Faster, Stronger, Better.
P
e
p
s
i
C
o
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0
Annual Report
2020
Creating More
Smiles with
Every Sip and
Every Bite SM
®
®
BRAND
®
BRAND
LEMON LIME SODA
2020 Financial Highlights
Net Revenue
5
6
17
10
26
4
32
Frito-Lay North America 26%
Quaker Foods North America 4%
PepsiCo Beverages
North America 32%
Latin America 10%
Europe 17%
Africa, Middle East and
South Asia 6%
Asia Pacific, Australia and
New Zealand and China Region 5%
5
5
12
9
17
6
Mix of Net Revenue
45
42
55
Food 55%
Beverage 45%
PepsiCo, Inc. & Consolidated Subsidiaries
(in millions, except per share data; all per share amounts assume dilution)
Operating Profit by Division
46
58
Frito-Lay North America 46%
Quaker Foods North America 6%
PepsiCo Beverages
North America 17%
Latin America 9%
Europe 12%
Africa, Middle East and
South Asia 5%
Asia Pacific, Australia and
New Zealand and China Region 5%
U.S. 58%
Outside U.S. 42%
Summary of Operations
2020
2019
% Chg(a)
Net revenue
$70,372
$67,161
5%
Core operating profit(b)
$10,531
$10,602
(1)%
Reported earnings per share
$5.12
$5.20
(2)%
Core earnings per share(c)
$5.52
$5.53
–
Free cash flow(d)
$6,428
$5,587
15%
Capital spending
$4,240
$4,232
–
Common share repurchases
$2,000
$3,000
(33)%
Dividends paid
$5,509
$5,304
4%
(a) Percentage changes are based on unrounded amounts.
(b) Excludes the mark-to-market net impact of our commodity derivatives,
restructuring and impairment charges, as well as inventory fair value
adjustments and merger and integration charges. See page 128 “Reconciliation
of GAAP and Non-GAAP Information” for a reconciliation to the most
directly comparable financial measure in accordance with GAAP. 2020
reported operating profit decreased 2%.
(c) Excludes the mark-to-market net impact of our commodity derivatives,
restructuring and impairment charges, inventory fair value adjustments
and merger and integration charges, as well as pension-related settlement
charges. In 2019, also excludes net tax related to the Tax Cuts and Jobs
Act (TCJ Act). See page 128 “Reconciliation of GAAP and Non-GAAP
Information” for a reconciliation to the most directly comparable financial
measure in accordance with GAAP.
(d) Includes the impact of net capital spending. See page 128 “Reconciliation
of GAAP and Non-GAAP Information” for a reconciliation to the most
directly comparable financial measure in accordance with GAAP. 2020 net
cash provided by operating activities increased 10%.
Sustainability & Community Highlights
We continue to make progress in our sustainability journey, using
our scale, reach, and expertise to help build a more sustainable
food system that can meet 21st century needs. We are committed
to setting and working toward goals around climate, agriculture,
water, packaging, people, and products, while partnering with
peers, governments, and nongovernmental organizations to deliver
positive outcomes for all our stakeholders. At the same time, we
remain committed to addressing systemic barriers to opportunity
through our Racial Equality Journey, and we continue to support
communities in need through The PepsiCo Foundation. For more
information on our Sustainability progress, Racial Equality Journey,
and The PepsiCo Foundation, please visit www.pepsico.com.
CLIMATE
AGRICULTURE
WATER
In 2020, we achieved
100% RENEWABLE
ELECTRICITY FOR OUR
U.S. DIRECT OPERATIONS
and announced plans to transition to 100%
renewable electricity globally.
Approximately 57% of our global electricity
needs were met by renewable sources in 2020.
100% OF OUR DIRECT
COMMODITIES1 ARE
SUSTAINABLY SOURCED
IN 28 COUNTRIES,
and globally, nearly 86% of our direct
commodities are sustainably sourced as
of 2020.
We achieved our goal to source 100%
Bonsucro certified sustainable cane sugar
globally by 2020 and achieved 99% RSPO2
physically certified palm oil as of 2020.
As of 2020, our operational
WATER-USE EFFICIENCY
IMPROVED BY 15%
in high water-risk areas since 2015,
progress toward our goal of 25% by 2025.
The Pioneer Foods acquisition is included in the
presented metric and contributed 3 percentage points
to the improved progress against the 2015 baseline
year. The SodaStream acquisition is not included in
the presented metric because data was not readily
available; this exclusion is estimated to be not
statistically consequential.
PACKAGING
PEOPLE
PRODUCTS
We are transitioning several brands to
BOTTLES MADE OF 100%
rPET3 ACROSS 22
GLOBAL MARKETS,
in key packaging sizes, to help drive a
circular economy and ensure packaging
never becomes waste.
We are also investing in strategies beyond
the bottle through reusable platforms like
SodaStream, a business that delivered
double-digit net revenue growth in 2020.
WOMEN HOLD 41%
OF OUR GLOBAL
MANAGER POSITIONS4
and continue to be paid within 1% of men
in 71 countries (representing 99% of
our salaried employee population), after
controlling for legitimate drivers of pay
such as job level, geographic location,
and performance ratings.5
We’ve continued to expand our portfolio of
improved choices for consumers. No-sugar
Pepsi Black (also known as Pepsi Zero
Sugar or Pepsi MAX), which had double-
digit volume growth in 2020, is available in
118 GLOBAL MARKETS.
Quaker showed strong growth across all key
markets in 2020 and gained market share
in the cereals category in the U.S.
RACIAL EQUALITY
DIVERSITY
COVID-19 RELIEF
In 2020, together with The PepsiCo
Foundation, we committed to investing
MORE THAN $570
MILLION OVER 5 YEARS
to lift up Black and Hispanic businesses
and communities, address issues of
inequality, and create opportunity.
In 2020, we set new targets to
INCREASE OUR BLACK &
HISPANIC MANAGERIAL
POPULATIONS
in the U.S. to 10% of our workforce
over the next five years.
Together with The PepsiCo Foundation,
we invested more than $60 million
globally and provided over
145 MILLION MEALS
to communities and families impacted
by COVID-19 in 2020.
1Potatoes, whole corn, oats, and oranges 2Roundtable on Sustainable Palm Oil 3Recycled PET 4Based on full-time and part-time employees 5Based on base compensation
Organizational changes (e.g., acquisitions, mergers, divestitures) are evaluated to determine if they have a statistically significant impact to sustainability metric performance.
Dear Fellow Shareholders,
When I wrote to you
last Spring, few could
have imagined what
2020 had in store
for our company and
our world. From a
global pandemic that
cost millions of lives
and unleashed an
economic catastrophe,
to tragic examples
of systemic racial
inequality, to an
escalating climate
crisis, and even the passing of PepsiCo’s patriarch and
first CEO, Donald M. Kendall, the past 12 months have
been among the most challenging in recent memory.
And yet, despite all the heartache and pain, all the volatility and
disruption, I am extremely proud to tell you that PepsiCo continues
to persevere. Our strategy to become Faster, Stronger, and Better has
proven to be the right one, in good times and bad—enabling us to be there
for our communities when they need us most, whilst accelerating our
growth and gaining share in many key markets.
In 20201:
Our organic revenue growth accelerated to 5.7 percent in Q4, with
5 percent growth in global snacks and foods and 6 percent growth in
global beverages, and mid-single digit growth in both our international
developed markets and developing and emerging markets.
We delivered 4.3 percent organic revenue growth for the full year,
which is a true testament to the dedication and efforts of our
employees during a global pandemic, our diversified portfolio and
channel mix, and our agile supply chain and go-to-market systems.
We gained or held share in most of our top markets in both snacks
and beverages.
Core constant currency EPS increased 2 percent for the full year.
the challenge, creating smiles for our fellow associates, our communities,
our consumers, our customers, the planet, and, of course, our shareholders.
In doing so, we welcomed the opportunity to drive positive change among
ourselves and in the wider world. Our commitment to transparency in our
reporting underpins this aspiration to be not just a successful company,
but a sustainable one.
Smiles for Our Associates
and Communities
We know that our company can only succeed when the society
we serve flourishes. That’s why we are focused on creating
smiles for our associates and communities by:
Working to ensure safe working environments through social
distancing and distribution of personal protective equipment (PPE),
especially for our frontline workers, and donating PPE to fellow
frontline workers around the world;
Expanding benefits for associates who were diagnosed with COVID-19
or had to care for a sick family member;
Working with The PepsiCo Foundation to invest more than
$60 million and provide over 145 million meals to hungry families
impacted by COVID-19 in 2020, with a special focus on providing
nutritious meals for students who usually get meals through school;
Launching our Racial Equality Journey to elevate diverse voices
within our company, our supply chain partners, and communities,
whilst helping break down longstanding racial barriers. In 2020, we
began with a $400 million set of initiatives focused on increasing
Black representation at PepsiCo, supporting Black-owned businesses,
and lifting up Black communities over five years. We built on this
with a further $172 million set of initiatives over five years focused
on Hispanic Americans, in addition to spending $224 million with
Hispanic suppliers in 2020; and
Celebrating success through our internal Smiles initiative, which
encourages associates to send smiles to each other for living our
PepsiCo Way behaviors and to commemorate special events. In 2020,
we created more than 240,000 smiles on the platform.
These efforts were recognized by our associates in our annual
organizational health survey. In 2020, we achieved our highest-ever
engagement score, which is a measure of the energy, pride, and
optimism of our associates.
I am proud that we were able to achieve these results whilst: 1) staying
focused on the issues that matter most to society, and 2) continuing to
invest in the business to increase capacity, build better systems, and
drive better ways to run our supply chain—capabilities aimed not only
at accelerating our long-term growth, but also creating smiles for our
many stakeholders.
“
In 2020, the entire PepsiCo family fully embraced our mission to Create
More Smiles with Every Sip and Every Bite. During a year of so much
adversity, this simple act was never more powerful. Each of us rose to
In 2020, the entire PepsiCo
family fully embraced our
mission to Create More Smiles
with Every Sip and Every Bite.
1 Q4 2020 reported net revenue increased 8.8%. Q4 2020 global snacks and foods reported net revenue increased 9%. Q4 2020 global beverages reported net revenue increased 8%.
Q4 2020 international developed markets reported net revenue grew double-digits. Q4 2020 international developing and emerging markets reported net revenue grew double-digits.
Full-year 2020 reported net revenue increased 4.8%. Full-year 2020 reported EPS decreased 2%. Full-year QFNA 2020 reported net revenue increased 10%. Organic revenue and
core constant currency EPS are non-GAAP financial measures. Please refer to “Reconciliation of GAAP and Non-GAAP Information” beginning on page 128 of this Annual Report
for definitions and more information about these results, including a reconciliation to the most directly comparable financial measure in accordance with GAAP.
”
PepsiCo Annual Report 2020
01
Smiles for Our Consumers
In a year where routines were routinely disrupted, we had to satisfy
new demands that grew from the pandemic, with more consumers
eating at home.
In 2020, I’m pleased to say we met the challenge, creating
smiles for our consumers by:
Driving innovation in our core brands, with a special focus on no-sugar
beverages and flavors that celebrate local food cultures, including
Cheetos Popcorn, Flamin’ Limon Doritos, Mountain Dew Zero,
Gatorade’s Bolt24, Gatorade Zero, and Driftwell;
Continuing to build a range of premium snacks designed to address
evolving consumer desires and emerging health and wellness trends,
with options like Off The Eaten Path, bare, and BFY Brands;
Expanding our investment in omnichannel capabilities, especially
eCommerce, as consumers increasingly turn online for their food
and beverage needs. This includes launching PantryShop.com and
Snacks.com in the U.S., where eCommerce estimated retail sales grew
significantly in 2020, and acquiring Be & Cheery, one of the largest
online snacks companies in China;
Doing even more to drive SodaStream as a sustainable, personalized
beverage system, including making it easier for consumers to create
their favorite beverages at home with bubly drops for SodaStream
and other flavors based on popular beverages like Pepsi MAX and
Mountain Dew;
Increasing our presence in the fast-growing and highly profitable
energy category by acquiring Rockstar Energy Beverages;
Closing on and continuing to integrate the acquisition of Pioneer
Foods, which gives us a scaled platform for foods sales and
distribution in Sub-Saharan Africa; and
Powering Quaker Foods North America to 11 percent organic revenue
growth for the year1, an outstanding performance against strong
demand for at-home consumption.
Smiles for Our Customers
As consumer preferences and habits change, we are focused
on pivoting our resources to provide first-class service levels,
driving game-changing innovation, and delivering a level of
growth unmatched in our industry, creating smiles for our
customers by:
Unlocking granular growth opportunities across our business
through innovative data-driven media, marketing, and merchandising
solutions, including our new ROI Engine and Canvas capabilities,
which leverage near real-time analytics and performance output to
optimize investments;
Building dynamic COVID-19 models that reflect the evolving financial
and medical impact of COVID-19 on households, creating customized
outputs for our customers, and democratizing these outputs through
online forums and interactive Tableau dashboards;
Extending our Perfect Store capability, enabling improved service,
value offers, assortment, and merchandising for our important small
format customers; and
02
Launching micro-fulfillment centers to increase our strategic capability
to help meet the spike in eCommerce demand for our key customers.
Our team’s holistic support for our customers earned numerous awards
and recognitions in 2020, including being named the number one
manufacturer in the Kantar PoweRanking for the fifth year in a row in
the U.S. and earning similarly strong feedback in many countries around
the world.
Smiles for Our Planet
We know that our ability to create smiles for our associates,
communities, consumers, and customers depends on our ability to
create smiles for our planet. That’s why we are focused on continuing
to integrate purpose into our business strategy and brands to become
PepsiCo Positive, delivering better outcomes for people and the
environment, whilst enabling us to be a faster-growing and more
resilient company. This includes our effort to help build a more
sustainable food system, from how we grow our ingredients and make
our products, to how we inspire consumers to make positive choices.
Agriculture is the foundation of the food system and core to our business,
so we’re working to source ingredients through more sustainable and
resilient practices.
As we do that, we are also increasing our support for farmers
transitioning to regenerative agriculture practices that are
gentler on the earth and can help mitigate climate change:
100 percent of our direct commodities (potatoes, whole corn, oats,
and oranges) are sustainably sourced in 28 countries, whilst nearly
86 percent of our direct commodities are sustainably sourced globally
as of 2020.
Our Sustainable Farming Program is now operating in 36 countries
and engages more than 40,000 farmers.
Our network of local demonstration farms—with sites in India, Brazil,
and Thailand, among others—is proving to be very powerful, providing a
place where farmers can test new techniques and learn from their peers.
We are collaborating with the World Economic Forum on a network of
Innovation Hubs, which bring together the best minds in food science,
agronomy, and technology to develop food systems that are inclusive,
efficient, sustainable, and nutritious.
Even Faster, Stronger, and Better
2020 was an extremely busy year, and we
expect to accelerate our efforts in 2021, so
we can keep pace with the world and stay
ahead of the competition. That means setting
our sights on becoming even Faster, even
Stronger, and even Better.
PepsiCo Annual Report 2020 “
Even Faster, Stronger, and Better
As we reflect on all the smiles we created in 2020, we know
that none of it would be possible without the associates who
are the backbone of our company and the shareholders who
have trusted us with their investment.
We also know that a company of our size and scale can have
a positive impact across our value chain by making products
in a way that builds a circular, inclusive, fair economy. That’s
why we are:
Continuing our efforts to help build a world where packaging never
becomes waste by setting a target to use 100 percent rPET for our
Pepsi brand2 in nine EU markets by 2022. We estimate this will
eliminate over 70,000 tons of virgin, fossil-fuel based plastic per year
and will lower carbon emissions per Pepsi brand bottle by approximately
40 percent in those markets;
Taking steps to address the risks and impacts of climate change by
more than doubling our science-based climate goal, targeting a more
than 40 percent reduction of absolute greenhouse gas emissions
across our value chain by 2030;
Aiming to achieve net-zero emissions across our global operations
by 2040, 10 years earlier than called for in the Paris Agreement, after
already shifting to 100 percent renewable electricity for our direct
operations in the U.S. in 2020 through a diversified portfolio of solutions;
Introducing SodaStream Professional, an eco-friendly, on-the-go
customizable hydration platform that is part of our Beyond the Bottle
strategy; and
Joining other leading companies in signing the UN’s Business
Ambition for 1.5°C pledge.
Beyond our value chain, we are working to inspire people to
make positive choices with products that create more smiles
for them and the planet:
This includes continuing to advance our 2025 goals to reduce added
sugars, sodium, and saturated fat, with our no-sugar Pepsi Black now
available in 118 markets and Lay’s Oven Baked in 27 markets globally.
