (COSO). 
PepsiCo, Inc.’s management is responsible for these consolidated 
financial statements, for maintaining effective internal control 
over financial reporting, and for its assessment of the effectiveness 
of internal control over financial reporting, included in the accom-
panying Management’s Report on Internal Control over Financial 
Reporting. Our responsibility is to express an opinion on these 
consolidated financial statements and an opinion on the Company’s 
internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the 
Public Company Accounting Oversight Board (United States). Those 
standards require that we plan and perform the audits to obtain 
reasonable assurance about whether the financial statements are 
free of material misstatement and whether effective internal control 
over financial reporting was maintained in all material respects. Our 
audits of the consolidated financial statements included examining, 
on a test basis, evidence supporting the amounts and disclosures in 
the financial statements, assessing the accounting principles used 
and significant estimates made by management, and evaluating the 
overall financial statement presentation. Our audit of internal con-
trol over financial reporting included obtaining an understanding 
of internal control over financial reporting, assessing the risk that a 
material weakness exists, and testing and evaluating the design and 
operating effectiveness of internal control based on the assessed 
risk. Our audits also included performing such other procedures as 
we considered necessary in the circumstances. We believe that our 
audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process 
designed to provide reasonable assurance regarding the reliability 
of financial reporting and the preparation of financial statements 
for external purposes in accordance with generally accepted 
accounting principles. A company’s internal control over financial 

reporting includes those policies and procedures that (1) pertain 
to the maintenance of records that, in reasonable detail, accurately 
and fairly reflect the transactions and dispositions of the assets of 
the company; (2) provide reasonable assurance that transactions are 
recorded as necessary to permit preparation of financial statements 
in accordance with generally accepted accounting principles, and 
that receipts and expenditures of the company are being made only 
in accordance with authorizations of management and directors 
of the company; and (3) provide reasonable assurance regarding 
prevention or timely detection of unauthorized acquisition, use, or 
disposition of the company’s assets that could have a material effect 
on the financial statements.

Because of its inherent limitations, internal control over financial 

reporting may not prevent or detect misstatements. Also, pro-
jections of any evaluation of effectiveness to future periods are 
subject to the risk that controls may become inadequate because 
of changes in conditions, or that the degree of compliance with the 
policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to 

above present fairly, in all material respects, the financial position 
of PepsiCo, Inc. as of December 31, 2011 and December 25, 2010, 
and the results of its operations and its cash flows for each of the 
fiscal years in the three- year period ended December 31, 2011, in 
conformity with U.S. generally accepted accounting principles. Also 
in our opinion, PepsiCo, Inc. maintained, in all material respects, 
effective internal control over financial reporting as of December 31, 
2011, based on criteria established in Internal Control —  Integrated 
Framework issued by COSO.

The scope of management’s assessment of the effectiveness of 
internal control over financial reporting excluded the internal con-
trol over financial reporting of Wimm- Bill-Dann Foods OJSC and its 
subsidiaries (“WBD”), which the Company acquired in February 2011. 
WBD represented 9% of the Company’s consolidated total assets 
and 4% of the Company’s consolidated net revenues as of and for 
the year ended December 31, 2011. Our audit of internal control over 
financial reporting of PepsiCo, Inc. also excluded an evaluation of 
the internal control over financial reporting of WBD.

New York, New York
February 27, 2012

81

PepsiCo, Inc. 2011 Annual Report

Selected Financial Data

(in millions except per share amounts, unaudited)
Net revenue
Gross profit
53rd week(a)
Mark- to-market net impact(b)
Merger and integration charges(c)
Restructuring and impairment charges(d)
Gain on previously held equity interests(e)
Inventory fair value adjustments(f)
Venezuela currency devaluation(g)
Asset write- off(h)
Foundation contribution(i)
Debt repurchase(j)
Net income attributable to PepsiCo
Net income attributable to PepsiCo per common 

  $ 
  $ 

First 
Quarter
  $ 11,937
  $  6,490
–
(31)
55
–
–
34
–
–
–
–
  $  1,143

  $ 

  $ 
  $ 

Second 
Quarter
  $ 16,827
  $  8,864
–
9
58
–
–
4
–
–
–
–
  $  1,885

  $ 

2011

2010

  $ 
  $ 

Third 
Quarter
  $ 17,582
  $  9,130
–
53
61
–
–
3
–
–
–
–
  $  2,000

  $ 

Fourth 
Quarter
  $ 20,158
  $ 10,427
(94)
  $ 
71
  $ 
155
  $ 
383
  $ 
–
5
–
–
–
–
  $  1,415

  $ 

First 
Quarter
  $ 9,368
  $ 4,905
–
  $ 
(46)
  $  321
–
  $  (958)
  $  281
  $  120
  $  145
  $  100
–
  $ 1,430

  $ 
  $ 

Second 
Quarter
  $ 14,801
  $  8,056
–
4
155
–
–
76
–
–
–
–
  $  1,603

  $ 

  $ 
  $ 

Third 
Quarter
  $ 15,514
  $  8,506
–
(16)
69
–
–
17
–
–
–
–
  $  1,922

  $ 

  $ 
  $ 

Fourth 
Quarter
  $ 18,155
  $  9,796
–
(33)
263
–
–
24
–
–
–
  $ 
178
  $  1,365

  $ 

share —  basic

  $  0.72

  $  1.19

  $  1.27

  $  0.90

  $  0.90

  $  1.00

  $  1.21

  $  0.86

Net income attributable to PepsiCo per common 

share —  diluted

Cash dividends declared per common share
Stock price per share(k)

High
Low
Close

  $  0.71
  $  0.48

  $  1.17
  $  0.515

  $  1.25
  $  0.515

  $  0.89
  $  0.515

  $  0.89
  $  0.45

  $  0.98
  $  0.48

  $  1.19
  $  0.48

  $  0.85
  $  0.48

  $  67.46
  $  62.05
  $  63.24

  $  71.89
  $  63.50
  $  68.69

  $  70.75
  $  60.10
  $  63.30

  $  66.78
  $  58.50
  $  66.35

  $ 66.98
  $ 58.75
  $ 66.56

  $  67.61
  $  61.04
  $  63.56

  $  66.83
  $  60.32
  $  65.57

  $  68.11
  $  63.43
  $  65.69

(a) The 2011 fiscal year consisted of fifty- three weeks compared to fifty- two weeks in our normal fiscal year. The 53rd week increased 2011 net revenue by $623 million, gross profit by 

$358 million, pre- tax income by $94 million and net income attributable to PepsiCo by $64 million or $0.04 per share.