To become even Faster, we will focus on accelerating our
share of market gains, competing fiercely in every segment,
and investing in growing channels and categories.
To become even Stronger, we will work to continue transforming
our cost structure, capabilities, and culture, including sharpening
our holistic cost management initiatives, accelerating our digital
transformation, and investing in our people and talent development.
To become even Better, we will strive to elevate our efforts to
deliver positive outcomes for people and the planet by helping
to build a more sustainable food system, strengthening our
communities, and advancing social equity.
”
We also expanded the Stacy’s Rise Project from five female
entrepreneurs to 15 in 2020, with finalists focused on areas
such as social impact, sustainability, and diversity.
Finally, in 2020 we also published our first Green Bond Report. The
report provides an update on the allocation of net proceeds from our
billion-dollar Green Bond to Eligible Green Projects through the end
of 2019, specifically: water sustainability, decarbonization of our
operations and supply chain, and sustainable plastics and packaging.
Smiles for Our Shareholders
Ultimately, creating smiles for our associates and communities,
consumers, customers, and the planet is what enables us to create
smiles for our shareholders.
In addition to the Full Year and Q4 financial performance
numbers I called out earlier, in 2020 we also:
Returned a total of $7.5 billion in cash to shareholders through
dividends and share repurchases; and
Delivered an 11.7 percent increase in total shareholder return, a strong
showing compared to other consumer staples.
Last month, we also announced a 5 percent increase in our annualized
dividend per share, effective with the expected June 2021 dividend
payment—our 49th consecutive annual dividend increase.
As we reflect on all the smiles we created in 2020, we know that none
of it would be possible without the associates who are the backbone
of our company and the shareholders who have trusted us with their
investment. This year, more than ever, we are grateful for your faith in us.
As vaccines usher in a new phase of the pandemic, we will keep working
to earn your trust and support by Winning with Purpose and planning
for a post-COVID future. If we work together, I am confident we can
make 2021 a year of resurgence and renewal, with even more smiles for
our many stakeholders and the communities we all share.
Sincerely,
Ramon L. Laguarta
PepsiCo Chairman of the Board of Directors
and Chief Executive Officer
2 Includes Pepsi MAX, Pepsi MAX Lima, Pepsi MAX without caffeine, Pepsi Light, Pepsi
Light without caffeine, and regular Pepsi.
PepsiCo Annual Report 2020
03
PepsiCo Board of Directors
Segun Agbaje
Managing Director and
Chief Executive Officer,
Guaranty Trust Bank plc
Elected 2020
Shona L. Brown
Independent Advisor;
Former Senior Advisor,
Google Inc.
Elected 2009
Cesar Conde
Chairman,
NBCUniversal News
Group
Elected 2016
Ian Cook
Former Chairman,
President and Chief
Executive Officer,
Colgate-Palmolive
Company
Elected 2008
Dina Dublon
Former Executive
Vice President and
Chief Financial Officer,
JPMorgan Chase & Co.
Elected 2005
Richard W. Fisher1
Former President
and Chief Executive
Officer, Federal Reserve
Bank of Dallas
Elected 2015
Michelle Gass
Chief Executive Officer,
Kohl’s Corporation
Elected 2019
Ramon L. Laguarta
Chairman of the Board of
Directors and Chief
Executive Officer, PepsiCo
Elected 2018
Sir Dave Lewis
Former Group Chief
Executive Officer,
Tesco PLC
Elected 2020
David C. Page, MD
Professor, Massachusetts
Institute of Technology;
Former Director and
President, Whitehead
Institute for Biomedical
Research
Elected 2014
Robert C. Pohlad
President of various
family-owned entities;
Former Chairman and
Chief Executive Officer,
PepsiAmericas, Inc.
Elected 2015
Daniel Vasella, MD
Former Chairman and
Chief Executive Officer,
Novartis AG
Elected 2002
Darren Walker
President,
Ford Foundation
Elected 2016
Alberto Weisser
Former Chairman and
Chief Executive Officer,
Bunge Limited
Elected 2011
1 Not standing for re-election
and retiring at PepsiCo’s 2021
Annual Meeting of Shareholders.
PepsiCo Leadership
See pages 24–26 of the Form 10-K for a list of PepsiCo Executive Officers subject to Section
16 of the Securities Exchange Act of 1934. David Flavell assumed the role of Executive
Vice President, General Counsel and Corporate Secretary effective March 1, 2021.
Ramon L. Laguarta
Chairman of the Board of
Directors and Chief
Executive Officer
Jim Andrew
Executive Vice President,
Beyond the Bottle and
Chief Sustainability Officer
Roberto Azevêdo
Executive Vice President
and Chief Corporate
Affairs Officer
Jon Banner
Executive Vice President,
Global Communications
and President,
PepsiCo Foundation
David Flavell
Executive Vice President,
General Counsel and
Corporate Secretary
Hugh F. Johnston
Vice Chairman, Executive
Vice President and Chief
Financial Officer
Athina Kanioura
Executive Vice President
and Chief Strategy and
Transformation Officer
Ram Krishnan
Global Chief
Commercial Officer
René Lammers
Executive Vice President
and Chief Science Officer
Silviu Popovici
Chief Executive Officer,
Europe
Grace Puma
Executive Vice President,
Global Operations
Paula Santilli
Chief Executive Officer,
Latin America
Ronald Schellekens
Executive Vice President
and Chief Human
Resources Officer
Wern-Yuen Tan
Chief Executive Officer,
Asia Pacific, Australia,
New Zealand and China
Kirk Tanner
Chief Executive Officer,
PepsiCo Beverages
North America
Eugene Willemsen
Chief Executive Officer,
Africa, Middle East,
South Asia
Steven Williams
Chief Executive Officer,
PepsiCo Foods
North America
2020 Citizenship Giving
PepsiCo Foundation2
Corporate Contributions
Division Contributions3
Division Estimated In-kind3
Total
(in millions)
$100
4
20
81
2020 Diversity Statistics
Board of Directors
Senior Executives5
Executives
All Managers
$205
All Employees
Women %
(Global)
People of
Color4 %
(U.S. Only)
21%
20%
37%
41%
25%
36%
29%
28%
30%
43%
2 PepsiCo Foundation includes $50 million in COVID-19 support.
3 Division contributions and estimated in-kind includes $21 million in COVID-19 support.
The data in this chart is as of December 31, 2020. This chart reflects both full-time and
part-time employees.
4 Based on completed self-identification forms. Defined as ethnically/racially diverse individuals.
5 Composed of PepsiCo Executive Officers subject to Section 16 of the Securities Exchange
Act of 1934.
04
PepsiCo Annual Report 2020 PepsiCo, Inc.
Annual Report 2020
Form 10-K
For the fiscal year ended December 26, 2020
60859_10k_pgs_i-ii, 128-132.indd 1
60859_10k_pgs_i-ii, 128-132.indd 1
3/13/21 5:39 PM
3/13/21 5:39 PM
Page intentionally left blank
2
60859_10k_pgs_i-ii, 128-132.indd 2
60859_10k_pgs_i-ii, 128-132.indd 2
3/13/21 5:40 PM
3/13/21 5:40 PM
PepsiCo Annual Report 2020 UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 26, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
Commission file number 1-1183
PepsiCo, Inc.
(Exact Name of Registrant as Specified in its Charter)
North Carolina
13-1584302
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
700 Anderson Hill Road, Purchase, New York 10577
(Address of principal executive offices and Zip Code)
(914) 253-2000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class
Common Stock, par value 1-2/3 cents per share
1.750% Senior Notes Due 2021
2.500% Senior Notes Due 2022
0.250% Senior Notes Due 2024
2.625% Senior Notes Due 2026
0.750% Senior Notes Due 2027
0.875% Senior Notes Due 2028
0.500% Senior Notes Due 2028
1.125% Senior Notes Due 2031
0.400% Senior Notes Due 2032
0.875% Senior Notes Due 2039
1.050% Senior Notes Due 2050
Trading Symbols
PEP
PEP21a
PEP22a
PEP24
PEP26
PEP27
PEP28
PEP28a
PEP31
PEP32
PEP39
PEP50
Name of each exchange on which registered
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ¨
60859_10k_pgs_iii - 127.indd 3
60859_10k_pgs_iii - 127.indd 3
3/13/21 5:41 PM
3/13/21 5:41 PM
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes ☒ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of PepsiCo, Inc. Common Stock held by nonaffiliates of PepsiCo, Inc. (assuming for these purposes, but
without conceding, that all executive officers and directors of PepsiCo, Inc. are affiliates of PepsiCo, Inc.) as of June 12, 2020, the last
day of business of our most recently completed second fiscal quarter, was $178.5 billion (based on the closing sale price of PepsiCo,
Inc.’s Common Stock on that date as reported on the Nasdaq Global Select Market).
The number of shares of PepsiCo, Inc. Common Stock outstanding as of February 4, 2021 was 1,379,608,641.
Documents Incorporated by Reference
Portions of the Proxy Statement relating to PepsiCo, Inc.’s 2021 Annual Meeting of Shareholders are incorporated by reference into
Part III of this Form 10-K.
60859_10k_pgs_iii - 127.indd 4
60859_10k_pgs_iii - 127.indd 4
3/13/21 5:41 PM
3/13/21 5:41 PM
PepsiCo, Inc.
Form 10-K Annual Report
For the Fiscal Year Ended December 26, 2020
Table of Contents
Business
PART I
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5.
Item 7.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.
Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Exhibits and Financial Statement Schedules
Form 10-K Summary
2
11
22
23
23
23
27
28
113
113
114
113
114
114
114
115
115
115
116
117
60859_10k_pgs_iii - 127.indd 1
60859_10k_pgs_iii - 127.indd 1
3/13/21 5:41 PM
3/13/21 5:41 PM
1
Forward-Looking Statements
This Annual Report on Form 10-K 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 (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 “aim,”
“anticipate,” “believe,” “drive,” “estimate,” “expect,” “expressed confidence,” “forecast,” “future,”
“goal,” “guidance,” “intend,” “may,” “objective,” “outlook,” “plan,” “position,” “potential,”
“project,” “seek,” “should,” “strategy,” “target,” “will” or similar statements or variations of such
words and other similar expressions. All statements addressing our future operating performance, and
statements addressing events and developments that we expect or anticipate will occur in the future, are
forward-looking statements 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 statement. These risks and uncertainties include, but are not
limited to, those described in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Our Business – Our Business Risks.”
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 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.
Item 1. Business.
PART I
When used in this report, the terms “we,” “us,” “our,” “PepsiCo” and the “Company” mean PepsiCo, Inc.
and its consolidated subsidiaries, collectively. Certain terms used in this Annual Report on Form 10-K are
defined in the Glossary included in Item 7. of this report.
Company Overview
We were incorporated in Delaware in 1919 and reincorporated in North Carolina in 1986. We are a
leading global food and beverage company with a complementary portfolio of brands, including Frito-
Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. Through our operations, authorized bottlers, contract
manufacturers and other third parties, we make, market, distribute and sell a wide variety of convenient
beverages, foods and snacks, serving customers and consumers in more than 200 countries and territories.
Our Operations
We are organized into seven reportable segments (also referred to as divisions), as follows:
1) Frito-Lay North America (FLNA), which includes our branded food and snack businesses in the
United States and Canada;
2) Quaker Foods North America (QFNA), which includes our cereal, rice, pasta and other branded
food businesses in the United States and Canada;
3) PepsiCo Beverages North America (PBNA), which includes our beverage businesses in the United
States and Canada;
4) Latin America (LatAm), which includes all of our beverage, food and snack businesses in Latin
America;
5) Europe, which includes all of our beverage, food and snack businesses in Europe;
6) Africa, Middle East and South Asia (AMESA), which includes all of our beverage, food and snack
businesses in Africa, the Middle East and South Asia; and
2
60859_10k_pgs_iii - 127.indd 2
60859_10k_pgs_iii - 127.indd 2
3/13/21 5:41 PM
3/13/21 5:41 PM
7) Asia Pacific, Australia and New Zealand and China Region (APAC), which includes all of our
beverage, food and snack businesses in Asia Pacific, Australia and New Zealand, and China
region.
Frito-Lay North America
Either independently or in conjunction with third parties, FLNA makes, markets, distributes and sells
branded snack foods. These foods include branded dips, Cheetos cheese-flavored snacks, Doritos tortilla
chips, Fritos corn chips, Lay’s potato chips, Ruffles potato chips and Tostitos tortilla chips. FLNA’s
branded products are sold to independent distributors and retailers. In addition, FLNA’s joint venture with
Strauss Group makes, markets, distributes and sells Sabra refrigerated dips and spreads.
Quaker Foods North America
Either independently or in conjunction with third parties, QFNA makes, markets, distributes and sells
cereals, rice, pasta and other branded products. QFNA’s products include Aunt Jemima mixes and syrups,
Cap’n Crunch cereal, Life cereal, Quaker Chewy granola bars, Quaker grits, Quaker oatmeal, Quaker rice
cakes, Quaker simply granola and Rice-A-Roni side dishes. QFNA’s branded products are sold to
independent distributors and retailers.
PepsiCo Beverages North America
Either independently or in conjunction with third parties, PBNA makes, markets and sells beverage
concentrates, fountain syrups and finished goods under various beverage brands including Aquafina, Diet
Mountain Dew, Diet Pepsi, Gatorade, Mountain Dew, Pepsi, Propel and Tropicana. PBNA operates its
own bottling plants and distribution facilities and sells branded finished goods directly to independent
distributors and retailers. PBNA also sells concentrate and finished goods for our brands to authorized and
independent bottlers, who in turn sell our branded finished goods to independent distributors and retailers
in certain markets. PBNA also, either independently or in conjunction with third parties, makes, markets,
distributes and sells ready-to-drink tea and coffee products through joint ventures with Unilever (under the
Lipton brand name) and Starbucks, respectively. Further, PBNA manufactures and distributes certain
brands licensed from Keurig Dr Pepper Inc., including Crush, Dr Pepper and Schweppes, and certain juice
brands licensed from Dole Food Company, Inc. (Dole) and Ocean Spray Cranberries, Inc. (Ocean Spray).
In 2020, we acquired Rockstar Energy Beverages (Rockstar), an energy drink maker with whom we had a
distribution agreement prior to the acquisition. See Note 14 to our consolidated financial statements for
further information about our acquisition of Rockstar.
Latin America
Either independently or in conjunction with third parties, LatAm makes, markets, distributes and sells a
number of snack food brands including Cheetos, Doritos, Emperador, Lay’s, Marias Gamesa, Rosquinhas
Mabel, Ruffles, Sabritas, Saladitas and Tostitos, as well as many Quaker-branded cereals and snacks.
LatAm also, either independently or in conjunction with third parties, makes, markets, distributes and sells
beverage concentrates, fountain syrups and finished goods under various beverage brands including 7UP,
Gatorade, H2oh!, Manzanita Sol, Mirinda, Pepsi, Pepsi Black, San Carlos and Toddy. These branded
products are sold to authorized and independent bottlers, independent distributors and retailers. LatAm
also, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-
to-drink tea products through an international joint venture with Unilever (under the Lipton brand name).
60859_10k_pgs_iii - 127.indd 3
60859_10k_pgs_iii - 127.indd 3
3/13/21 5:41 PM
3/13/21 5:41 PM
3
Europe
Either independently or in conjunction with third parties, Europe makes, markets, distributes and sells a
number of snack food brands including Cheetos, Chipita, Doritos, Lay’s, Ruffles and Walkers, as well as
many Quaker-branded cereals and snacks, through consolidated businesses, as well as through
noncontrolled affiliates. Europe also, either independently or in conjunction with third parties, makes,
markets, distributes and sells beverage concentrates, fountain syrups and finished goods under various
beverage brands including 7UP, Diet Pepsi, Lubimy Sad, Mirinda, Pepsi, Pepsi Max and Tropicana. These
branded products are sold to authorized and independent bottlers, independent distributors and retailers. In
certain markets, however, Europe operates its own bottling plants and distribution facilities. Europe also,
as part of its beverage business, manufactures and distributes SodaStream sparkling water makers and
related products. Further, Europe makes, markets, distributes and sells a number of dairy products
including Agusha, Chudo and Domik v Derevne. Europe also, either independently or in conjunction with
third parties, makes, markets, distributes and sells ready-to-drink tea products through an international
joint venture with Unilever (under the Lipton brand name).