(b) In 2011, we recognized $102 million ($71 million after- tax or $0.04 per share) of mark- to-market net losses on commodity hedges in corporate unallocated expenses. In 2010, we 

recognized $91 million ($58 million after- tax or $0.04 per share) of mark- to-market net gains on commodity hedges in corporate unallocated expenses.

(c) In 2011, we incurred merger and integration charges of $329 million related to our acquisitions of PBG, PAS and WBD. In total, these charges had an after- tax impact of $271 million or 

$0.17 per share. In 2010, we incurred merger and integration charges of $799 million related to our acquisitions of PBG and PAS, as well as advisory fees in connection with our acquisition 
of WBD. In addition, we recorded $9 million of merger- related charges, representing our share of the respective merger costs of PBG and PAS. In total, these charges had an after- tax 
impact of $648 million or $0.40 per share. See Note 3.

(d) Restructuring and impairment charges in 2011 were $383 million ($286 million after- tax or $0.18 per share). See Note 3.
(e) In 2010, in connection with our acquisitions of PBG and PAS, we recorded a gain on our previously held equity interests of $958 million ($0.60 per share), comprising $735 million which was 
non- taxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax liabilities associated with these previously held equity interests. See Note 15.

(f ) In 2011, we recorded $46 million ($28 million after- tax or $0.02 per share) of incremental costs related to fair value adjustments to the acquired inventory included in WBD’s balance 
sheet at the acquisition date and hedging contracts included in PBG’s and PAS’s balance sheets at the acquisition date. In 2010, we recorded $398 million ($333 million after- tax or 
$0.21 per share) of incremental costs related to fair value adjustments to the acquired inventory and other related hedging contracts included in PBG’s and PAS’s balance sheets at the 
acquisition date.

(g) In 2010, we recorded a one- time $120 million net charge ($120 million after- tax or $0.07 per share) related to our change to hyperinflationary accounting for our Venezuelan businesses and 

the related devaluation of the bolivar.

(h) In 2010, we recorded a $145 million charge ($92 million after- tax or $0.06 per share) related to a change in scope of one release in our ongoing migration to SAP software.
( i )  In 2010, we made a $100 million ($64 million after- tax or $0.04 per share) contribution to The PepsiCo Foundation Inc., in order to fund charitable and social programs over the next 

several years.

( j )  In 2010, we paid $672 million in a cash tender offer to repurchase $500 million (aggregate principal amount) of our 7.90% senior unsecured notes maturing in 2018. As a result of this debt 

repurchase, we recorded a $178 million charge to interest expense ($114 million after- tax or $0.07 per share), primarily representing the premium paid in the tender offer.

(k) Represents the composite high and low sales price and quarterly closing prices for one share of PepsiCo common stock.

82

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Five- Year Summary (unaudited)

Net revenue
Net income attributable to PepsiCo
Net income attributable to PepsiCo per common share — basic
Net income attributable to PepsiCo per common share — diluted
Cash dividends declared per common share
Total assets
Long- term debt
Return on invested capital(a)

2011
$ 66,504
$  6,443
$  4.08
$  4.03
$  2.025
$ 72,882
$ 20,568

2010
$ 57,838
$  6,320
$  3.97
$  3.91
$  1.89
$ 68,153
$ 19,999

2009
$ 43,232
$  5,946
$  3.81
$  3.77
$  1.775
$ 39,848
$  7,400

2008
$ 43,251
$  5,142
$  3.26
$  3.21
$  1.65
$ 35,994
$  7,858

2007
$ 39,474
$  5,658
$  3.48
$  3.41
$  1.425
$ 34,628
$  4,203

  14.3%  

  17.0%  

  27.5%  

  24.0%  

  29.9%

(a)  Return on invested capital is defined as adjusted net income attributable to PepsiCo divided by the sum of average common shareholders’ equity and average total debt. Adjusted net 
income attributable to PepsiCo is defined as net income attributable to PepsiCo plus interest expense after- tax. Interest expense after- tax was $548 million in 2011, $578 million in 2010, 
$254 million in 2009, $210 million in 2008 and $143 million in 2007.

(cid:116)(cid:1)

(cid:42)(cid:79)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70)(cid:84)(cid:1)(cid:83)(cid:70)(cid:84)(cid:85)(cid:83)(cid:86)(cid:68)(cid:85)(cid:86)(cid:83)(cid:74)(cid:79)(cid:72)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:74)(cid:78)(cid:81)(cid:66)(cid:74)(cid:83)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:68)(cid:73)(cid:66)(cid:83)(cid:72)(cid:70)(cid:84)(cid:1)(cid:80)(cid:71)(cid:27)

Pre- tax

After- tax

Per share

(cid:116)(cid:1)

(cid:42)(cid:79)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70)(cid:84)(cid:1)(cid:78)(cid:66)(cid:83)(cid:76)(cid:14)(cid:1)(cid:85)(cid:80)(cid:14)(cid:78)(cid:66)(cid:83)(cid:76)(cid:70)(cid:85)(cid:1)(cid:79)(cid:70)(cid:85)(cid:1)(cid:77)(cid:80)(cid:84)(cid:84)(cid:70)(cid:84)(cid:16)(cid:9)(cid:72)(cid:66)(cid:74)(cid:79)(cid:84)(cid:10)(cid:1)(cid:80)(cid:71)(cid:27)