Africa, Middle East and South Asia
Either independently or in conjunction with third parties, AMESA makes, markets, distributes and sells a
number of snack food brands including Chipsy, Doritos, Kurkure, Lay’s, Sasko, Spekko and White Star,
as well as many Quaker-branded cereals and snacks, through consolidated businesses, as well as through
noncontrolled affiliates. AMESA also makes, markets, distributes and sells beverage concentrates,
fountain syrups and finished goods under various beverage brands including 7UP, Aquafina, Mirinda,
Mountain Dew and Pepsi. These branded products are sold to authorized and independent bottlers,
independent distributors and retailers. In certain markets, however, AMESA operates its own bottling
plants and distribution facilities. AMESA also, either independently or in conjunction with third parties,
makes, markets, distributes and sells ready-to-drink tea products through an international joint venture
with Unilever (under the Lipton brand name). In 2020, we acquired Pioneer Food Group Ltd. (Pioneer
Foods), a food and beverage company in South Africa with exports to countries across the globe. See Note
14 to our consolidated financial statements for further information about our acquisition of Pioneer Foods.
Asia Pacific, Australia and New Zealand and China Region
Either independently or in conjunction with third parties, APAC makes, markets, distributes and sells a
number of snack food brands including BaiCaoWei, Cheetos, Doritos, Lay’s and Smith’s, as well as many
Quaker-branded cereals and snacks, through consolidated businesses, as well as through noncontrolled
affiliates. APAC also makes, markets, distributes and sells beverage concentrates, fountain syrups and
finished goods under various beverage brands including 7UP, Aquafina, Mirinda, Mountain Dew and
Pepsi. These branded products are sold to authorized and independent bottlers, independent distributors
and retailers. APAC also, either independently or in conjunction with third parties, makes, markets,
distributes and sells ready-to-drink tea products through an international joint venture with Unilever
(under the Lipton brand name). Further, APAC licenses the Tropicana brand for use in China on co-
branded juice products in connection with a strategic alliance with Tingyi (Cayman Islands) Holding
Corp. (Tingyi). In 2020, we acquired all of the outstanding shares of Hangzhou Haomusi Food Co., Ltd.
(Be & Cheery), one of the largest online snacks companies in China. See Note 14 to our consolidated
financial statements for further information about our acquisition of Be & Cheery.
COVID-19
The novel coronavirus (COVID-19) pandemic in 2020 resulted in challenging operating environments and
affected almost all of the more than 200 countries and territories in which our products are made,
manufactured, distributed or sold, including as a result of travel bans and restrictions, quarantines,
curfews, restrictions on public gatherings, shelter in place and safer-at-home orders, business shutdowns
4
60859_10k_pgs_iii - 127.indd 4
60859_10k_pgs_iii - 127.indd 4
3/13/21 5:41 PM
3/13/21 5:41 PM
and closures. We expect that the COVID-19 pandemic will continue to impact our business operations,
including our employees, customers, consumers, bottlers, contract manufacturers, distributors, joint
venture partners, suppliers and other third parties with which we do business. The extent to which the
COVID-19 pandemic will impact our future business operations and financial results remains uncertain
and will continue to depend on numerous evolving factors outside our control.
See “Item 1A. Risk Factors” for discussion of the risks and uncertainties associated with the COVID-19
pandemic. Also, see “Our Business Risks” in Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations and Note 1 to our consolidated financial statements for further
information related to the impact of COVID-19 on our 2020 financial results.
Our Distribution Network
Our products are primarily brought to market through direct-store-delivery (DSD), customer warehouse
and distributor networks and are also sold directly to consumers through e-commerce platforms and
retailers. 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 beverages, foods and
snacks directly to retail stores where the products are merchandised by our employees or our independent
bottlers. 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.
Customer Warehouse
Some of our products are delivered from our manufacturing plants and distribution centers, both company
and third-party operated, to customer warehouses. These less costly systems generally work best for
products that are less fragile and perishable, and have lower turnover.
Distributor Networks
We distribute many of our products through third-party distributors. Third-party distributors are
particularly effective when greater distribution reach can be achieved by including a wide range of
products on the delivery vehicles. For example, our foodservice and vending business distributes
beverages, foods and snacks to restaurants, businesses, schools and stadiums through third-party
foodservice and vending distributors and operators.
E-commerce
Our products are also available and sold directly to consumers on a growing number of company-owned
and third-party e-commerce websites and mobile commerce applications.
Ingredients and Other Supplies
The principal ingredients we use in our beverage, food and snack products are apple, orange and pineapple
juice and other juice concentrates, aspartame, corn, corn sweeteners, flavorings, flour, grapefruit, oranges
and other fruits, oats, potatoes, raw milk, rice, seasonings, sucralose, sugar, vegetable and essential oils,
and wheat. We also use water in the manufacturing of our products. Our key packaging materials include
plastic resins, including polyethylene terephthalate (PET) and polypropylene resins used for plastic
beverage bottles and film packaging used for snack foods, aluminum, glass, closures, cardboard and
paperboard cartons. In addition, we continue to integrate recyclability into our product development
process and support the increased use of recycled content, including recycled PET, in our packaging. Fuel,
electricity and natural gas are also important commodities for our businesses due to their use in our and
our business partners’ facilities and the vehicles delivering our products. We employ specialists to secure
5
60859_10k_pgs_iii - 127.indd 5
60859_10k_pgs_iii - 127.indd 5
3/13/21 5:41 PM
3/13/21 5:41 PM
adequate supplies of many of these items and have not experienced any significant continuous shortages
that would prevent us from meeting our requirements. Many of these ingredients, raw materials and
commodities are purchased in the open market. The prices we pay for such items are subject to
fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing
agreements and derivative instruments, including swaps and futures. In addition, risk to our supply of
certain raw materials is mitigated through purchases from multiple geographies and suppliers. When
prices increase, we may or may not pass on such increases to our customers. In addition, we continue to
make investments to improve the sustainability and resources of our agricultural supply chain, including
the development of our initiative to advance sustainable farming practices by our suppliers and expanding
it further globally. See Note 9 to our consolidated financial statements for further information on how we
manage our exposure to commodity prices.
We also maintain voluntary supply chain finance agreements with several participating global financial
institutions, pursuant to which our suppliers, at their sole discretion, may elect to sell their accounts
receivable with PepsiCo to such global financial institutions. These agreements have not had a material
impact on our business or financial results. See “Our Financial Results – Our Liquidity and Capital
Resources” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations for further information.
Our Brands and Intellectual Property Rights
We own numerous valuable trademarks which are essential to our worldwide businesses, including
Agusha, Amp Energy, Aquafina, Aquafina Flavorsplash, Arto Lifewtr, Aunt Jemima, BaiCaoWei, Bare,
Bokomo, Bolt24, bubly, Cap’n Crunch, Ceres, Cheetos, Chester’s, Chipita, Chipsy, Chokis, Chudo,
Cracker Jack, Crunchy, Diet Mountain Dew, Diet Mug, Diet Pepsi, Diet 7UP (outside the United States),
Domik v Derevne, Doritos, Driftwell, Duyvis, Elma Chips, Emperador, Evolve, Frito-Lay, Fritos,
Fruktovy Sad, G2, Gamesa, Gatorade, Grandma’s, H2oh!, Health Warrior, Imunele, Izze, J-7 Tonus, Kas,
KeVita, Kurkure, Lay’s, Life, Lifewtr, Liquifruit, Lubimy, Manzanita Sol, Marias Gamesa, Matutano,
Mirinda, Miss Vickie’s, Moirs, Mother’s, Mountain Dew, Mountain Dew Code Red, Mountain Dew
Game Fuel, Mountain Dew Ice, Mountain Dew Kickstart, Mountain Dew Zero Sugar, Mug, Munchies,
Muscle Milk, Naked, Near East, Off the Eaten Path, O.N.E., Paso de los Toros, Pasta Roni, Pearl Milling
Company, Pepsi, Pepsi Black, Pepsi Max, Pepsi Zero Sugar, PopCorners, Pronutro, Propel, Quaker,
Quaker Chewy, Rice-A-Roni, Rockstar Energy, Rold Gold, Rosquinhas Mabel, Ruffles, Sabritas, Safari,
Sakata, Saladitas, San Carlos, Sandora, Santitas, Sasko, 7UP (outside the United States), 7UP Free
(outside the United States), Sierra Mist, Sierra Mist Zero Sugar, Simba, Smartfood, Smith’s, Snack a
Jacks, SoBe, SodaStream, Sonric’s, Spekko, Stacy’s, Sting, Stubborn Soda, SunChips, Toddy, Toddynho,
Tostitos, Trop 50, Tropicana, Tropicana Pure Premium, Tropicana Twister, V Water, Vesely Molochnik,
Walkers, Weetbix, White Star, Ya and Yachak. We also hold long-term licenses to use valuable
trademarks in connection with our products in certain markets, including Dole and Ocean Spray. We also
distribute Bang Energy drinks and various Keurig Dr Pepper Inc. brands, including Dr Pepper in certain
markets, Crush and Schweppes. Joint ventures in which we have an ownership interest either own or have
the right to use certain trademarks, such as Lipton, Sabra and Starbucks. Trademarks remain valid so long
as they are used properly for identification purposes, and we emphasize correct use of our trademarks. We
have authorized, through licensing arrangements, the use of many of our trademarks in such contexts as
snack food joint ventures and beverage bottling appointments. In addition, we license the use of our
trademarks on merchandise that is sold at retail, which enhances brand awareness.
We either own or have licenses to use a number of patents which relate to certain of our products, their
packaging, the processes for their production and the design and operation of various equipment used in
our businesses. Some of these patents are licensed to others.
6
60859_10k_pgs_iii - 127.indd 6
60859_10k_pgs_iii - 127.indd 6
3/13/21 5:41 PM
3/13/21 5:41 PM
Seasonality
Our businesses are affected by seasonal variations. Our beverage, food and snack sales are generally
highest in the third quarter due to seasonal and holiday-related patterns and generally lowest in the first
quarter. However, taken as a whole, seasonality has not had a material impact on our consolidated
financial results.
Our Customers
Our customers include wholesale and other distributors, foodservice customers, grocery stores, drug
stores, convenience stores, discount/dollar stores, mass merchandisers, membership stores, hard
discounters, e-commerce retailers and authorized independent bottlers, among others. We normally grant
our independent 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. We also grant distribution rights to our independent bottlers for
certain beverage products bearing our trademarks for specified geographic areas.
We rely on and provide financial incentives to our customers to assist in the distribution and promotion of
our products to the consumer. 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 incentives, advertising support, new product
support, and vending and cooler equipment placement. Consumer incentives include pricing discounts and
promotions, and other promotional offers. Advertising support is directed at advertising programs and
supporting independent bottler media. New product support 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 equipment placement programs support the acquisition and
placement of vending machines and cooler equipment. The nature and type of programs vary annually.
Changes to the retail landscape, including increased consolidation of retail ownership, the rapid growth of
sales through e-commerce websites and mobile commerce applications, including through subscription
services and other direct-to-consumer businesses, the integration of physical and digital operations among
retailers, as well as the international expansion of hard discounters, and the current economic
environment, including in light of the COVID-19 pandemic, continue to increase the importance of major
customers. In 2020, sales to Walmart Inc. (Walmart) and its affiliates, including Sam’s Club (Sam’s),
represented approximately 14% of our consolidated net revenue, with sales reported across all of our
divisions, including concentrate sales to our independent bottlers, which were used in finished goods sold
by them to Walmart. The loss of this customer would have a material adverse effect on our FLNA, QFNA
and PBNA divisions.
See “Off-Balance-Sheet Arrangements” in “Our Financial Results – Our Liquidity and Capital Resources”
in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for
further information on our independent bottlers.
Our Competition
Our beverage, food and snack products are in highly competitive categories and markets and compete
against products of international beverage, food and snack companies that, like us, operate in multiple
geographies, as well as regional, local and private label manufacturers and economy brands and other
competitors, including smaller companies developing and selling micro brands directly to consumers
through e-commerce platforms or through retailers focused on locally-sourced products. In many countries
in which our products are sold, including the United States, The Coca-Cola Company is our primary
beverage competitor. Other beverage, food and snack competitors include, but are not limited to,
7
60859_10k_pgs_iii - 127.indd 7
60859_10k_pgs_iii - 127.indd 7
3/13/21 5:41 PM
3/13/21 5:41 PM
Campbell Soup Company, Conagra Brands, Inc., Kellogg Company, Keurig Dr Pepper Inc., The Kraft
Heinz Company, Link Snacks, Inc., Mondelēz International, Inc., Monster Beverage Corporation, Nestlé
S.A., Red Bull GmbH and Utz Brands, Inc.
Many of our food and snack products hold significant leadership positions in the food and snack industry
in the United States and worldwide. In 2020, we and The Coca-Cola Company represented approximately
22% and 20%, respectively, of the U.S. liquid refreshment beverage category by estimated retail sales in
measured channels, according to Information Resources, Inc. However, The Coca-Cola Company has
significant carbonated soft drink (CSD) share advantage in many markets outside the United States.
Our beverage, food and snack products compete primarily on the basis of brand recognition and loyalty,
taste, price, value, quality, product variety, innovation, distribution, advertising, marketing and
promotional activity (including digital), packaging, convenience, service and the ability to anticipate and
effectively respond to consumer preferences and trends, including increased consumer focus on health and
wellness and the continued acceleration of e-commerce and other methods of distributing and purchasing
products. Success in this competitive environment is dependent on effective promotion of existing
products, effective introduction of new products and reformulations of existing products, increased
efficiency in production techniques, effective incorporation of technology and digital tools across all areas
of our business, the effectiveness of our advertising campaigns, marketing programs, product packaging
and pricing, new vending and dispensing equipment 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.
Research and Development
We engage in a variety of research and development activities and invest in innovation globally with the
goal of meeting the needs of our customers and consumers and accelerating growth. These activities
principally involve: innovations focused on creating consumer preferred products to grow and transform
our portfolio through development of new technologies, ingredients, flavors and substrates; development
and improvement of our manufacturing processes including reductions in cost and environmental
footprint; implementing product improvements to our global portfolio that reduce added sugars, sodium or
saturated fat; offering more products with functional ingredients and positive nutrition including whole
grains, fruit, vegetables, dairy, protein, fiber, micronutrients and hydration; development of packaging
technology and new package designs, including reducing the amount of plastic in our packaging and
developing recyclable and sustainable packaging; development of marketing, merchandising and
dispensing equipment; further expanding our beyond the bottle portfolio including innovation for our
SodaStream business; investments in technology and digitalization including data analytics to enhance our
consumer insights and research; continuing to strengthen our omnichannel capabilities, particularly in e-
commerce; and efforts focused on reducing our impact on the environment including reducing water use
in our operations and our agricultural practices.
Our research centers are located around the world, including in Brazil, China, India, Ireland, Mexico,
Russia, South Africa, the United Kingdom and the United States, and leverage consumer insights, food
science and engineering to meet our strategy to continually innovate our portfolio of convenient foods and
beverages.
Regulatory Matters
The conduct of our businesses, including the production, storage, distribution, sale, display, advertising,
marketing, labeling, content, quality, safety, transportation, packaging, disposal, recycling and use of our
products, as well as our employment and occupational health and safety practices and protection of
personal information, 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
8
60859_10k_pgs_iii - 127.indd 8
60859_10k_pgs_iii - 127.indd 8
3/13/21 5:41 PM
3/13/21 5:41 PM
government entities and agencies in the more than 200 other countries and territories in which our
products are made, manufactured, distributed or sold. It is our policy to abide by the laws and regulations
around the world that apply to our businesses.
The U.S. laws and regulations that we are subject to include, but are not limited to: the Federal Food, Drug
and Cosmetic Act and various state laws governing food safety; the Food Safety Modernization Act; the
Occupational Safety and Health Act and various state laws and regulations governing workplace health
and safety; various federal, state and local environmental protection laws, as discussed below; the Federal
Motor Carrier Safety Act; the Federal Trade Commission Act; the Lanham Act; various federal and state
laws and regulations governing competition and trade practices; various federal and state laws and
regulations governing our employment practices, including those related to equal employment
opportunity, such as the Equal Employment Opportunity Act and the National Labor Relations Act and
those related to overtime compensation, such as the Fair Labor Standards Act; data privacy and personal
data protection laws and regulations, including the California Consumer Privacy Act of 2018; customs and
foreign trade laws and regulations, including laws regarding the import or export of our products or
ingredients used in our products and tariffs; laws regulating the sale of certain of our products in schools;
laws regulating our supply chain, including the 2010 California Transparency in Supply Chains Act and
laws relating to the payment of taxes. We are also required to comply with the Foreign Corrupt Practices
Act and the Trade Sanctions Reform and Export Enhancement Act. We are also subject to various state
and local statutes and regulations, including state consumer protection laws such as Proposition 65 in
California, which requires that a specific warning appear on any product that contains a substance listed
by the State of California as having been found to cause cancer or birth defects, unless the amount of such
substance in the product is below a safe harbor level.
We are subject to numerous similar and other laws and regulations outside the United States, including but
not limited to laws and regulations governing food safety, international trade and tariffs, supply chain,
including the U.K. Modern Slavery Act, occupational health and safety, competition, anti-corruption and
data privacy, including the European Union General Data Protection Regulation. In many jurisdictions,
compliance with competition laws is of special importance to us due to our competitive position in those
jurisdictions, as is compliance with anti-corruption laws, including the U.K. Bribery Act. We rely on legal
and operational compliance programs, as well as in-house and outside counsel and other experts, to guide
our businesses in complying with the laws and regulations around the world that apply to our businesses.
In addition, certain jurisdictions have either imposed, or are considering imposing, new or increased taxes
on the manufacture, distribution or sale of our products, ingredients or substances contained in, or
attributes of, our products or commodities used in the production of our products. These taxes vary in
scope and form: some apply to all beverages, including non-caloric beverages, while others apply only to
beverages with a caloric sweetener (e.g., sugar). Similarly, some measures apply a single tax rate per
ounce/liter on beverages containing over a certain level of added sugar (or other sweetener) while others
apply a graduated tax rate depending upon the amount of added sugar (or other sweetener) in the beverage
and some apply a flat tax rate on beverages containing a particular substance or ingredient, regardless of
the level of such substance or ingredient.
In addition, certain jurisdictions have either imposed, or are considering imposing, product labeling or
warning requirements or other limitations on the marketing or sale of certain of our products as a result of
ingredients or substances contained in such products or the audience to whom products are marketed.
These types of provisions have required that we highlight perceived concerns about a product, warn
consumers to avoid consumption of certain ingredients or substances present in our products, restrict the
age of consumers to whom products are marketed or sold or limit the location in which our products may
be available. It is possible that similar or more restrictive requirements may be proposed or enacted in the
future.
9
60859_10k_pgs_iii - 127.indd 9
60859_10k_pgs_iii - 127.indd 9
3/13/21 5:41 PM
3/13/21 5:41 PM
In addition, certain jurisdictions have either imposed or are considering imposing regulations designed to
increase recycling rates or encourage waste reduction. These regulations vary in scope and form from
deposit return systems designed to incentivize the return of beverage containers, to extended producer
responsibility policies and even bans on the use of some types of single-use plastics. It is possible that
similar or more restrictive requirements may be proposed or enacted in the future.
We are also subject to national and local environmental laws in the United States and in foreign countries
in which we do business, including laws related to water consumption and treatment, wastewater
discharge and air emissions. In the United States, our facilities must comply with the Clean Air Act, the
Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act and other federal and state laws regarding handling, storage,
release and disposal of wastes generated onsite and sent to third-party owned and operated offsite licensed
facilities and our facilities outside the United States must comply with similar laws and regulations. In
addition, continuing concern over climate change may result in new or increased legal and regulatory
requirements (in or outside of the United States) to reduce or mitigate the potential effects of greenhouse
gases, or to limit or impose additional costs on commercial water use due to local water scarcity concerns.
Our policy is to abide by all applicable environmental laws and regulations, and we have internal
programs in place with respect to our global environmental compliance. We have made, and plan to
continue making, necessary expenditures for compliance with applicable environmental laws and
regulations. While these expenditures have not had a material impact on our business, financial condition
or results of operations to date, changes in environmental compliance requirements, and any expenditures
necessary to comply with such requirements, could adversely affect our financial performance. In
addition, we and our subsidiaries are subject to environmental remediation obligations arising in the
normal course of business, as well as remediation and related indemnification obligations in connection
with certain historical activities and contractual obligations, including those of businesses acquired by us
or our subsidiaries. While these environmental remediation and indemnification obligations cannot be
predicted with certainty, such obligations have not had, and are not expected to have, a material impact on
our capital expenditures, earnings or competitive position.
In addition to the discussion in this section, see also “Item 1A. Risk Factors.”
Human Capital
PepsiCo believes that human capital management, including attracting, developing and retaining a high
quality workforce, is critical to our long-term success. Our Board and its Committees provide oversight on
a broad range of human capital management topics, including corporate culture, diversity and inclusion,
pay equity, health and safety, training and development and compensation and benefits.
We employed approximately 291,000 people worldwide as of December 26, 2020, including
approximately 120,000 people within the United States. We are party to numerous collective bargaining
agreements and believe that relations with our employees are generally good.
Protecting the safety, health, and well-being of our associates around the world is PepsiCo’s top priority.
We strive to achieve an injury-free work environment. We also continue to invest in emerging
technologies to protect our employees from injuries, including leveraging fleet telematics and distracted
driving technology, resulting in reductions in road traffic accidents, and deploying wearable ergonomic
risk reduction devices. In addition, throughout the COVID-19 pandemic, we have remained focused on the
health and safety of our associates, especially our frontline associates who continue to make, move and
sell our products during this critical time, including by implementing new safety protocols in our facilities,
providing personal protective equipment and enabling testing.
We believe that our culture of diversity and inclusion is a competitive advantage that fuels innovation,
enhances our ability to attract and retain talent and strengthens our reputation. We continually strive to
10
60859_10k_pgs_iii - 127.indd 10
60859_10k_pgs_iii - 127.indd 10
3/13/21 5:41 PM
3/13/21 5:41 PM
improve the attraction, retention, and advancement of diverse associates to ensure we sustain a high-
caliber pipeline of talent that also represents the communities we serve. As of December 26, 2020, our
global workforce was approximately 25% female, while management roles were approximately 41%
female. As of December 26, 2020, approximately 43% of our U.S. workforce was comprised of racially/
ethnically diverse individuals, of which approximately 30% of our U.S. associates in managerial roles
were racially/ethnically diverse individuals. Direct reports of our Chief Executive Officer include 7
executives globally who are racially/ethnically diverse and/or female.
We are also committed to the continued growth and development of our associates. PepsiCo supports and
develops its associates through a variety of global training and development programs that build and
strengthen employees' leadership and professional skills, including career development plans, mentoring
programs and in-house learning opportunities, such as PEP U Degreed, our internal global online learning
resource. In 2020, PepsiCo employees completed over 875,000 hours of training.
Available Information
We are required to file annual, quarterly and current reports, proxy statements and other information with
the U.S. Securities and Exchange Commission (SEC). The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
proxy statements and amendments to those documents filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), are also available free of
charge on our Internet site at http://www.pepsico.com as soon as reasonably practicable after such reports
are electronically filed with or furnished to the SEC.
Investors should note that we currently announce material information to our investors and others using
filings with the SEC, press releases, public conference calls, webcasts or our corporate website
(www.pepsico.com), including news and announcements regarding our financial performance, key
personnel, our brands and our business strategy. Information that we post on our corporate website could
be deemed material to investors. We encourage investors, the media, our customers, consumers, business
partners and others interested in us to review the information we post on these channels. We may from
time to time update the list of channels we will use to communicate information that could be deemed
material and will post information about any such change on www.pepsico.com. The information on our
website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other
filings with the SEC.
Item 1A. Risk Factors.
The following risks, some of which have occurred and any of which may occur in the future, can have a
material adverse effect on our business or financial performance, which in turn can affect the price of our
publicly traded securities. These are not the only risks we face. There may be other risks we are not
currently aware of or that we currently deem not to be material but may become material in the future.
COVID-19 Risks
The impact of COVID-19 continues to create considerable uncertainty for our business.
Our global operations continue to expose us to risks associated with the COVID-19 pandemic. Authorities
around the world have implemented numerous measures to try to reduce the spread of the virus and such
measures have impacted and continue to impact us, our business partners and consumers. While some of
these measures have been lifted or eased in certain jurisdictions, other jurisdictions have seen a resurgence
of COVID-19 cases resulting in reinstitution or expansion of such measures.
11
60859_10k_pgs_iii - 127.indd 11
60859_10k_pgs_iii - 127.indd 11
3/13/21 5:41 PM
3/13/21 5:41 PM
We have seen and could continue to see changes in consumer demand as a result of COVID-19, including
the inability of consumers to purchase our products due to illness, quarantine or other restrictions, store
closures, or financial hardship. We also continue to see shifts in product and channel preferences,
particularly an increase in demand in the e-commerce channel, which has impacted and could continue to
impact our sales and profitability. Reduced demand for our products or changes in consumer purchasing
patterns, as well as continued economic uncertainty, can adversely affect our customers’ financial
condition, which can result in bankruptcy filings and/or an inability to pay for our products. In addition,
we may also continue to experience business disruptions as a result of COVID-19, resulting from
temporary closures of our facilities or facilities of our business partners or the inability of a significant
portion of our or our business partners’ workforce to work because of illness, quarantine, or travel or other
governmental restrictions. Any sustained interruption in our or our business partners’ operations,
distribution network or supply chain or any significant continuous shortage of raw materials or other
supplies, including personal protective equipment or sanitization products, can negatively impact our
business. We have also incurred, and expect to continue to incur, increased employee and operating costs
as a result of COVID-19, such as costs related to expanded benefits and frontline incentives, the provision
of personal protective equipment and increased sanitation, allowances for credit losses, upfront payment
reserves and inventory write-offs, which have negatively impacted and may continue to negatively impact
our profitability. In addition, the increase in certain of our employees working remotely has resulted in
increased demand on our information technology infrastructure, which can be subject to failure, disruption
or unavailability, and increased vulnerability to cyberattacks and other cyber incidents. Also, continued
economic uncertainty associated with the COVID-19 pandemic has resulted in volatility in the global
capital and credit markets which can impair our ability to access these markets on terms commercially
acceptable to us, or at all.
The impact of COVID-19 has heightened, or in some cases manifested, certain of the other risks discussed
herein. The extent of the impact of the COVID-19 pandemic on our business remains uncertain and will
continue to depend on numerous evolving factors that we are not able to accurately predict and which will
vary by jurisdiction and market, including the duration and scope of the pandemic, the development and
availability of effective treatments and vaccines, global economic conditions during and after the
pandemic, governmental actions that have been taken, or may be taken in the future, in response to the
pandemic, and changes in consumer behavior in response to the pandemic, some of which may be more
than just temporary.
Business Risks
Reduction in future demand for our products would adversely affect our business.
Demand for our products depends in part on our ability to anticipate and effectively respond to shifts in
consumer trends and preferences, including the types of products our consumers want and how they
browse for, purchase and consume them. Consumer preferences continuously evolve due to a variety of
factors, including: changes in consumer demographics, consumption patterns and channel preferences
(including continued rapid increases in the e-commerce and online-to-offline channels); pricing; product
quality; concerns or perceptions regarding packaging and its environmental impact (such as single-use and
other plastic packaging); and concerns or perceptions regarding the nutrition profile and health effects of,
or location of origin of, ingredients or substances in our products. Concerns with any of the foregoing
could lead consumers to reduce or publicly boycott the purchase or consumption of our products.
Consumer preferences are also influenced by perception of our brand image or the brand images of our
products, the success of our advertising and marketing campaigns, our ability to engage with our
consumers in the manner they prefer, including through the use of digital media, and the perception of our
use, and the use of social media. These and other factors have reduced in the past and could continue to
reduce consumers’ willingness to purchase certain of our products. Any inability on our part to anticipate
12
60859_10k_pgs_iii - 127.indd 12
60859_10k_pgs_iii - 127.indd 12
3/13/21 5:41 PM
3/13/21 5:41 PM
or react to changes in consumer preferences and trends, or make the right strategic investments to do so,
including investments in data analytics to understand consumer trends, can lead to reduced demand for our
products, lead to inventory write-offs or erode our competitive and financial position, thereby adversely
affecting our business. In addition, our business operations are subject to disruption by natural disasters or
other events beyond our control that could negatively impact product availability and decrease demand for
our products if our crisis management plans do not effectively resolve these issues.
Damage to our reputation or brand image can adversely affect our business.
Maintaining a positive reputation globally is critical to selling our products. Our reputation or brand image
has in the past been, and could in the future be, adversely impacted by a variety of factors, including: any
failure by us or our business partners to maintain high ethical, social, business and environmental
practices, including with respect to human rights, child labor laws and workplace conditions and employee
health and safety; any failure to achieve our sustainability goals, including with respect to the nutrition
profile of our products, packaging, water use and our impact on the environment; any failure to address
health concerns about our products or particular ingredients in our products, including concerns regarding
whether certain of our products contribute to obesity; our research and development efforts; any product
quality or safety issues, including the recall of any of our products; any failure to comply with laws and
regulations; consumer perception of our advertising campaigns, sponsorship arrangements, marketing
programs and use of social media; or any failure to effectively respond to negative or inaccurate comments
about us on social media or otherwise regarding any of the foregoing. Damage to our reputation or brand
image has in the past and could in the future decrease demand for our products, thereby adversely
affecting our business.
Issues or concerns with respect to product quality and safety can adversely affect our business.
Product quality or safety issues, including alleged mislabeling, misbranding, spoilage, undeclared
allergens, adulteration or contamination, whether as a result of failure to comply with food safety laws or
otherwise, have in the past and could in the future reduce consumer confidence and demand for our
products, cause production and delivery disruptions, require product recalls and result in increased costs
(including payment of fines and/or judgments) and damage our reputation, all of which can adversely
affect our business. Failure to maintain adequate oversight over product quality or safety can result in
product recalls, litigation, government investigations or inquiries or civil or criminal proceedings, all of
which may result in fines, penalties, damages or criminal liability. Our business can also be adversely
affected if consumers lose confidence in product quality, safety and integrity generally, even if such loss
of confidence is unrelated to products in our portfolio.
Any inability to compete effectively can adversely affect our business.
Our products compete against products of international beverage, food and snack companies that, like us,
operate in multiple geographies, as well as regional, local and private label and economy brand
manufacturers and other competitors, including smaller companies developing and selling micro brands
directly to consumers through e-commerce platforms or through retailers focused on locally sourced
products. In many countries in which our products are sold, including the United States, The Coca-Cola
Company is our primary beverage competitor. Our products compete primarily on the basis of brand
recognition and loyalty, taste, price, value, quality, product variety, innovation, distribution, advertising,
marketing and promotional activity, packaging, convenience, service and the ability to anticipate and
effectively respond to consumer preferences and trends. Our business can be adversely affected if we are
unable to effectively promote or develop our existing products or introduce new products, if our
competitors spend more aggressively than we do or if we are otherwise unable to effectively respond to
pricing pressure or compete effectively, and we may be unable to grow or maintain sales or category share
or we may need to increase capital, marketing or other expenditures.
13
60859_10k_pgs_iii - 127.indd 13
60859_10k_pgs_iii - 127.indd 13
3/13/21 5:41 PM
3/13/21 5:41 PM
Failure to attract, develop and maintain a highly skilled and diverse workforce can have an adverse
effect on our business.
Our business requires that we attract, develop and maintain a highly skilled and diverse workforce. Our
employees are highly sought after by our competitors and other companies and our continued ability to
compete effectively depends on our ability to attract, retain, develop and motivate highly skilled personnel
for all areas of our organization. Any unplanned turnover or unsuccessful implementation of our
succession plans to backfill current leadership positions, including the Chief Executive Officer, or failure
to attract, develop and maintain a highly skilled and diverse workforce, including with key capabilities
such as e-commerce and digital marketing and data analytic skills, can deplete our institutional knowledge
base, erode our competitive advantage or result in increased costs due to increased competition for
employees, higher employee turnover or increased employee benefit costs. In addition, failure to attract,
retain and develop associates from underrepresented communities can damage our business results and our
reputation. Any of the foregoing can adversely affect our business.
Water scarcity can adversely affect our business.
We and our business partners use water in the manufacturing and sourcing of our products. Lack of
available water of acceptable quality, increasing focus by governmental and non-governmental
organizations, investors, customers and consumers on water scarcity and increasing pressure to conserve
and replenish water in areas of scarcity and stress may lead to: supply chain disruption; adverse effects on
our operations or the operations of our business partners; higher compliance costs; capital expenditures
(including investments in the development of technologies to enhance water efficiency and reduce
consumption); higher production costs, including less favorable pricing for water; the interruption or
cessation of operations at, or relocation of, our facilities or the facilities of our business partners; failure to
achieve our sustainability goals relating to water use; perception of our failure to act responsibly with
respect to water use or to effectively respond to legal or regulatory requirements concerning water
scarcity; or damage to our reputation, any of which can adversely affect our business.
Changes in the retail landscape or in sales to any key customer can adversely affect our business.