Pre- tax

After- tax

Per share

2011

$ 383

$ 286

$ 0.18

2010

$  (91)

$  (58)

$ (0.04)

2009

$  36

$  29

$ 0.02

2009

$ (274)

$ (173)

$ (0.11)

2008

$ 543

$ 408

$ 0.25

2008

$ 346

$ 223

$ 0.14

2007

$ 102

$  70

$ 0.04

2007

$  (19)

$  (12)

$ (0.01)

2011

$ 102

$  71

$ 0.04

(cid:116)(cid:1) (cid:53)(cid:73)(cid:70)(cid:1)(cid:19)(cid:17)(cid:18)(cid:18)(cid:1)(cid:246)(cid:84)(cid:68)(cid:66)(cid:77)(cid:1)(cid:90)(cid:70)(cid:66)(cid:83)(cid:1)(cid:68)(cid:80)(cid:79)(cid:84)(cid:74)(cid:84)(cid:85)(cid:70)(cid:69)(cid:1)(cid:80)(cid:71)(cid:1)(cid:246)(cid:71)(cid:85)(cid:90)(cid:14)(cid:1)(cid:85)(cid:73)(cid:83)(cid:70)(cid:70)(cid:1)(cid:88)(cid:70)(cid:70)(cid:76)(cid:84)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:83)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:246)(cid:71)(cid:85)(cid:90)(cid:14)(cid:1)(cid:85)(cid:88)(cid:80)(cid:1)(cid:88)(cid:70)(cid:70)(cid:76)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:79)(cid:80)(cid:83)(cid:78)(cid:66)(cid:77)(cid:1)(cid:246)(cid:84)(cid:68)(cid:66)(cid:77)(cid:1)(cid:90)(cid:70)(cid:66)(cid:83)(cid:15)(cid:1)(cid:53)(cid:73)(cid:70)(cid:1)(cid:22)(cid:20)(cid:83)(cid:69)(cid:1)(cid:88)(cid:70)(cid:70)(cid:76)(cid:1)(cid:74)(cid:79)(cid:68)(cid:83)(cid:70)(cid:66)(cid:84)(cid:70)(cid:69)(cid:1)(cid:19)(cid:17)(cid:18)(cid:18)(cid:1)(cid:79)(cid:70)(cid:85)(cid:1)(cid:83)(cid:70)(cid:87)(cid:70)(cid:79)(cid:86)(cid:70)(cid:1)(cid:67)(cid:90)(cid:1)(cid:5)(cid:23)(cid:19)(cid:20)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:79)(cid:70)(cid:85)(cid:1)(cid:74)(cid:79)(cid:68)(cid:80)(cid:78)(cid:70)(cid:1)