The retail landscape continues to evolve, including rapid growth in e-commerce channels and hard
discounters. Our business will be adversely affected if we are unable to maintain and develop successful
relationships with e-commerce retailers and hard discounters, while also maintaining relationships with
our key customers operating in traditional retail channels (many of whom are also focused on increasing
their e-commerce sales). Our business can be adversely affected if e-commerce channels and hard
discounters take significant additional market share away from traditional retailers or we fail to find ways
to create more powerful digital tools and capabilities for our retail customers to enable them to grow their
businesses. In addition, our business can be adversely affected if we are unable to profitably expand our
own direct-to-consumer e-commerce capabilities. The retail industry is also impacted by increased
consolidation of ownership and purchasing power, particularly in North America, Europe and Latin
America, resulting in large retailers or buying groups with increased purchasing power, impacting our
ability to compete in these areas. Consolidation also adversely impacts our smaller customers’ ability to
compete effectively, resulting in an inability on their part to pay for our products or reduced or canceled
orders of our products. Further, we must maintain mutually beneficial relationships with our key
customers, including Walmart, to compete effectively. Any inability to resolve a significant dispute with
any of our key customers, a change in the business condition (financial or otherwise) of any of our key
customers, even if unrelated to us, a significant reduction in sales to any key customer, or the loss of any
of our key customers can adversely affect our business.
60859_10k_pgs_iii - 127.indd 14
60859_10k_pgs_iii - 127.indd 14
3/13/21 5:41 PM
3/13/21 5:41 PM
14
Disruption of our supply chain may adversely affect our business.
Many of the raw materials and supplies used in the production of our products are sourced from countries
experiencing civil unrest, political instability or unfavorable economic conditions. Some raw materials and
supplies, including packaging materials such as recycled PET, are available only from a limited number of
suppliers or from a sole supplier or are in short supply when seasonal demand is at its peak. There can be
no assurance that we will be able to maintain favorable arrangements and relationships with suppliers or
that our contingency plans will be effective to prevent disruptions that may arise from shortages or
discontinuation of any raw materials and other supplies that we use in the manufacture, production and
distribution of our products. The raw materials and other supplies, including agricultural commodities and
fuel, that we use for the manufacturing, production and distribution of our products are subject to price
volatility and fluctuations in availability caused by many factors, including changes in supply and demand,
weather conditions (including potential effects of climate change), fire, natural disasters, disease or pests
(including the impact of greening disease on the citrus industry), agricultural uncertainty, health epidemics
or pandemics or other contagious outbreaks, governmental incentives and controls (including import/
export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers), political
uncertainties, acts of terrorism, governmental instability or currency exchange rates. Many of our raw
materials and supplies are purchased in the open market. The prices we pay for such items are subject to
fluctuation. If price changes result in unexpected or significant increases in the costs of any raw materials
or other supplies, we may be unwilling or unable to increase our product prices or unable to effectively
hedge against price increases to offset these increased costs without suffering reduced volume, revenue,
margins and operating results.
Political and social conditions can adversely affect our business.
Political and social conditions in the markets in which our products are sold have been and could continue
to be difficult to predict, resulting in adverse effects on our business. The results of elections, referendums
or other political conditions (including government shutdowns) in these markets, including the United
Kingdom’s withdrawal from the European Union, have in the past and could continue to impact how
existing laws, regulations and government programs or policies are implemented or result in uncertainty as
to how such laws, regulations, programs or policies may change, including with respect to tariffs,
sanctions, environmental and climate change regulations, taxes, benefit programs, the movement of goods,
services and people between countries, relationships between countries, customer or consumer perception
of a particular country or its government and other matters, and has resulted in and could continue to result
in exchange rate fluctuation, volatility in global stock markets and global economic uncertainty or
adversely affect demand for our products, any of which can adversely affect our business. In addition,
political and social conditions in certain cities throughout the U.S. as well as globally have resulted in
demonstrations and protests, including in connection with political elections and civil rights and liberties.
Our operations, including the distribution of our products and the ingredients or other raw materials used
in the production of our products, may be disrupted if such events persist for a prolonged period of time,
including due to actions taken by governmental authorities in affected cities and regions, which can
adversely affect our business.
Our business can be adversely affected if we are unable to grow in developing and emerging markets.
Our success depends in part on our ability to grow our business in developing and emerging markets,
including Mexico, Russia, the Middle East, Brazil, China, South Africa and India. There can be no
assurance that our products will be accepted or be successful in any particular developing or emerging
market, due to competition, price, cultural differences, consumer preferences, method of distribution or
otherwise. Our business in these markets has been and could continue in the future to be impacted by
economic, political and social conditions; acts of war, terrorist acts, and civil unrest, including
demonstrations and protests; competition; tariffs, sanctions or other regulations restricting contact with
15
60859_10k_pgs_iii - 127.indd 15
60859_10k_pgs_iii - 127.indd 15
3/13/21 5:41 PM
3/13/21 5:41 PM
certain countries in these markets; foreign ownership restrictions; nationalization of our assets or the assets
of our business partners; government-mandated closure, or threatened closure, of our operations or the
operations of our business partners; restrictions on the import or export of our products or ingredients or
substances used in our products; highly inflationary economies; devaluation or fluctuation or
demonetization of currency; regulations on the transfer of funds to and from foreign countries, currency
controls or other currency exchange restrictions, which result in significant cash balances in foreign
countries, from time to time, or can significantly affect our ability to effectively manage our operations in
certain of these markets and can result in the deconsolidation of such businesses; the lack of well-
established or reliable legal systems; increased costs of doing business due to compliance with complex
foreign and U.S. laws and regulations that apply to our international operations, including the Foreign
Corrupt Practices Act, the U.K. Bribery Act and the Trade Sanctions Reform and Export Enhancement
Act; and adverse consequences, such as the assessment of fines or penalties, for any failure to comply with
laws and regulations. Our business can be adversely affected if we are unable to expand our business in
developing and emerging markets, effectively operate, or manage the risks associated with operating, in
these markets, or achieve the return on capital we expect from our investments in these markets.
Changes in economic conditions can adversely impact our business.
Many of the jurisdictions in which our products are sold have experienced and could continue to
experience uncertain or unfavorable economic conditions, such as recessions or economic slowdowns,
which have and could continue to result in adverse changes in interest rates, tax laws or tax rates; volatile
commodity markets; highly
inflationary economies, devaluation, fluctuation or demonetization;
contraction in the availability of credit; demonetization, austerity or stimulus measures; the effects of any
default by or deterioration in the creditworthiness of the countries in which our products are sold; or a
decrease in the fair value of pension or post-retirement assets that could increase future employee benefit
costs and/or funding requirements of our pension or post-retirement plans. In addition, we cannot predict
how current or future economic conditions will affect our business partners, including financial
institutions with whom we do business, and any negative impact on any of the foregoing may also have an
adverse impact on our business.
Future cyber incidents and other disruptions to our information systems can adversely affect our
business.
We depend on information systems and technology, including public websites and cloud-based services,
for many activities important to our business, including communications within our company, interfacing
with customers and consumers; ordering and managing inventory; managing and operating our facilities;
protecting confidential information; maintaining accurate financial records and complying with regulatory,
financial reporting, legal and tax requirements. Our business has in the past and could in the future be
negatively affected by system shutdowns, degraded systems performance, systems disruptions or security
incidents. These disruptions or incidents may be caused by cyberattacks and other cyber incidents,
network or power outages, software, equipment or telecommunications failures, the unintentional or
malicious actions of employees or contractors, natural disasters, fires or other catastrophic events.
Cyberattacks and other cyber incidents are occurring more frequently, are constantly evolving in nature,
are becoming more sophisticated and are being carried out by groups and individuals with a wide range of
expertise and motives. Cyberattacks and cyber incidents take many forms including cyber extortion, denial
of service, social engineering, introduction of viruses or malware, exploiting vulnerabilities in hardware,
software or other infrastructure, hacking, website defacement or theft of passwords and other credentials,
unauthorized use of computing resources for digital currency mining and business email compromise. As
with other global companies, we are regularly subject to cyberattacks and other cyber incidents, including
many of the types of attacks and incidents described above. If we do not allocate and effectively manage
the resources necessary to continue to build and maintain our information technology infrastructure, or if
16
60859_10k_pgs_iii - 127.indd 16
60859_10k_pgs_iii - 127.indd 16
3/13/21 5:41 PM
3/13/21 5:41 PM
we fail to timely identify or appropriately respond to cyberattacks or other cyber incidents, our business
can be adversely affected, resulting in transaction errors, processing inefficiencies, data loss, legal claims
or proceedings, regulatory penalties, and the loss of sales and customers.
Similar risks exist with respect to third-party providers, including cloud-based service providers, that we
rely upon for aspects of our information technology support services and administrative functions,
including payroll processing, health and benefit plan administration and certain finance and accounting
functions, and the systems managed, hosted, provided and/or used by such third parties and their vendors.
The need to coordinate with various third-party service providers, including with respect to timely
notification and access to personnel and information concerning an incident, may complicate our efforts to
resolve issues that arise. As a result, we are subject to the risk that the activities associated with our third-
party service providers can adversely affect our business even if the attack or breach does not directly
impact our systems or information.
Although the cyber incidents and other systems disruptions that we have experienced to date have not had
a material effect on our business, such incidents or disruptions could have a material adverse effect on us
in the future. While we devote significant resources to network security, disaster recovery, employee
training and other security measures to protect our systems and data, there are no assurances that such
measures will protect us against all cyber incidents or systems disruptions. In addition, while we currently
maintain insurance coverage that, subject to its terms and conditions, is intended to address costs
associated with certain aspects of cyber incidents and information systems failures, this insurance
coverage may not, depending on the specific facts and circumstances surrounding an incident, cover all
losses or all types of claims that arise from an incident, or the damage to our reputation or brands that may
result from an incident.
Failure to successfully complete or manage strategic transactions can adversely affect our business.
We regularly review our portfolio of businesses and evaluate potential acquisitions, joint ventures,
distribution agreements, divestitures, refranchisings and other strategic transactions. The success of these
transactions is dependent upon, among other things, our ability to realize the full extent of the expected
returns, benefits, cost savings or synergies as a result of a transaction, within the anticipated time frame, or
at all; receipt of necessary consents, clearances and approvals; and diversion of management’s attention
from day-to-day operations. Risks associated with strategic
integrating
manufacturing, distribution, sales, accounting, financial reporting and administrative support activities and
information technology systems with our company; operating through new business models or in new
categories or territories; motivating, recruiting and retaining executives and key employees; conforming
controls (including internal control over financial reporting and disclosure controls and procedures) and
policies (including with respect to environmental compliance, health and safety compliance and
compliance with anti-bribery laws); retaining existing customers and consumers and attracting new
customers and consumers; managing tax costs or inefficiencies; maintaining good relations with divested
or refranchised businesses in our supply or sales chain; managing the impact of business decisions or other
actions or omissions of our joint venture partners that may have different interests than we do; and other
unanticipated problems or liabilities, such as contingent liabilities and litigation. Strategic transactions that
are not successfully completed or managed effectively, or our failure to effectively manage the risks
associated with such transactions, have in the past and could continue to result in adverse effects on our
business.
transactions
include
Our reliance on third-party service providers can have an adverse effect on our business.
We rely on third-party service providers, including cloud data service providers, for certain areas of our
business, including payroll processing, health and benefit plan administration and certain finance and
accounting functions. Failure by these third parties to meet their contractual, regulatory and other
obligations to us, or our failure to adequately monitor their performance, has in the past and could
17
60859_10k_pgs_iii - 127.indd 17
60859_10k_pgs_iii - 127.indd 17
3/13/21 5:41 PM
3/13/21 5:41 PM
continue to result in our inability to achieve the expected cost savings or efficiencies and result in
additional costs to correct errors made by such service providers. Depending on the function involved,
such errors can also lead to business disruption, systems performance degradation, processing
inefficiencies or other systems disruptions, the loss of or damage to intellectual property or sensitive data
through security breaches or otherwise, incorrect or adverse effects on financial reporting, litigation or
remediation costs, damage to our reputation or have a negative impact on employee morale, all of which
can adversely affect our business.
In addition, we continue on our multi-year business transformation initiative to migrate certain of our
systems, including our financial processing systems, to enterprise-wide systems solutions. If we do not
allocate and effectively manage the resources necessary to build and sustain the proper information
technology infrastructure, or if we fail to achieve the expected benefits from this initiative, our business
could be adversely affected.
Climate change or measures to address climate change can negatively affect our business or damage
our reputation.
Climate change may have a negative effect on agricultural productivity which may result in decreased
availability or less favorable pricing for certain commodities that are necessary for our products, such as
potatoes, sugar cane, corn, wheat, rice, oats, oranges and other fruits (and fruit-derived oils). In addition,
climate change may also increase the frequency or severity of natural disasters and other extreme weather
conditions, which could impair our production capabilities, disrupt our supply chain or impact demand for
our products. Also, concern over climate change may result in new or increased legal and regulatory
requirements to reduce or mitigate the effects of climate change, which could result in significant
increased costs and require additional investments in facilities and equipment. As a result, the effects of
climate change can negatively affect our business and operations. In addition, any failure to achieve our
goals with respect to reducing our impact on the environment or perception of a failure to act responsibly
with respect to the environment or to effectively respond to regulatory requirements concerning climate
change can lead to adverse publicity, resulting in an adverse effect on our business or damage to our
reputation.
Strikes or work stoppages can cause our business to suffer.
Many of our employees are covered by collective bargaining agreements, and other employees may seek
to be covered by collective bargaining agreements. Strikes or work stoppages or other business
interruptions can occur if we are unable to renew, or enter into new, collective bargaining agreements on
satisfactory terms and can impair manufacturing and distribution of our products, lead to a loss of sales,
increase our costs or otherwise affect our ability to fully implement future operational changes to enhance
our efficiency or to adapt to changing business needs or strategy, all of which can adversely affect our
business.
Financial Risks
Failure to realize benefits from our productivity initiatives can adversely affect our financial
performance.
Our future growth depends, in part, on our ability to continue to reduce costs and improve efficiencies,
including implementing shared business service organizational models. We continue to identify and
implement productivity initiatives that we believe will position our business for long-term sustainable
growth by allowing us to achieve a lower cost structure, improve decision-making and operate more
efficiently. Some of these measures result in unintended consequences, such as business disruptions,
distraction of management and employees, reduced morale and productivity, unexpected employee
attrition, an inability to attract or retain key personnel and negative publicity. If we are unable to
successfully implement our productivity initiatives as planned or do not achieve expected savings as a
18
60859_10k_pgs_iii - 127.indd 18
60859_10k_pgs_iii - 127.indd 18
3/13/21 5:41 PM
3/13/21 5:41 PM
result of these initiatives, we may not realize all or any of the anticipated benefits, resulting in adverse
effects on our financial performance.
A deterioration in our estimates and underlying assumptions regarding the future performance of our
business can result in an impairment charge that can adversely affect our results of operations.
We conduct impairment tests on our goodwill and other indefinite-lived intangible assets annually or more
frequently if circumstances indicate that impairment may have occurred. In addition, amortizable
intangible assets, property, plant and equipment and other long-lived assets are evaluated for impairment
upon a significant change in the operating or macroeconomic environment. A deterioration in our
underlying assumptions regarding the impact of competitive operating conditions, macroeconomic
conditions or other factors used to estimate the future performance of any of our reporting units or assets,
including any deterioration in the weighted-average cost of capital based on market data available at the
time, can result in an impairment, which can adversely affect our results of operations.
Fluctuations in exchange rates impact our financial performance.
Because our consolidated financial statements are presented in U.S. dollars, the financial statements of our
subsidiaries outside the United States, where the functional currency is other than the U.S. dollar, are
translated into U.S. dollars. Given our global operations, we also pay for the ingredients, raw materials
and commodities used in our business in numerous currencies. Fluctuations in exchange rates, including as
a result of currency controls or other currency exchange restrictions have had, and could continue to have,
an adverse impact on our financial performance.
Our borrowing costs and access to capital and credit markets can be adversely affected by a downgrade
or potential downgrade of our credit ratings.
Rating agencies routinely evaluate us and their ratings are based on a number of factors, including our
cash generating capability, levels of indebtedness, policies with respect to shareholder distributions and
our financial strength generally, as well as factors beyond our control, such as the state of the economy
and our industry. We expect to maintain Tier 1 commercial paper access, which we believe will facilitate
appropriate financial flexibility and ready access to global credit markets at favorable interest rates. Any
downgrade or announcement that we are under review for a potential downgrade of our credit ratings,
especially any downgrade to below investment grade, can increase our future borrowing costs, impair our
ability to access capital and credit markets on terms commercially acceptable to us or at all, result in a
reduction in our liquidity, or 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), all of which can adversely affect our financial performance.