attributable to PepsiCo by $64 million or $0.04 per share.
(cid:42)(cid:79)(cid:1)(cid:19)(cid:17)(cid:18)(cid:18)(cid:13)(cid:1)(cid:88)(cid:70)(cid:1)(cid:74)(cid:79)(cid:68)(cid:86)(cid:83)(cid:83)(cid:70)(cid:69)(cid:1)(cid:78)(cid:70)(cid:83)(cid:72)(cid:70)(cid:83)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:74)(cid:79)(cid:85)(cid:70)(cid:72)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:68)(cid:73)(cid:66)(cid:83)(cid:72)(cid:70)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:5)(cid:20)(cid:19)(cid:26)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:83)(cid:70)(cid:77)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:49)(cid:35)(cid:40)(cid:13)(cid:1)(cid:49)(cid:34)(cid:52)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:56)(cid:35)(cid:37)(cid:15)(cid:1)(cid:42)(cid:79)(cid:1)(cid:85)(cid:80)(cid:85)(cid:66)(cid:77)(cid:13)(cid:1)(cid:85)(cid:73)(cid:70)(cid:84)(cid:70)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:84)(cid:1)(cid:73)(cid:66)(cid:69)(cid:1)(cid:66)(cid:79)(cid:1)(cid:66)(cid:71)(cid:85)(cid:70)(cid:83)(cid:14)(cid:1)(cid:85)(cid:66)(cid:89)(cid:1)(cid:74)(cid:78)(cid:81)(cid:66)(cid:68)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:5)(cid:19)(cid:24)(cid:18)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:83)(cid:1)
$0.17 per share.
(cid:42)(cid:79)(cid:1)(cid:19)(cid:17)(cid:18)(cid:18)(cid:13)(cid:1)(cid:88)(cid:70)(cid:1)(cid:83)(cid:70)(cid:68)(cid:80)(cid:83)(cid:69)(cid:70)(cid:69)(cid:1)(cid:5)(cid:21)(cid:23)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:9)(cid:5)(cid:19)(cid:25)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:66)(cid:71)(cid:85)(cid:70)(cid:83)(cid:14)(cid:1)(cid:85)(cid:66)(cid:89)(cid:1)(cid:80)(cid:83)(cid:1)(cid:5)(cid:17)(cid:15)(cid:17)(cid:19)(cid:1)(cid:81)(cid:70)(cid:83)(cid:1)(cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:10)(cid:1)(cid:80)(cid:71)(cid:1)(cid:74)(cid:79)(cid:68)(cid:83)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:66)(cid:77)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:84)(cid:1)(cid:83)(cid:70)(cid:77)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:71)(cid:66)(cid:74)(cid:83)(cid:1)(cid:87)(cid:66)(cid:77)(cid:86)(cid:70)(cid:1)(cid:66)(cid:69)(cid:75)(cid:86)(cid:84)(cid:85)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:83)(cid:70)(cid:69)(cid:1)(cid:74)(cid:79)(cid:87)(cid:70)(cid:79)(cid:85)(cid:80)(cid:83)(cid:90)(cid:1)(cid:74)(cid:79)(cid:68)(cid:77)(cid:86)(cid:69)(cid:70)(cid:69)(cid:1)(cid:74)(cid:79)(cid:1)(cid:56)(cid:35)(cid:37)(cid:8)(cid:84)(cid:1)(cid:67)(cid:66)(cid:77)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:84)(cid:73)(cid:70)(cid:70)(cid:85)(cid:1)
at the acquisition date and hedging contracts included in PBG’s and PAS’s balance sheets at the acquisition date.
(cid:42)(cid:79)(cid:1)(cid:19)(cid:17)(cid:18)(cid:17)(cid:13)(cid:1)(cid:88)(cid:70)(cid:1)(cid:74)(cid:79)(cid:68)(cid:86)(cid:83)(cid:83)(cid:70)(cid:69)(cid:1)(cid:78)(cid:70)(cid:83)(cid:72)(cid:70)(cid:83)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:74)(cid:79)(cid:85)(cid:70)(cid:72)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:68)(cid:73)(cid:66)(cid:83)(cid:72)(cid:70)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:5)(cid:24)(cid:26)(cid:26)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:83)(cid:70)(cid:77)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:49)(cid:35)(cid:40)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:49)(cid:34)(cid:52)(cid:13)(cid:1)(cid:66)(cid:84)(cid:1)(cid:88)(cid:70)(cid:77)(cid:77)(cid:1)(cid:66)(cid:84)(cid:1)(cid:66)(cid:69)(cid:87)(cid:74)(cid:84)(cid:80)(cid:83)(cid:90)(cid:1)(cid:71)(cid:70)(cid:70)(cid:84)(cid:1)(cid:74)(cid:79)(cid:1)(cid:68)(cid:80)(cid:79)(cid:79)(cid:70)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:66)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:56)(cid:35)(cid:37)(cid:15)(cid:1)
In addition, we recorded $9 million of merger- related charges, representing our share of the respective merger costs of PBG and PAS. In total, these costs had an after- tax impact of 
$648 million or $0.40 per share.
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non- taxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax liabilities associated with these previously held equity interests.
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contracts included in PBG’s and PAS’s balance sheets at the acquisition date.
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the related devaluation of the bolivar.
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several years.
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repurchase, we recorded a $178 million charge to interest expense ($114 million after- tax or $0.07 per share), primarily representing the premium paid in the tender offer.
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our share of the respective merger costs of PBG and PAS. In total, these costs had an after- tax impact of $44 million or $0.03 per share.
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(cid:42)(cid:79)(cid:1)(cid:19)(cid:17)(cid:17)(cid:24)(cid:13)(cid:1)(cid:88)(cid:70)(cid:1)(cid:83)(cid:70)(cid:68)(cid:80)(cid:72)(cid:79)(cid:74)(cid:91)(cid:70)(cid:69)(cid:1)(cid:5)(cid:18)(cid:19)(cid:26)(cid:835)(cid:78)(cid:74)(cid:77)(cid:77)(cid:74)(cid:80)(cid:79)(cid:1)(cid:9)(cid:5)(cid:17)(cid:15)(cid:17)(cid:25)(cid:1)(cid:81)(cid:70)(cid:83)(cid:1)(cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:10)(cid:1)(cid:80)(cid:71)(cid:1)(cid:79)(cid:80)(cid:79)(cid:14)(cid:1)(cid:68)(cid:66)(cid:84)(cid:73)(cid:1)(cid:85)(cid:66)(cid:89)(cid:1)(cid:67)(cid:70)(cid:79)(cid:70)(cid:246)(cid:85)(cid:84)(cid:1)(cid:83)(cid:70)(cid:77)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:71)(cid:66)(cid:87)(cid:80)(cid:83)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:83)(cid:70)(cid:84)(cid:80)(cid:77)(cid:86)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:71)(cid:80)(cid:83)(cid:70)(cid:74)(cid:72)(cid:79)(cid:1)(cid:85)(cid:66)(cid:89)(cid:1)(cid:78)(cid:66)(cid:85)(cid:85)(cid:70)(cid:83)(cid:84)(cid:15)

(cid:116)(cid:1)

(cid:116)(cid:1)

(cid:116)(cid:1)

(cid:116)(cid:1)

(cid:116)(cid:1)

(cid:116)(cid:1)

(cid:116)(cid:1)
(cid:116)(cid:1)

(cid:116)(cid:1)

(cid:116)(cid:1)

(cid:116)(cid:1)
(cid:116)(cid:1)

83

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP and Non- GAAP Information

Net revenue excluding the impact of acquisitions and divestitures, 
division operating profit, core results and core constant currency 
results are non- GAAP financial measures as they exclude certain 
items noted below. However, we believe investors should consider 
these measures as they are more indicative of our ongoing perfor-
mance and with how management evaluates our operational results 
and trends.

53rd Week Impact
In 2011, we had an additional week of results (53rd week). Our fiscal 
year ends on the last Saturday of each December, resulting in an 
additional week of results every five or six years. The 53rd week 
increased net revenue by $623 million and operating profit by 
$109 million in the year ended December 31, 2011.

Commodity Mark- to-Market Net Impact
In the year ended December 31, 2011, we recognized $102 million 
of mark- to-market net losses on commodity hedges in corporate 
unallocated expenses. In the year ended December 25, 2010, we 
recognized $91 million of mark- to-market net gains on commod-
ity hedges in corporate unallocated expenses. In the year ended 
December 30, 2006, we recognized $18 million of mark- to-market net 
losses on commodity hedges in corporate unallocated expenses. We 
centrally manage commodity derivatives on behalf of our divisions. 
Certain of these commodity derivatives do not qualify for hedge 
accounting treatment and are marked to market with the resulting 
gains and losses recognized in corporate unallocated expenses. 
These gains and losses are subsequently reflected in division results 
when the divisions take delivery of the underlying commodity.

Merger and Integration Charges
In the year ended December 31, 2011, we incurred merger and inte-
gration charges of $329 million related to our acquisitions of PBG, 
PAS and WBD, including $112 million recorded in the PAB segment, 
$123 million recorded in the Europe segment, $78 million recorded 
in corporate unallocated expenses and $16 million recorded in 
interest expense. These charges also include closing costs and 
advisory fees related to our acquisition of WBD. In the year ended 
December 25, 2010, we incurred merger and integration charges of 
$799 million related to our acquisitions of PBG and PAS, as well as 
advisory fees in connection with our acquisition of WBD, including 
$467 million recorded in the PAB segment, $111 million recorded 
in the Europe segment, $191 million recorded in corporate unallo-
cated expenses and $30 million recorded in interest expense. These 
charges also include closing costs, one- time financing costs and 
advisory fees related to our acquisitions of PBG and PAS. In addi-
tion, in the year ended December 25, 2010, we recorded $9 million 
of merger- related charges, representing our share of the respective 
merger costs of PBG and PAS, in bottling equity income.

Restructuring Charges
In the year ended December 31, 2011, we incurred charges of 
$383 million in conjunction with our multi- year productivity plan 
(Productivity Plan), including $76 million recorded in the FLNA 
segment, $18 million recorded in the QFNA segment, $48 million 
recorded in the LAF segment, $81 million recorded in the PAB 

segment, $77 million recorded in the Europe segment, $9 million 
recorded in the AMEA segment and $74 million recorded in corpo-
rate unallocated expenses. The Productivity Plan includes actions 
in all segments of our business that we believe will strengthen our 
complementary food, snack and beverage businesses through 
a new integrated operating model designed to streamline our 
organization, accelerate information sharing, facilitate timely 
decision- making and drive operational productivity. In the year 
ended December 30, 2006, we recorded restructuring and impair-
ment charges of $67 million in conjunction with consolidating the 
manufacturing network at Frito- Lay.

Gain on Previously Held Equity Interests in PBG and PAS
In the first quarter of 2010, in connection with our acquisitions of 
PBG and PAS, we recorded a gain on our previously held equity 
interests of $958 million, comprising $735 million which is non- 
taxable and recorded in bottling equity income and $223 million 
related to the reversal of deferred tax liabilities associated with these 
previously held equity interests.

Inventory Fair Value Adjustments
In the year ended December 31, 2011, we recorded $46 million 
of incremental costs in cost of sales related to fair value adjust-
ments to the acquired inventory included in WBD’s balance sheet 
at the acquisition date and hedging contracts included in PBG’s 
and PAS’s balance sheets at the acquisition date. In the year ended 
December 25, 2010, we recorded $398 million of incremental costs, 
substantially all in cost of sales, related to fair value adjustments 
to the acquired inventory and other related hedging contracts 
included in PBG’s and PAS’s balance sheets at the acquisition date, 
including $358 million recorded in the PAB segment and $40 million 
recorded in the Europe segment.

Venezuela Currency Devaluation
As of the beginning of our 2010 fiscal year, we recorded a one- time 
$120 million net charge related to our change to hyperinflationary 
accounting for our Venezuelan businesses and the related devalu-
ation of the bolivar fuerte (bolivar). $129 million of this net charge 
was recorded in corporate unallocated expenses, with the balance 
(income of $9 million) recorded in our PAB segment.

Asset Write- Off
In the first quarter of 2010, we recorded a $145 million charge related 
to a change in scope of one release in our ongoing migration to SAP 
software. This change was driven, in part, by a review of our North 
America systems strategy following our acquisitions of PBG and PAS. 
This change does not impact our overall commitment to continue 
our implementation of SAP across our global operations over the 
next few years.

Foundation Contribution
In the first quarter of 2010, we made a $100 million contribution 
to The PepsiCo Foundation, Inc. (Foundation), in order to fund 
charitable and social programs over the next several years. This con-
tribution was recorded in corporate unallocated expenses.

84

PepsiCo, Inc. 2011 Annual Report

Interest Expense Incurred in Connection with
Debt Repurchase
In the year ended December 25, 2010, we paid $672 million in a 
cash tender offer to repurchase $500 million (aggregate principal 
amount) of our 7.90% senior unsecured notes maturing in 2018. As 
a result of this debt repurchase, we recorded a $178 million charge 
to interest expense, primarily representing the premium paid in the 
tender offer.

Tax Adjustments
In the year ended December 30, 2006, we recorded non- cash tax 
benefits of $602 million, substantially all of which related to the 
Internal Revenue Service’s (IRS’s) examination of our consolidated 
income tax returns for the years 1998 through 2002. In 2006, PBG 
also recorded non- cash tax benefits in connection with the IRS’s 
examination of certain of their consolidated income tax returns. 
We recorded our share of $18 million of these tax benefits in bottling 
equity income.

Management Operating Cash Flow
Additionally, management operating cash flow is the primary 
 measure management uses to monitor cash flow performance. 
This is not a measure defined by GAAP. Since net capital spending is 
essential to our product innovation initiatives and maintaining our 
operational capabilities, we believe that it is a recurring and neces-
sary use of cash. As such, we believe investors should also consider 
net capital spending when evaluating our cash from operating 
activities. Additionally, we consider certain other items (included in 
the Net Cash Provided by Operating Activities Reconciliation table) 
in evaluating management operating cash flow which we believe 
investors should consider in evaluating our management operating 
cash flow results.