Legal, Tax and Regulatory Risks
Taxes aimed at our products can adversely affect our business or financial performance.
Certain jurisdictions in which our products are sold have either imposed, or are considering imposing, new
or increased taxes on the manufacture, distribution or sale of certain of our products, particularly our
beverages, as a result of the ingredients or substances contained in our products. These taxes vary in scope
and form: some apply to all beverages, including non-caloric beverages, while others apply only to
beverages with a caloric sweetener (e.g., sugar). Similarly, some measures apply a single tax rate per
ounce/liter on beverages containing over a certain amount of added sugar (or other sweetener), some apply
a graduated tax rate depending upon the amount of added sugar (or other sweetener) in the beverage and
others apply a flat tax rate on beverages containing any amount of added sugar (or other sweetener). For
example, Poland enacted a graduated tax on all sweetened beverages, effective January 1, 2021, at a rate
of PLN 0.5 (USD 0.12) per liter for drinks with a sugar (or other sweetener) content of up to 5g per 100ml
and an additional PLN 0.05 (USD 0.01) for each gram of sugar (or other sweetener) over 5g. These tax
measures, whatever their scope or form, have in the past and could continue to increase the cost of certain
19
60859_10k_pgs_iii - 127.indd 19
60859_10k_pgs_iii - 127.indd 19
3/13/21 5:41 PM
3/13/21 5:41 PM
of our products, reduce overall consumption of our products or lead to negative publicity, resulting in an
adverse effect on our business and financial performance.
Limitations on the marketing or sale of our products can adversely affect our business and financial
performance.
Certain jurisdictions in which our products are sold have either imposed, or are considering imposing,
limitations on the marketing or sale of our products as a result of ingredients or substances in our products.
These limitations require that we highlight perceived concerns about a product, warn consumers to avoid
consumption of certain ingredients or substances present in our products, restrict the age of consumers to
whom products are marketed or sold or limit the location in which our products may be available. For
example, Mexico has imposed a stop-sign labeling scheme to signal the presence of non-caloric
sweeteners and caffeine in pre-packaged foods and non-alcoholic beverages. Certain jurisdictions have
imposed or are considering imposing color-coded labeling requirements where colors such as red, yellow
and green are used to indicate various levels of a particular ingredient, such as sugar, sodium or saturated
fat, in products. The imposition or proposed imposition of additional limitations on the marketing or sale
of our products has in the past and could continue to reduce overall consumption of our products, lead to
negative publicity or leave consumers with the perception that our products do not meet their health and
wellness needs, resulting in an adverse effect on our business and financial performance.
Laws and regulations related to the use or disposal of plastics or other packaging can adversely affect
our business and financial performance.
Certain of our products are sold in plastic or other packaging designed to be recyclable. However, not all
packaging is recycled, whether due to lack of infrastructure or otherwise, and certain of our packaging is
not currently recyclable. Packaging waste that displays one or more of our brands has in the past resulted
in and could continue to result in negative publicity or reduced consumer demand for our products,
adversely affecting our financial performance. Many jurisdictions in which our products are sold have
imposed or are considering imposing regulations or policies intended to encourage the use of sustainable
packaging, waste reduction or increased recycling rates or to restrict the sale of products utilizing certain
packaging. These regulations vary in form and scope and include taxes to incentivize behavior, restrictions
on certain products and materials, requirements for bottle caps to be tethered to bottles, bans on the use of
single-use plastics, extended producer responsibility policies and requirements to charge deposit fees. For
example, the European Union has imposed a minimum recycled content requirement for beverage bottles
packaging and similar legislation is under consideration in several states in the United States. These laws
and regulations have in the past and could continue to increase the cost of our products, impact demand
for our products, result in negative publicity and require us and our business partners, including our
independent bottlers, to increase our capital expenditures to invest in minimizing the amount of plastic or
other materials used in our packaging or to develop alternative packaging, all of which can adversely
affect our business and financial performance.
Failure to comply with personal data protection and privacy laws can adversely affect our business.
We are subject to a variety of continuously evolving and developing laws and regulations in numerous
jurisdictions regarding personal data protection and privacy laws. These laws and regulations may be
interpreted and applied differently from country to country or, within the United States, from state to state,
and can create inconsistent or conflicting requirements. Our efforts to comply with these laws and
regulations, including with respect to data from residents of the European Union who are covered by the
General Data Protection Regulation or residents of the state of California who are covered by the
California Consumer Privacy Act, impose significant costs and challenges that are likely to continue to
increase over time. Failure to comply with these laws and regulations can result in litigation, claims, legal
or regulatory proceedings, inquiries or investigations or damage to our reputation, all of which can
adversely affect our business.
20
60859_10k_pgs_iii - 127.indd 20
60859_10k_pgs_iii - 127.indd 20
3/13/21 5:41 PM
3/13/21 5:41 PM
Increases in income tax rates, changes in income tax laws or disagreements with tax authorities can
adversely affect our financial performance.
Increases in income tax rates or other changes in tax laws, including changes in how existing tax laws are
interpreted or enforced, can adversely affect our financial performance. For example, economic and
political conditions in countries where we are subject to taxes, including the United States, have in the past
and could continue to result in significant changes in tax legislation or regulation, including as a result of
any changes enacted during the new U.S. presidential administration. The increasingly complex global tax
environment has in the past and could continue to increase tax uncertainty, resulting in higher compliance
costs and adverse effects on our financial performance. We are also subject to regular reviews,
examinations and audits by numerous taxing authorities with respect to income and non-income based
taxes. Economic and political pressures to increase tax revenues in jurisdictions in which we operate, or
the adoption of new or reformed tax legislation or regulation, may make resolving tax disputes more
difficult and the final resolution of tax audits and any related litigation can differ from our historical
provisions and accruals, resulting in an adverse effect on our financial performance.
If we are unable to adequately protect our intellectual property rights, or if we are found to infringe on
the intellectual property rights of others, our business can be adversely affected.
We possess intellectual property rights that are important to our business, including ingredient formulas,
trademarks, copyrights, patents, business processes and other trade secrets. The laws of various
jurisdictions in which we operate have differing levels of protection of intellectual property. Our
competitive position and the value of our products and brands can be reduced and our business adversely
affected if we fail to obtain or adequately protect our intellectual property, including our ingredient
formulas, or if there is a change in law that limits or removes the current legal protections afforded our
intellectual property. Also, if, in the course of developing new products or improving the quality of
existing products, we are found to have infringed on the intellectual property rights of others, directly or
indirectly, such finding can damage our reputation and limit our ability to introduce new products or
improve the quality of existing products, resulting in an adverse effect on our business.
Failure to comply with laws and regulations applicable to our business can adversely affect our
business.
The conduct of our business is subject to numerous laws and regulations relating to the production,
storage, distribution, sale, display, advertising, marketing, labeling, content (including whether a product
contains genetically engineered ingredients), quality, safety, transportation, traceability, packaging,
disposal, recycling and use of our products, employment and occupational health and safety,
environmental matters (including pesticide use) and data privacy and protection. In addition, in many
jurisdictions, compliance with competition laws is of special importance to us due to our competitive
position, as is compliance with anti-corruption laws. The imposition of new laws, changes in laws or
regulatory requirements or changing interpretations thereof, and differing or competing regulations and
standards across the markets where our products are made, manufactured, distributed or sold, have in the
past and could continue to result in higher compliance costs, capital expenditures and higher production
costs, resulting in adverse effects on our business. In addition, if one jurisdiction imposes or proposes to
impose new laws or regulations that impact the manufacture, distribution or sale of our products, other
jurisdictions can often follow. Failure to comply with such laws or regulations can subject us to criminal
or civil enforcement actions, including fines, injunctions, product recalls, penalties, disgorgement of
profits or activity restrictions, all of which can adversely affect our business.
60859_10k_pgs_iii - 127.indd 21
60859_10k_pgs_iii - 127.indd 21
3/13/21 5:41 PM
3/13/21 5:41 PM
21
Potential liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries or
investigations can have an adverse impact on our business.
We and our subsidiaries are party to a variety of litigation, claims, legal or regulatory proceedings,
inquiries and investigations, including but not limited to matters related to our advertising, marketing or
commercial practices, product labels, claims and ingredients, intellectual property rights, environmental,
privacy, employment, tax and insurance matters and matters relating to our compliance with applicable
laws and regulations. These matters are inherently uncertain and there is no guarantee that we will be
successful in defending ourselves or that our assessment of the materiality of these matters and the likely
outcome or potential losses and established reserves will be consistent with the ultimate outcome of such
matters. Responding to these matters, even those that are ultimately non-meritorious, requires us to incur
significant expense and devote significant resources, and may generate adverse publicity that damages our
reputation or brand image. Any of the foregoing can adversely affect our business.
Item 1B. Unresolved Staff Comments.
We have received no written comments regarding our periodic or current reports from the staff of the SEC
that were issued 180 days or more preceding the end of our 2020 year and that remain unresolved.
60859_10k_pgs_iii - 127.indd 22
60859_10k_pgs_iii - 127.indd 22
3/13/21 5:41 PM
3/13/21 5:41 PM
22
Item 2. Properties.
Our principal executive office located in Purchase, New York and our facilities located in Plano, Texas,
all of which we own, are our most significant corporate properties.
In connection with making, marketing, distributing and selling our products, each division utilizes
manufacturing, processing, bottling and production plants, warehouses, distribution centers, storage
facilities, offices, including division headquarters, research and development facilities and other facilities,
all of which are either owned or leased.
Significant properties by division are as follows:
FLNA
QFNA
PBNA
PBNA
PBNA
LatAm
LatAm
Europe
Europe
Europe
AMESA
APAC
Property Type
Research and development facility
Location
Plano, Texas
Food plant
Cedar Rapids, Iowa
Research and development facility Valhalla, New York
Concentrate plant
Arlington, Texas
Tropicana plant
Snack plant
Two snack plants
Snack plant
Manufacturing plant
Dairy plant
Snack plant
Snack plant
Bradenton, Florida
Celaya, Mexico
Vallejo, Mexico
Kashira, Russia
Lehavim, Israel
Moscow, Russia
Riyadh, Saudi Arabia
Wuhan, China
Owned/ Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned (a)
Owned (a)
Owned (a)
FLNA, QFNA, PBNA
Shared service center
Winston Salem, North Carolina Leased
PBNA, LatAm
Concentrate plant
Colonia, Uruguay
PBNA, Europe, AMESA
Two concentrate plants
PBNA, AMESA, APAC
Concentrate plant
All divisions
(a) The land on which these plants are located is leased.
Shared service center
Cork, Ireland
Singapore
Hyderabad, India
Owned (a)
Owned
Owned (a)
Leased
Most of our plants are owned or leased on a long-term basis. In addition to company-owned or leased
properties described above, we also utilize a highly distributed network of plants, warehouses and
distribution centers that are owned or leased by our contract manufacturers, co-packers, strategic alliances
or joint ventures in which we have an equity interest. We believe that our properties generally are in good
operating condition and, taken as a whole, are suitable, adequate and of sufficient capacity for our current
operations.
Item 3. Legal Proceedings.
We and our subsidiaries are party to a variety of litigation, claims, legal or regulatory proceedings,
inquiries and investigations. While the results of such litigation, claims, legal or regulatory proceedings,
inquiries and investigations cannot be predicted with certainty, management believes that the final
outcome of the foregoing will not have a material adverse effect on our financial condition, results of
operations or cash flows. See also “Item 1. Business – Regulatory Matters” and “Item 1A. Risk Factors.”
Item 4. Mine Safety Disclosures.
Not applicable.
__________________________________________________
23
60859_10k_pgs_iii - 127.indd 23
60859_10k_pgs_iii - 127.indd 23
3/13/21 5:41 PM
3/13/21 5:41 PM
Information About Our Executive Officers
The following is a list of names, ages and backgrounds of our current executive officers:
Name Age Title
Marie T. Gallagher
Hugh F. Johnston
61 Senior Vice President and Controller, PepsiCo
59 Vice Chairman, PepsiCo; Executive Vice President and Chief Financial
Officer, PepsiCo
Ramon L. Laguarta
Silviu Popovici
Paula Santilli
Ronald Schellekens
Kirk Tanner
Eugene Willemsen
Steven Williams
David Yawman
57 Chairman of the Board of Directors and Chief Executive Officer, PepsiCo
53 Chief Executive Officer, Europe
56 Chief Executive Officer, Latin America
56 Executive Vice President and Chief Human Resources Officer, PepsiCo
52 Chief Executive Officer, PepsiCo Beverages North America
53 Chief Executive Officer, Africa, Middle East, South Asia
55 Chief Executive Officer, PepsiCo Foods North America
52 Executive Vice President, General Counsel and Corporate Secretary,
PepsiCo
Marie T. Gallagher was appointed PepsiCo’s Senior Vice President and Controller in 2011.
Ms. Gallagher joined PepsiCo in 2005 as Vice President and Assistant Controller. Prior to joining
PepsiCo, Ms. Gallagher was Assistant Controller at Altria Corporate Services from 1992 to 2005 and,
prior to that, a senior manager at Coopers & Lybrand.
Hugh F. Johnston was appointed Vice Chairman, PepsiCo in 2015 and Executive Vice President and
Chief Financial Officer, PepsiCo in 2010. In addition to providing strategic financial leadership for
PepsiCo, Mr. Johnston’s portfolio has included a variety of responsibilities, including leadership of the
Company’s information technology function since 2015, the Company’s global e-commerce business from
2015 to 2019, and the Quaker Foods North America division from 2014 to 2016. He has also held a
number of leadership roles throughout his PepsiCo career, serving as Executive Vice President, Global
Operations from 2009 to 2010, President of Pepsi-Cola North America from 2007 to 2009, Executive Vice
President, Operations from 2006 to 2007, and Senior Vice President, Transformation from 2005 to 2006.
Prior to that, he served as Senior Vice President and Chief Financial Officer of PepsiCo Beverages and
Foods from 2002 through 2005, and as PepsiCo’s Senior Vice President of Mergers and Acquisitions in
2002. Mr. Johnston joined PepsiCo in 1987 as a Business Planner and held various finance positions until
1999 when he left to join Merck & Co., Inc. as Vice President, Retail, a position which he held until he
rejoined PepsiCo in 2002. Prior to joining PepsiCo in 1987, Mr. Johnston was with General Electric
Company in a variety of finance positions.
Ramon L. Laguarta has served as PepsiCo’s Chief Executive Officer and a director on the Board since
2018, and assumed the role of Chairman of the Board in 2019. Mr. Laguarta previously served as
President of PepsiCo from 2017 to 2018. Prior to serving as President, Mr. Laguarta held a variety of
positions of increasing responsibility in Europe, including as Commercial Vice President of PepsiCo
Europe from 2006 to 2008, PepsiCo Eastern Europe Region from 2008 to 2012, President, Developing &
Emerging Markets, PepsiCo Europe from 2012 to 2015, Chief Executive Officer, PepsiCo Europe in 2015,
and Chief Executive Officer, Europe Sub-Saharan Africa from 2015 until 2017. From 2002 to 2006, he
was General Manager for Iberia Snacks and Juices, and from 1999 to 2001 a General Manager for Greece
Snacks. Prior to joining PepsiCo in 1996 as a marketing vice president for Spain Snacks, Mr. Laguarta
worked for Chupa Chups, S.A., where he worked in several international assignments in Asia, Europe, the
Middle East and the United States. Mr. Laguarta has served as a director of Visa Inc. since 2019.
24
60859_10k_pgs_iii - 127.indd 24
60859_10k_pgs_iii - 127.indd 24
3/13/21 5:41 PM
3/13/21 5:41 PM
Silviu Popovici was appointed Chief Executive Officer, Europe, effective 2019. Prior to this role, he
served as Chief Executive Officer, Europe Sub-Saharan Africa in 2019 and as President, Europe Sub-
Saharan Africa from 2017 to early 2019. Mr. Popovici previously served as President, Russia, Ukraine and
CIS (The Commonwealth of Independent States) from 2015 to 2017, and as President, PepsiCo Russia
from 2013 to 2015. Mr. Popovici joined PepsiCo in 2011 following PepsiCo’s acquisition of Wimm-Bill-
Dann Foods OJSC (WBD) and served as General Manager, WBD Foods Division from 2011 until 2012.
Prior to the acquisition, Mr. Popovici held senior leadership roles at WBD, running its dairy business from
2008 to 2011 and its beverages business from 2006 to 2008.