Net Revenue Reconciliation

Reported Net Revenue
53rd Week
Core Net Revenue

Year Ended

12/31/11
  $ 66,504
(623)
  $ 65,881

12/25/10
  $ 57,838
–
  $ 57,838

Growth

15%

14%

Division Operating Profit Reconciliation

Total Operating Profit Reconciliation

Reported Operating Profit
53rd Week
Mark- to-Market Net Losses/(Gains)
Merger and Integration Charges
Restructuring Charges
Venezuela Currency Devaluation
Asset Write- Off
Foundation Contribution
Inventory Fair Value Adjustments
Core Operating Profit

Operating Margin Reconciliation

Reported Operating Margin
53rd Week
Mark- to-Market Net Losses
Merger and Integration Charges
Restructuring Charges
Inventory Fair Value Adjustments
Core Operating Margin

Year Ended

12/31/11
  $  9,633
(109)
102
313
383
–
–
–
46
  $ 10,368

12/25/10
  $ 8,332
–
(91)
  769
–
  120
  145
  100
  398
  $ 9,773

Year Ended 12/31/11

Net 
Revenue
  $ 66,504
(623)
–
–
–
–
  $ 65,881

Operating 
Profit
  $  9,633
(109)
102
313
383
46
  $ 10,368

Diluted EPS Reconciliation (5-Year CAGR)

Reported Diluted EPS
53rd Week
Mark- to-Market Net Losses
Merger and Integration Charges
Restructuring and Impairment Charges
Inventory Fair Value Adjustments
Tax Benefits
Core Diluted EPS

Year Ended

12/30/06
$  3.34
−
  0.01
−
  0.03
−
 (0.37)
$  3.01

12/31/11
$  4.03
 (0.04)
  0.04
  0.17
  0.18
  0.02
−
$  4.40

Net Revenue Reconciliation (5-Year CAGR)

Reported Net Revenue
53rd Week
Core Net Revenue

Year Ended

12/30/06
  $ 35,137
−
  $ 35,137

12/31/11
  $ 66,504
(623)
  $ 65,881

Core Division Operating Profit
53rd Week
Merger and Integration Charges
Restructuring Charges
Venezuela Currency Devaluation
Inventory Fair Value Adjustments
Division Operating Profit
Impact of Corporate Unallocated
Total Reported Operating Profit

Year Ended

12/31/11
  $ 11,329
127
(235)
(309)
–
(46)
 10,866
 (1,233)
  $  9,633

12/25/10
  $ 10,626
–
(578)
–
9
(398)
  9,659
 (1,327)
  $  8,332

Growth

7%

Operating Profit Reconciliation (5-Year CAGR)

Reported Operating Profit
53rd Week
Mark- to-Market Net Losses
Merger and Integration Charges
Restructuring and Impairment Charges
Inventory Fair Value Adjustments
Core Operating Profit

16%

Year Ended

12/30/06
  $ 6,502
−
18
−
67
−
  $ 6,587

12/31/11
  $  9,633
(109)
102
313
383
46
  $ 10,368

Growth

16%

6%

Margin

14%

16%

CAGR

4%

8%

CAGR

14%

13%

CAGR

8%

9%

85

PepsiCo, Inc. 2011 Annual Report

   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
Reconciliation of GAAP and Non- GAAP Information
(continued)

Net Income Attributable to PepsiCo Reconciliation

Global Nutrition Group (GNG) Net Revenue Reconciliation

Year Ended

12/31/11

12/25/10

Growth

Reported Net Income Attributable to PepsiCo   $ 6,443   $ 6,320    
53rd Week
Mark- to-Market Net Losses/(Gains)
Merger and Integration Charges
Restructuring Charges
Gain on Previously Held Equity Interests
Inventory Fair Value Adjustments
Venezuela Currency Devaluation
Asset Write- Off
Foundation Contribution
Debt Repurchase
Core Net Income Attributable to PepsiCo

(64)  
71  
  271  
  286  
–  
28  
–  
–  
–  
–  

–
(58)
  648
–
  (958)
  333
  120
92
64
  114

  $ 7,035   $ 6,675    

2%

5%

Net Cash Provided by Operating Activities Reconciliation

Net Cash Provided by Operating Activities
Capital Spending
Sales of Property, Plant and Equipment
Management Operating Cash Flow
Discretionary Pension and Retiree Medical 

Contributions (after- tax)

Payments Related to Restructuring Charges 

(after- tax)

Merger and Integration Payments (after- tax)
Foundation Contribution (after- tax)
Debt Repurchase (after- tax)
Capital Investments Related to the PBG/PAS 

Integration

Management Operating Cash Flow Excluding 

Year Ended

12/31/11

12/25/10

Growth

  $ 8,944   $ 8,448    

6%

 (3,339)  
84  
 5,689  

 (3,253)
81
 5,276

44  

  983

21  
  283  
–  
–  

20
  299
64
  112

  108  

  138

above Items

  $ 6,145   $ 6,892    

(11)%

Reported GNG Net Revenue Growth
53rd Week
Impact of Acquisitions and Divestitures
Core GNG Net Revenue Growth Excluding Acquisitions and 

Divestitures

Return on Invested Capital (ROIC) Reconciliation

Reported ROIC
Impact of Cash, Cash Equivalents and Short- Term Investments
Restructuring Charges
Merger and Integration Charges
Core Net ROIC

Note: All other reconciling items to reported ROIC round to zero.

Return on Equity (ROE) Reconciliation

Reported ROE
Restructuring Charges
Merger and Integration Charges
Core ROE

Note: All other reconciling items to reported ROE round to zero.

Year 
Ended 
12/31/11

  38%
  (1)
 (28)

  9%

Year 
Ended 
12/31/11

14%
1
1
1
17%

Year 
Ended 
12/31/11

29%
1
1
31%

Cumulative Total Shareholder Return
Return on PepsiCo stock investment (including dividends), the S&P 500  
and the S&P Average of Industry Groups*

in U.S. dollars  

PepsiCo, Inc.  S&P 500®  S&P® Avg. of Industry Groups*

150

100

50

2006

2007

2008

2009

2010

2011

PepsiCo, Inc.
S&P 500®
S&P® Avg. of Industry Groups*

12/06
$100
$100
$100

12/07
$124
$105
$111

12/08
$92
$66
$91

12/09
$105
$  84
$111

12/10
$116
$  97
$130

12/11
$122
$  99
$146

*  The S&P Average of Industry Groups is derived by weighting the returns of two applicable 

S&P Industry Groups (Non-Alcoholic Beverages and Food) by PepsiCo’s sales in its beverages 
and foods businesses. The returns for PepsiCo, the S&P 500 and the S&P Average indices are 
calculated through December 31, 2011.

86

PepsiCo, Inc. 2011 Annual Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Glossary

Acquisitions and divestitures: reflect all mergers and acquisitions 
activity, including the impact of acquisitions, divestitures and 
changes in ownership or control in consolidated subsidiaries and 
nonconsolidated equity investees.

Bottler Case Sales (BCS): measure of physical beverage volume 
shipped to retailers and independent distributors from both 
PepsiCo and our independent bottlers.

Bottler funding: financial incentives we give to our independent 
bottlers to assist in the distribution and promotion of our 
beverage products.

Concentrate Shipments and Equivalents (CSE): measure of our 
physical beverage volume shipments to independent bottlers, 
retailers and independent distributors. This measure is reported on 
our fiscal year basis.

Constant currency: financial results assuming constant foreign 
currency exchange rates used for translation based on the rates in 
effect for the comparable prior- year period. In order to compute our 
constant currency results, we multiply or divide, as appropriate, our 
current year U.S. dollar results by the current year average foreign 
exchange rates and then multiply or divide, as appropriate, those 
amounts by the prior year average foreign exchange rates.

Consumers: people who eat and drink our products.

CSD: carbonated soft drinks.

Customers: authorized independent bottlers, distributors 
and retailers.

Derivatives: financial instruments, such as futures, swaps, Treasury 
locks, options and forward contracts that we use to manage our risk 
arising from changes in commodity prices, interest rates, foreign 
exchange rates and stock prices.

Direct- Store-Delivery (DSD): delivery system used by us and our 
independent bottlers to deliver snacks and beverages directly to 
retail stores where our products are merchandised.

Effective net pricing: reflects the year- over-year impact of 
discrete pricing actions, sales incentive activities and mix resulting 
from selling varying products in different package sizes and in 
different countries.

Hedge accounting: treatment for qualifying hedges that 
allows fluctuations in a hedging instrument’s fair value to offset 
corresponding fluctuations in the hedged item in the same 
reporting period. Hedge accounting is allowed only in cases where 
the hedging relationship between the hedging instruments and 
hedged items is highly effective, and only prospectively from the 
date a hedging relationship is formally documented.

Independent bottlers: customers to whom we have granted exclu-
sive contracts to sell and manufacture certain beverage products 
bearing our trademarks within a specific geographical area.

Management operating cash flow: net cash provided by oper-
ating activities less capital spending plus sales of property, plant 
and equipment. It is our primary measure used to monitor cash 
flow performance.

Mark- to-market net gain or loss or impact: the change in market 
value for commodity contracts that we purchase to mitigate the 
volatility in costs of energy and raw materials that we consume. The 
market value is determined based on average prices on national 
exchanges and recently reported transactions in the marketplace.

Marketplace spending: sales incentives offered through various 
programs to our customers and consumers (trade spending), as well 
as advertising and other marketing activities.

Servings: common metric reflecting our consolidated physical unit 
volume. Our divisions’ physical unit measures are converted into 
servings based on U.S. Food and Drug Administration guidelines for 
single- serving sizes of our products.

Transaction gains and losses: the impact on our consolidated 
financial statements of exchange rate changes arising from 
specific transactions.

Translation adjustment: the impact of converting our foreign 
affiliates’ financial statements into U.S. dollars for the purpose of 
consolidating our financial statements.

87

PepsiCo, Inc. 2011 Annual Report

Common Stock Information

Shareholder Information

If using overnight or certified mail, send to:

Merrill Lynch 
Client Account Services ESOP 
1800 Merrill Lynch Drive 
MSC 0802 
Pennington, NJ 08534

In all correspondence, please provide your 
account number (for U.S. citizens, this is 
your Social Security number), your address 
and your telephone number, and mention 
PepsiCo SharePower. For telephone inqui-
ries, please have a copy of your most recent 
statement available.

Associate Benefit Plan Participants

PepsiCo 401(k) Plan

The PepsiCo Savings & Retirement  
  Center at Fidelity 
P.O. Box 770003 
Cincinnati, OH 45277-0065 
Telephone: 800-632-2014 
(Overseas: Dial your country’s AT&T 
Access Number +800-632-2014. In the 
U.S., access numbers are available by 
calling 800-331-1140. From anywhere in 
the world, access numbers are  available 
online at www.att.com/traveler.) 
Website: www.netbenefits.com

PepsiCo Stock Purchase Program:

Fidelity Stock Plan Services 
100 Crosby Parkway 
Mailzone KC1M 
Covington, KY 41015 
Telephone: 800-632-2014 
Website: www.netbenefits.com

Please have a copy of your most recent state-
ment available when calling with inquiries.

If using overnight or certified mail, send to:

Fidelity Investments 
100 Crosby Parkway 
Mailzone KC1M 
Covington, KY 41015

Stock Trading Symbol(cid:2)—(cid:2)PEP

Annual Meeting

Stock Exchange Listings

The New York Stock Exchange is the 
 principal market for PepsiCo common stock, 
which is also listed on the Chicago and Swiss 
Stock Exchanges.

Shareholders

As of February 15, 2012, there were approxi-
mately 159,980 shareholders of record.

Dividend Policy

Dividends are usually declared in late 
January or early February, May, July and 
November and paid at the end of March, 
June and September and the beginning of 
January. The dividend record dates for these 
payments are, subject to approval by the 
Board of Directors, expected to be March 2, 
June 1, September 7 and December 7, 2012. 
We have paid consecutive quarterly cash 
dividends since 1965.

Stock Performance

PepsiCo was formed through the 1965 
merger of Pepsi-Cola Company and Frito-Lay, 
Inc. A $1,000 investment in our stock made 
on December 29, 2006 was worth about 
$1,218 on December 30, 2011,  assuming 
the reinvestment of dividends into PepsiCo 
stock. This performance  represents a com-
pounded annual growth rate of 4.0 percent.

Cash Dividends Declared

Per Share (in $)

11
10
09
08
07

2.025

1.890

1.775

1.650

1.425

The closing price for a share of PepsiCo 
common stock on the New York Stock 
Exchange was the price as reported by 
Bloomberg for the years ending 2007–2011. 
Past performance is not necessarily indica-
tive of future returns on investments in 
PepsiCo common stock.