Paula Santilli was appointed Chief Executive Officer, Latin America, effective 2019. Previously, she
served in various leadership positions at PepsiCo Mexico Foods, as President from 2017 to 2019, as Chief
Operating Officer from 2016 to 2017 and as Vice President and General Manager from 2011 to 2016.
Prior to joining PepsiCo Mexico Foods, she held a variety of roles, including leadership positions in
Beverages in Mexico, as well as in Foods and Snacks in the Latin America Southern Cone region
comprising Argentina, Uruguay and Paraguay. Ms. Santilli joined PepsiCo in 2001 following PepsiCo’s
acquisition of the Quaker Oats Company. At Quaker, she held various roles of increasing responsibility
from 1992 to 2001, including running the regional Quaker Foods and Gatorade businesses in Argentina,
Chile and Uruguay.
Ronald Schellekens was appointed Executive Vice President and Chief Human Resources Officer,
PepsiCo, in 2018. Prior to that, Mr. Schellekens served as Group HR Director of Vodafone Group
Services Limited from 2009 to 2018, where he was responsible for the Vodafone Human Resource
Management function, as well as health and safety, and property and real estate functions. Prior to joining
Vodafone, Mr. Schellekens was executive vice president, human resources for the global downstream
division of Royal Dutch Shell Plc. Prior to that, he worked for PepsiCo for nine years from 1994 to 2003
in various international, senior human resources roles, including assignments in Switzerland, Spain, South
Africa, the United Kingdom and Poland, where he was most recently responsible for the Europe, Middle
East & Africa region for PepsiCo Foods International. Prior to that, he served for nine years at AT&T Inc.
in Human Resources.
Kirk Tanner was appointed Chief Executive Officer, PepsiCo Beverages North America, effective 2019.
Prior to that, Mr. Tanner served as President and Chief Operating Officer, North America Beverages from
2016 to 2018, Chief Operating Officer, North America Beverages and President, Global Foodservice from
2015 to 2016, and President, Global Foodservice from 2014 to 2015. Mr. Tanner joined PepsiCo in 1992,
where he has worked in numerous domestic and international locations and in a variety of roles, including
Senior Vice President of Frito-Lay North America’s West region from 2009 to 2013, Vice President, Sales
of PepsiCo U.K. and Ireland from 2008 to 2009, Region Vice President of Frito-Lay North America’s
Mountain region from 2005 to 2008, Region Vice President of Frito-Lay North America’s Mid-America
region from 2002 to 2005 and Region Vice President of Frito-Lay North America’s California region from
2000 to 2002.
Eugene Willemsen was appointed Chief Executive Officer, Africa, Middle East, South Asia, effective
2019. Previously he served as Chief Executive Officer, Sub-Saharan Africa in 2019 and as Executive Vice
President, Global Categories and Franchise Management from 2015 to 2019. Before that, he led the global
Pepsi-Lipton Joint Venture as President from 2014 to 2015. Prior to such role, Mr. Willemsen served as
PepsiCo’s Senior Vice President and General Manager, South East Europe from 2011 to 2013, as Senior
Vice President and General Manager, Commercial, Europe from 2008 to 2011, as Senior Vice President
and General Manager, Northern Europe from 2006 to 2008, as Vice President, General Manager, Benelux
from 2000 to 2005 and as Commercial Director, Benelux for the snacks business from 1998 to 2000. Mr.
Willemsen joined PepsiCo in 1995 as a business development manager.
25
60859_10k_pgs_iii - 127.indd 25
60859_10k_pgs_iii - 127.indd 25
3/13/21 5:41 PM
3/13/21 5:41 PM
Steven Williams was appointed Chief Executive Officer, PepsiCo Foods North America, effective 2019.
Prior to this role, Mr. Williams served in leadership positions for Frito-Lay’s U.S. operations, as Senior
Vice President, Commercial Sales and Chief Commercial Officer from 2017 to 2019 and as General
Manager and Senior Vice President, East Division from 2016 to 2017. Prior to that, he served as General
Manager and Senior Vice President, Customer Management for PepsiCo’s global Walmart business from
2013 to 2016, as Sales Senior Vice President, North American Nutrition from 2011 to 2013 and as Vice
President, Sales, Central Division from 2009 to 2011. Mr. Williams joined PepsiCo in 2001 as a part of
PepsiCo’s acquisition of the Quaker Oats Company, which he joined in 1997 and has held leadership
positions of increasing responsibility in sales and customer management.
David Yawman has served as Executive Vice President, General Counsel and Corporate Secretary,
PepsiCo since 2017 and will continue in that role until March 1, 2021. From 2017 through 2020, Mr.
Yawman also oversaw PepsiCo’s Public Policy and Government Affairs department. He previously served
as Senior Vice President and Deputy General Counsel for PepsiCo and General Counsel for North
America and Corporate in 2017, as Senior Vice President, PepsiCo Deputy General Counsel, General
Counsel, North America Beverages and Quaker Foods North America from 2015 to 2017, as Senior Vice
President, PepsiCo Deputy General Counsel, General Counsel, PepsiCo America Beverages from 2014 to
2015, as Senior Vice President, PepsiCo Chief Compliance and Ethics Officer from 2012 to 2014, and as
Senior Vice President, General Counsel, Pepsi Beverages Company from 2010 to 2012. Prior to that, he
served five years in the law department of The Pepsi Bottling Group, Inc. (PBG) and, prior to that, was a
member of PepsiCo’s corporate law department from the time he joined PepsiCo in 1998 until 2003.
Executive officers are elected by our Board of Directors, and their terms of office continue until the next
annual meeting of the Board or until their successors are elected and have qualified. There are no family
relationships among our executive officers.
60859_10k_pgs_iii - 127.indd 26
60859_10k_pgs_iii - 127.indd 26
3/13/21 5:41 PM
3/13/21 5:41 PM
26
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
Stock Trading Symbol – PEP
Stock Exchange Listings – The Nasdaq Global Select Market is the principal market for our common
stock, which is also listed on the SIX Swiss Exchange.
Shareholders – As of February 4, 2021, there were approximately 105,807 shareholders of record of our
common stock.
Dividends – We have paid consecutive quarterly cash dividends since 1965. The declaration and payment
of future dividends are at the discretion of the Board of Directors. Dividends are usually declared in
February, May, July and November and paid at the end of March, June and September and the beginning
of January. On February 4, 2021, the Board of Directors declared a quarterly dividend of $1.0225 payable
March 31, 2021, to shareholders of record on March 5, 2021. For the remainder of 2021, the record dates
for these dividend payments are expected to be June 4, September 3 and December 3, 2021, subject to
approval of the Board of Directors. On February 11, 2021, we announced a 5% increase in our annualized
dividend to $4.30 per share from $4.09 per share, effective with the dividend expected to be paid in June
2021. We expect to return a total of approximately $5.9 billion to shareholders in 2021, comprised of
dividends of approximately $5.8 billion and share repurchases of approximately $100 million. We have
recently completed our share repurchase activity and do not expect to repurchase any additional shares for
the balance of 2021.
For information on securities authorized for issuance under our equity compensation plans, see “Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
A summary of our common stock repurchases (in millions, except average price per share) during the
fourth quarter of 2020 is set forth in the table below.
Issuer Purchases of Common Stock
Total
Number of
Shares
Repurchased(a)
Average
Price Paid
Per Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Number (or
Approximate
Dollar Value) of
Shares that May Yet Be
Purchased Under the
Plans or Programs
$
9,525
Period
9/5/2020
1.0
0.9 $
1.0 $
134.59
138.83
9/6/2020 - 10/3/2020
10/4/2020 - 10/31/2020
11/1/2020 - 11/28/2020
(137)
9,388
(125)
9,263
(120)
9,143
11/29/2020 - 12/26/2020
(59)
144.83
Total
9,084
139.04
(a) All shares were repurchased in open market transactions pursuant to the $15 billion repurchase program authorized by our
Board of Directors and publicly announced on February 13, 2018, which commenced on July 1, 2018 and will expire on
June 30, 2021. Shares repurchased under this program may be repurchased in open market transactions, in privately
negotiated transactions, in accelerated stock repurchase transactions or otherwise.
0.4
3.2 $
0.4 $
3.2 $
141.82
0.9 $
0.9
0.9
60859_10k_pgs_iii - 127.indd 27
60859_10k_pgs_iii - 127.indd 27
3/13/21 5:41 PM
3/13/21 5:41 PM
27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OUR BUSINESS
Executive Overview
Our Operations
Other Relationships
Our Business Risks
OUR FINANCIAL RESULTS
Results of Operations – Consolidated Review
Results of Operations – Division Review
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Results of Operations – Other Consolidated Results
Non-GAAP Measures
Items Affecting Comparability
Our Liquidity and Capital Resources
Return on Invested Capital
OUR CRITICAL ACCOUNTING POLICIES
Revenue Recognition
Goodwill and Other Intangible Assets
Income Tax Expense and Accruals
Pension and Retiree Medical Plans
Consolidated Statement of Income
Consolidated Statement of Comprehensive 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 and Impairment Charges
Note 4 – Intangible Assets
Note 5 – Income Taxes
Note 6 – Share-Based Compensation
Note 7 – Pension, Retiree Medical and Savings Plans
Note 8 – Debt Obligations
Note 9 – Financial Instruments
Note 10 – Net Income Attributable to PepsiCo per Common Share
Note 11 – Preferred Stock
Note 12 – Accumulated Other Comprehensive Loss Attributable to PepsiCo
Note 13 – Leases
Note 14 – Acquisitions and Divestitures
Note 15 – Supplemental Financial Information
Report of Independent Registered Public Accounting Firm
GLOSSARY
29
30
30
30
35
37
39
39
39
40
40
41
41
42
42
44
47
51
52
53
54
55
58
59
60
62
63
64
68
72
76
78
82
86
92
94
99
99
100
101
103
105
107
111
60859_10k_pgs_iii - 127.indd 28
60859_10k_pgs_iii - 127.indd 28
3/13/21 5:41 PM
3/13/21 5:41 PM
28
Our discussion and analysis is intended to help the reader understand our results of operations and
financial condition 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. Unless otherwise noted, tabular dollars are presented in millions, except per share amounts.
All per share amounts reflect common stock per share amounts, assume dilution unless otherwise noted,
and are based on unrounded amounts. Percentage changes are based on unrounded amounts.
Discussion in this Form 10-K includes results of operations and financial condition for 2020 and 2019
and year-over-year comparisons between 2020 and 2019. For discussion on results of operations and
financial condition pertaining to 2018 and year-over-year comparisons between 2019 and 2018, please
refer to “Management's Discussion and Analysis of Financial Condition and Results of Operations” in
Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 28, 2019.
OUR BUSINESS
Executive Overview
PepsiCo is a leading global food and beverage company with a complementary portfolio of brands,
including Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. Through our operations, authorized
bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety
of convenient beverages, foods and snacks, serving customers and consumers in more than 200 countries
.
and territories
Everything we do is driven by an approach we call Winning with Purpose. Winning with Purpose is our
guide for achieving accelerated, sustainable growth that includes our mission, to Create More Smiles with
Every Sip and Every Bite; our vision, to Be the Global Leader in Convenient Foods and Beverages by
Winning with Purpose; and The PepsiCo Way, seven behaviors that define our shared culture.
This approach proved prescient and powerful in 2020 as we faced a worsening climate crisis, renewed
calls for racial equality, and the first global pandemic in a century. Life in communities around the world
was transformed, and our business was tested like never before. First and foremost, we had to protect the
health of our associates, so that we could continue to serve our consumers, customers and communities. At
the same time, we had to secure our supply chain; ensure continuity in manufacturing, distribution and
sales; further strengthen our e-commerce and digital capabilities; reimagine our marketing; deliver
positive outcomes for people, our shareholders and the planet; and much more.
These challenges were in addition to the structural issues facing our Company, including: shifting
consumer preferences and behaviors; a highly competitive operating environment; a rapidly changing
retail landscape, including the growth in e-commerce; continued macroeconomic and political volatility;
and an evolving regulatory landscape.
To meet this once in a generation moment and ensure our Company’s long-term success, we will continue
to focus on becoming Faster, Stronger, and Better:
• We will become Faster by sustaining or improving growth and market share in our high return
foods and snacks businesses in North America; improving the profitability of our PBNA business
and capturing our fair share of category growth; accelerating our growth and presence in
international snacks and food while investing wisely in beverages to balance between growth and
returns; and making the necessary investments in our manufacturing capacity, go-to-market
systems and digital initiatives, such as improving our presence and scale in our e-commerce
business.
60859_10k_pgs_iii - 127.indd 29
60859_10k_pgs_iii - 127.indd 29
3/13/21 5:41 PM
3/13/21 5:41 PM
29
• We will become Stronger by renewing our focus on driving holistic cost management throughout
our organization to support our investments in advantaged capabilities, such as a highly agile and
flexible end-to-end value chain; more precision around revenue management; and investing in data
analytics that can provide more granularity around consumer insights. We also plan to continue
investing to further expand global business services into new capabilities, which will enable better
insight and support for our businesses at a lower cost. And we will remain focused on diversifying
our workforce and reinforcing The PepsiCo Way, where we emphasize that employees act like
owners to get things done quickly.
• We will become Better by further integrating purpose into our business strategy and brands by
becoming planet positive, strengthening our roots in our communities, and advancing social
justice. This includes supporting practices and technologies that improve farmer livelihoods and
agricultural resiliency; using precious resources such as water more efficiently; accelerating our
efforts to reduce greenhouse gas emissions throughout our value chain; driving progress toward a
world where plastics need never become waste; advancing respect for human rights; and investing
to promote shared prosperity in local communities where we live and work.
We believe these priorities will position our Company for long-term sustainable growth.
See also “Item 1A. Risk Factors” for further information about risks and uncertainties that the Company
faces.
Our Operations
See “Item 1. Business” for information on our divisions and a description of our distribution network,
ingredients and other supplies, brands and intellectual property rights, seasonality, customers, competition
and human capital. In addition, see Note 1 to our consolidated financial statements for financial
information about our divisions and geographic areas.
Other Relationships
Certain members of our Board of Directors also serve on the boards of certain vendors and customers.
These 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 addition, 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 such services.
Our Business Risks
COVID-19
Our global operations continue to expose us to risks associated with the COVID-19 pandemic, which
continues to result in challenging operating environments and has affected almost all of the more than 200
countries and territories in which our products are made, manufactured, distributed or sold. Travel bans
and restrictions, quarantines, curfews, restrictions on public gatherings, shelter in place and safer-at-home
orders, business shutdowns and closures continue in many of these markets. These measures have
impacted and will continue to impact us, our customers (including foodservice customers), consumers,
employees, bottlers, contract manufacturers, distributors, joint venture partners, suppliers and other third
parties with whom we do business, which may result in changes in demand for our products, increases in
operating costs (whether as a result of changes to our supply chain or increases in employee costs,
including expanded benefits and frontline incentives, costs associated with the provision of personal
protective equipment and increased sanitation, or otherwise), or adverse impacts to our supply chain
through reduced availability of air or other commercial transport, port closures or border restrictions, any
30
60859_10k_pgs_iii - 127.indd 30
60859_10k_pgs_iii - 127.indd 30
3/13/21 5:41 PM
3/13/21 5:41 PM
of which can impact our ability to make, manufacture, distribute and sell our products. In addition,
measures that impact our ability to access our offices (several of which remain closed), plants,
warehouses, distribution centers or other facilities, or that impact the ability of our customers (including
our foodservice customers), consumers, bottlers, contract manufacturers, distributors, joint venture
partners, suppliers and other third parties to do the same, may continue to impact the availability or
productivity of our and their employees, many of whom are not able to perform their job functions
remotely.
Public concern regarding the risk of contracting COVID-19 has impacted and may continue to impact
demand from consumers, including due to consumers not leaving their homes or leaving their homes less
often than they did prior to the start of the pandemic or otherwise shopping for and consuming food and
beverage products in a different manner than they historically have or because some of our consumers
have lower discretionary income due to unemployment or reduced or limited work as a result of measures
taken in response to the pandemic. Even as governmental restrictions are relaxed and economies
gradually, partially, or fully reopen in certain of these jurisdictions and markets, the ongoing economic
impacts and health concerns associated with the pandemic may continue to affect consumer behavior,
spending levels and shopping and consumption preferences. In addition, as a result of COVID-19, certain
jurisdictions, such as certain states in Mexico, have enacted or are considering enacting new or expanded
product labeling or warning requirements or limitations on the marketing or sale of certain of our products
as a result of ingredients or substances contained in such products. Changes in consumer purchasing and
consumption patterns may increase demand for our products in one quarter, resulting in decreased demand
for our products in subsequent quarters, or in a lower-margin sales channel resulting in potentially reduced
profit from sales of our products. We continue to see shifts in product and channel preferences as markets
move through varying stages of restrictions and re-opening at different times, including changes in at-
home consumption, in immediate consumption and away-from-home channels, such as convenience and
gas and foodservice. In addition, we continue to see a rapid increase in demand in the e-commerce and
online-to-offline channels and any failure to capitalize on this demand could adversely affect our ability to
maintain and grow sales or category share and erode our competitive position.