Year-end Market Price of Stock

Based on calendar year end (in $)

80

60

40

20

0

07

08

09

10

11

The Annual Meeting of Shareholders will 
be held at the North Carolina History Center 
at Tryon Palace, 529 South Front Street, 
New Bern, North Carolina, on Wednesday, 
May 2, 2012, at 9:00 a.m. local time. Proxies 
for the meeting will be solicited by an 
 independent proxy solicitor. This annual 
report is not part of the proxy solicitation.

Inquiries Regarding Your Stock Holdings

Registered Shareholders (shares held by 
you in your name) should address commu-
nications concerning transfers, statements, 
dividend payments, address changes, 
lost certificates and other administrative 
 matters to:

PepsiCo, Inc.  
c/o Computershare 
P.O. Box 358015 
Pittsburgh, PA 15252-8015 
Telephone: 800-226-0083 
800-231-5469 (TDD for hearing impaired) 
201-680-6685 (Outside the U.S.) 
201-680-6610 (TDD outside the U.S.) 
E-mail: shrrelations@bnymellon.com 
Website: www.bnymellon.com/shareowner/ 
  equityaccess

or

Manager Shareholder Relations 
PepsiCo, Inc. 
700 Anderson Hill Road 
Purchase, NY 10577 
Telephone: 914-253-3055 
E-mail: investor@pepsico.com

In all correspondence or telephone inqui-
ries, please mention PepsiCo, your name 
as printed on your stock certificate, your 
Investor ID (IID), your address and your tele-
phone number.

SharePower Participants (associates with 
SharePower Options) should address all 
questions regarding your account, outstand-
ing options or shares received through 
option exercises to:

Merrill Lynch 
1400 Merrill Lynch Drive 
MSC NJ2-140-03-17 
Pennington, NJ 08534 
Telephone: 800-637-6713 (U.S., Puerto Rico  
  and Canada) 
609-818-8800 (all other locations)

88

PepsiCo, Inc. 2011 Annual Report

Shareholder Services

BuyDIRECT Plan 

Interested investors can make their initial 
purchase directly through Computershare, 
transfer agent for PepsiCo and Administrator  
for the Plan. A brochure detailing the Plan is 
available on our website, www.pepsico.com, 
or from our transfer agent:

PepsiCo, Inc. 
c/o Computershare 
P.O. Box 358015 
Pittsburgh, PA 15252-8015 
Telephone: 800-226-0083 
800-231-5469 (TDD for hearing impaired)  
201-680-6685 (Outside the U.S.) 
201-680-6610 (TDD outside the U.S.) 
E-mail: shrrelations@bnymellon.com 
Website: www.bnymellon.com/ 
shareowner/equityaccess

Other services include dividend reinvest-
ment, direct deposit of dividends, optional 
cash investments by electronic funds trans-
fer or check drawn on a U.S. bank, sale of 
shares, online account access, and electronic 
delivery of shareholder materials.

Financial and Other Information

PepsiCo’s 2012 quarterly earnings releases 
are expected to be issued the weeks of 
April 23, July 23, October 15, 2012 and 
February 11, 2013.

Copies of PepsiCo’s SEC reports, earnings 
and other financial releases, corporate news 
and additional company  information are 
available on our website, www.pepsico.com.

Independent Auditors

KPMG LLP 
345 Park Avenue 
New York, NY 10154-0102 
Telephone: 212-758-9700

Corporate Headquarters 

PepsiCo, Inc.
700 Anderson Hill Road
Purchase, NY 10577
Telephone: 914-253-2000

PepsiCo Website

www.pepsico.com

© 2012 PepsiCo, Inc.

PepsiCo’s Annual Report contains many of 
the valuable trademarks owned and/or used 
by PepsiCo and its subsidiaries and affiliates 
in the United States and internationally 
to distinguish products and services of 
outstanding quality. All other trademarks 
featured herein are the property of their 
respective owners.

PepsiCo’s Values

We are committed to delivering sustained 
growth through empowered people, acting 
responsibly and building trust.

Guiding Principles

We must always strive to:
Care for customers, consumers and the 

world we live in.

Sell only products we can be proud of.
Speak with truth and candor.
Balance short term and long term.
Win with diversity and inclusion.
Respect others and succeed together.

Environmental Profile

This annual report was printed with Forest 
Stewardship Council™ (FSC®) certified paper, 
the use of 100 percent certified renewable 
wind power resources and soy ink. PepsiCo 
continues to reduce the costs and environ-
mental impact of annual report printing and 
mailing by utilizing a distribution model 
that drives increased online readership 
and fewer printed copies. You can learn 
more about our environmental efforts at 
www.pepsico.com.

2011 Diversity and Inclusion Statistics

Contribution Summary

Board of Directors(a)

Senior Executives(b)

Executives

All Managers

All Associates(c)

Total

Women

13

13

2,863

15,382

97,749

4

4

888

5,481

18,443

%

31

31

31

36

19

People  
of Color

4

2

609

4,089

32,331

At year-end, we had approximately 297,000 associates worldwide.
(a)  Our Board of Directors is pictured on page 21.
(b)  Composed of PepsiCo Executive Officers listed on page 22.
(c)  Includes full-time associates only.
Executives, All Managers and All Associates are approximate numbers as of 12/31/11 for U.S. associates only.
Data in this chart is based on the U.S. definition for people of color.

%

31

15

21

27

33

(in millions)

PepsiCo Foundation

Corporate Contributions

Division Contributions

Division Estimated In-Kind Donations

Total(a)

(a)  Does not sum due to rounding.

2011

$29.8

6.3

8.3

47.6

$91.9

Design by Addison  www.addison.com  Printing by Sandy Alexander Inc.  Photography by J. Stephen Conn, Four Square Studio, ImageTap, Christa Renee, Jason Schmidt, Andy Spreitzer  CGI Artwork by Simon Danaher