Any reduced demand for our products or change in consumer purchasing and consumption patterns, as
well as continued economic uncertainty, can adversely affect our customers’ and business partners’
financial condition, which can result in bankruptcy filings and/or an inability to pay for our products,
reduced or canceled orders of our products, continued or additional closing of restaurants, stores,
entertainment or sports complexes, schools or other venues in which our products are sold, or reduced
capacity at any of the foregoing, or our business partners’ inability to supply us with ingredients or other
items necessary for us to make, manufacture, distribute or sell our products. Such adverse changes in our
customers’ or business partners’ financial condition have also resulted and may continue to result in our
recording additional charges for our inability to recover or collect any accounts receivable, owned or
leased assets, including certain foodservice and vending and other equipment, or prepaid expenses. In
addition, continued economic uncertainty associated with the COVID-19 pandemic has resulted in
volatility in the global capital and credit markets which can impair our ability to access these markets on
terms commercially acceptable to us, or at all.
While we have developed and implemented and continue to develop and implement health and safety
protocols, business continuity plans and crisis management protocols in an effort to mitigate the negative
impact of COVID-19 to our employees and our business, the extent of the impact of the pandemic on our
business and financial results will continue to depend on numerous evolving factors that we are not able to
accurately predict and which will vary by jurisdiction and market, including the duration and scope of the
pandemic, the development and availability of effective treatments and vaccines, global economic
conditions during and after the pandemic, governmental actions that have been taken, or may be taken in
31
60859_10k_pgs_iii - 127.indd 31
60859_10k_pgs_iii - 127.indd 31
3/13/21 5:41 PM
3/13/21 5:41 PM
the future, in response to the pandemic and changes in consumer behavior in response to the pandemic,
some of which may be more than just temporary.
Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
The CARES Act was enacted on March 27, 2020 in the United States. The CARES Act and related notices
include several significant provisions, such as delaying certain payroll tax payments, mandatory transition
tax payments under the Tax Cuts and Jobs Act (TCJ Act) and estimated income tax payments. The
CARES Act did not have a material impact on our financial results in 2020, including on our annual
estimated effective tax rate or on our liquidity. We will continue to monitor and assess the impact similar
legislation in other countries may have on our business and financial results.
Refer to the COVID-19 discussion above and Note 5 to our consolidated financial statements for further
information.
Risks Associated with International Operations
We are subject to risks in the normal course of business. During the periods presented in this report,
certain jurisdictions in which our products are made, manufactured, distributed or sold operated in a
challenging environment, experiencing unstable economic, political and social conditions, civil unrest,
natural disasters, debt and credit issues and currency controls or fluctuations. We continue to monitor the
economic, operating and political environment in these markets closely and to identify actions to
potentially mitigate any unfavorable impacts on our future results.
Imposition of Taxes and Regulations on our Products
Certain jurisdictions in which our products are made, manufactured, distributed or sold have either
imposed, or are considering imposing, new or increased taxes or regulations on the manufacture,
distribution or sale of our products or their packaging, ingredients or substances contained in, or attributes
of, our products or their packaging, commodities used in the production of our products or their packaging
or the recyclability or recoverability of our packaging. These taxes and regulations vary in scope and form.
For example, some taxes apply to all beverages, including non-caloric beverages, while others apply only
to beverages with a caloric sweetener (e.g., sugar). In addition, some regulations apply to all products
using certain types of packaging (e.g., plastic), while others are designed to increase the sustainability of
packaging, encourage waste reduction and increased recycling rates or facilitate the waste management
process or restrict the sale of products in certain packaging.
We sell a wide variety of beverages, foods and snacks in more than 200 countries and territories and the
profile of the products we sell, the amount of revenue attributable to such products and the type of
packaging used vary by jurisdiction. Because of this, we cannot predict the scope or form potential taxes,
regulations or other limitations on our products or their packaging may take, and therefore cannot predict
the impact of such taxes, regulations or limitations on our financial results. In addition, taxes, regulations
and limitations may impact us and our competitors differently. We continue to monitor existing and
proposed taxes and regulations in the jurisdictions in which our products are made, manufactured,
distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if
any, of such taxes, regulations or limitations, including advocating alternative measures with respect to the
imposition, form and scope of any such taxes, regulations or limitations.
Tax Cuts and Jobs Act
During the fourth quarter of 2017, the TCJ Act was enacted in the United States. The related provisional
measurement period allowed by the SEC ended in the fourth quarter of 2018. While our accounting for the
recorded impact of the TCJ Act was deemed to be complete, additional guidance issued by the IRS
impacted our recorded amounts after December 29, 2018. For further information, see “Our Liquidity and
32
60859_10k_pgs_iii - 127.indd 32
60859_10k_pgs_iii - 127.indd 32
3/13/21 5:41 PM
3/13/21 5:41 PM
Capital Resources,” “Our Critical Accounting Policies” and Note 5 to our consolidated financial
statements.
Other Tax Matters
On May 19, 2019, a public referendum held in Switzerland passed the Federal Act on Tax Reform and
AHV Financing (TRAF), effective January 1, 2020. The enactment of certain provisions of the TRAF
resulted in adjustments to our deferred taxes. During 2020, we recorded a net tax benefit of $72 million
related to the adoption of the TRAF in the Swiss Canton of Bern. During 2019, we recorded net tax
expense of $24 million related to the impact of the TRAF. See “Our Critical Accounting Policies” and
Note 5 to our consolidated financial statements for further information.
Retail Landscape
Our industry continues to be affected by disruption of the retail landscape, including the rapid growth in
sales through e-commerce websites and mobile commerce applications, including through subscription
services, the integration of physical and digital operations among retailers and the international expansion
of hard discounters. We have seen and expect to continue to see a further shift to e-commerce, online-to-
offline, and other online purchasing by consumers, including as a result of the COVID-19 pandemic. We
continue to monitor changes in the retail landscape and seek to identify actions we may take to build our
global e-commerce and digital capabilities, such as expanding our direct-to-consumer business, and
distribute our products effectively through all existing and emerging channels of trade and potentially
mitigate any unfavorable impacts on our future results.
See also “Item 1A. Risk Factors,” “Executive Overview” above and “Market Risks” below for more
information about these risks and the actions we have taken to address key challenges.
Risk Management Framework
The achievement of our strategic and operating objectives involves taking risks and that those risks may
evolve over time. To identify, assess, prioritize, address, manage, monitor and communicate these risks
across the Company’s operations, we leverage an integrated risk management framework. This framework
includes the following:
•
PepsiCo’s Board of Directors has oversight responsibility for PepsiCo’s integrated risk
management framework. One of the Board’s primary responsibilities is overseeing and interacting
with senior management with respect to key aspects of the Company’s business, including risk
assessment and risk mitigation of the Company’s top risks. The Board receives updates on key
risks throughout the year, including risks related to cybersecurity. During 2020, in addition to
COVID-19 discussions as part of risk updates to the Board and the relevant Committees, the
Board was provided with updates on COVID-19’s impact to our business, financial condition and
operations through memos, teleconferences or other appropriate means of communication. In
addition, the Board has tasked designated Committees of the Board with oversight of certain
categories of risk management, and the Committees report to the Board regularly on these
matters.
◦ The Audit Committee of the Board reviews and assesses the guidelines and policies
governing PepsiCo’s risk management and oversight processes, and assists the Board’s
oversight of financial, compliance and employee safety risks facing PepsiCo;
◦ The Compensation Committee of the Board reviews PepsiCo’s employee compensation
policies and practices to assess whether such policies and practices could lead to
unnecessary risk-taking behavior;
33
60859_10k_pgs_iii - 127.indd 33
60859_10k_pgs_iii - 127.indd 33
3/13/21 5:41 PM
3/13/21 5:41 PM
◦ The Nominating and Corporate Governance Committee assists the Board in its oversight
of the Company’s governance structure and other corporate governance matters, including
succession planning; and
◦ The Sustainability, Diversity and Public Policy Committee of the Board assists the Board
in its oversight of PepsiCo’s policies, programs and related risks that concern key
sustainability, diversity and inclusion, and public policy matters.
• The PepsiCo Risk Committee (PRC), which is comprised of a cross-functional, geographically
diverse, senior management group, including PepsiCo’s Chairman of the Board and Chief
Executive Officer, meets regularly to identify, assess, prioritize and address top strategic,
financial, operating, compliance, safety, reputational and other risks. The PRC is also responsible
for reporting progress on our risk mitigation efforts to the Board;
• Division and key country risk committees, comprised of cross-functional senior management
teams, meet regularly to identify, assess, prioritize and address division and country-specific
business risks;
•
•
•
PepsiCo’s Risk Management Office, which manages the overall risk management process,
provides ongoing guidance, tools and analytical support to the PRC and the division and key
country risk committees, identifies and assesses potential risks and facilitates ongoing
communication between the parties, as well as with PepsiCo’s Board of Directors, the Audit
Committee of the Board and other Committees of the Board;
PepsiCo’s Corporate Audit Department evaluates the ongoing effectiveness of our key internal
controls through periodic audit and review procedures; and
PepsiCo’s Compliance & Ethics and Law Departments lead and coordinate our compliance
policies and practices.
Market Risks
We are exposed to market risks arising from adverse changes in:
•
•
•
commodity prices, affecting the cost of our raw materials and energy;
foreign exchange rates and currency restrictions; and
interest rates.
In the normal course of business, we manage commodity price, foreign exchange and interest rate risks
through a variety of strategies, including productivity initiatives, global purchasing programs and hedging.
Ongoing productivity initiatives involve the identification and effective implementation of meaningful
cost-saving opportunities or efficiencies, including the use of derivatives. Our global purchasing programs
include fixed-price contracts and purchase orders and pricing agreements. See “Item 1A. Risk Factors” for
further discussion of our market risks, and see “Our Liquidity and Capital Resources” for further
information on our non-cancelable purchasing commitments.
The fair value of our derivatives fluctuates based on market rates and prices. The sensitivity of our
derivatives to these market fluctuations is discussed below. See Note 9 to our consolidated financial
statements for further discussion of these derivatives and our hedging policies. See “Our Critical
Accounting Policies” for a discussion of the exposure of our pension and retiree medical plan assets and
liabilities to risks related to market fluctuations.
Inflationary, deflationary and recessionary conditions impacting these market risks also impact the
demand for and pricing of our products. See “Item 1A. Risk Factors” for further discussion.
34
60859_10k_pgs_iii - 127.indd 34
60859_10k_pgs_iii - 127.indd 34
3/13/21 5:41 PM
3/13/21 5:41 PM
Commodity Prices
Our commodity derivatives had a total notional value of $1.1 billion as of December 26, 2020 and
December 28, 2019. At the end of 2020, the potential change in fair value of commodity derivative
instruments, assuming a 10% decrease in the underlying commodity price, would have decreased our net
unrealized gains in 2020 by $121 million, which would generally be offset by a reduction in the cost of the
underlying commodity purchases.
Foreign Exchange
Our operations outside of the United States generated 42% of our consolidated net revenue in 2020, with
Mexico, Russia, Canada, the United Kingdom, China and South Africa, collectively, comprising
approximately 21% of our consolidated net revenue in 2020. As a result, we are exposed to foreign
exchange risks in the international markets in which our products are made, manufactured, distributed or
sold. Additionally, we are exposed to foreign exchange risk from net investments in foreign subsidiaries,
foreign currency purchases, foreign currency assets and liabilities created in the normal course of business.
During 2020, unfavorable foreign exchange reduced net revenue growth by 2 percentage points, primarily
due to declines in the Mexican peso, Russian ruble and Brazilian real. Currency declines against the U.S.
dollar which are not offset could adversely impact our future financial results.
In addition, volatile economic, political and social conditions and civil unrest in certain markets in which
our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, Mexico,
the Middle East, Russia and Turkey, and currency controls or fluctuations in certain of these international
markets, continue to, and the threat or imposition of new or increased tariffs or sanctions or other
impositions in or related to these international markets may, result in challenging operating environments.
We also continue to monitor the economic and political developments related to the United Kingdom’s
withdrawal from the European Union (Brexit), including the effects of the post-Brexit trade deal entered
into between the United Kingdom and the European Union in December 2020, as well as the economic,
operating and political environment in Russia and the potential impact for the Europe segment and our
other businesses.
Our foreign currency derivatives had a total notional value of $1.9 billion as of December 26, 2020 and
December 28, 2019. At the end of 2020, we estimate that an unfavorable 10% change in the underlying
exchange rates would have increased our net unrealized losses in 2020 by $175 million, which would be
significantly offset by an inverse change in the fair value of the underlying exposure.
The total notional amount of our debt instruments designated as net investment hedges was $2.7 billion as
of December 26, 2020 and $2.5 billion as of December 28, 2019.
Interest Rates
Our interest rate derivatives had a total notional value of $3.0 billion as of December 26, 2020 and $5.0
billion as of December 28, 2019. Assuming year-end 2020 investment levels and variable rate debt, a 1-
percentage-point increase in interest rates would have decreased our net interest expense in 2020 by $80
million due to higher cash and cash equivalents and short-term investments levels, as compared with our
variable rate debt.
OUR FINANCIAL RESULTS
Results of Operations — Consolidated Review
Volume
Physical or unit volume is one of the key metrics management uses internally to make operating and
strategic decisions, including the preparation of our annual operating plan and the evaluation of our
business performance. We believe volume provides additional information to facilitate the comparison of
35
60859_10k_pgs_iii - 127.indd 35
60859_10k_pgs_iii - 127.indd 35
3/13/21 5:41 PM
3/13/21 5:41 PM
our historical operating performance and underlying trends, and provides additional transparency on how
we evaluate our business because it measures demand for our products at the consumer level.
Beverage volume includes volume of concentrate sold to independent bottlers and volume of finished
products bearing company-owned or licensed trademarks and allied brand products and joint venture
trademarks sold by company-owned bottling operations, including by our noncontrolled affiliates.
Concentrate volume sold to independent bottlers is reported in concentrate shipments and equivalents
(CSE), whereas finished beverage product volume is reported in bottler case sales (BCS). Both CSE and
BCS convert all beverage volume to an 8-ounce-case metric. Typically, CSE and BCS are not equal in any
given period due to seasonality, timing of product launches, product mix, bottler inventory practices and
other factors. While our net revenue is not entirely based on BCS volume due to the independent bottlers
in our supply chain, we believe that BCS is a better measure of the consumption of our beverage products.
PBNA, LatAm, Europe, AMESA and APAC, either independently or in conjunction with third parties,
make, market, distribute and sell ready-to-drink tea products through a joint venture with Unilever (under
the Lipton brand name), and PBNA, either independently or in conjunction with third parties, makes,
markets, distributes and sells ready-to-drink coffee products through a joint venture with Starbucks. In
addition, APAC licenses the Tropicana brand for use in China on co-branded juice products in connection
with a strategic alliance with Tingyi.
Food and snack volume includes volume sold by our subsidiaries and noncontrolled affiliates of snack
products bearing company-owned or licensed trademarks. Internationally, we measure food and snack
product volume in kilograms, while in North America we measure food and snack product volume in
pounds. FLNA makes, markets, distributes and sells Sabra refrigerated dips and spreads through a joint
venture with Strauss Group.
Consolidated Net Revenue and Operating Profit
Net revenue
Operating profit
Operating profit margin
2020
$ 70,372
$ 10,080
2019
$ 67,161
$ 10,291
Change
5 %
(2) %
14.3 %
15.3 % (1.0)
See “Results of Operations – Division Review” for a tabular presentation and discussion of key drivers of
net revenue.
Operating profit decreased 2% and operating profit margin declined 1.0 percentage point. Operating profit
performance was primarily driven by certain operating cost increases, partially offset by net revenue
growth and productivity savings.
The charges taken as a result of the COVID-19 pandemic negatively impacted operating profit
performance by 7 percentage points. See Note 1 to our consolidated financial statements for further
information. Additionally, higher inventory fair value adjustments and merger and integration charges
included in “Items Affecting Comparability” and unfavorable foreign exchange each negatively impacted
operating profit performance by 2 percentage points.
60859_10k_pgs_iii - 127.indd 36
60859_10k_pgs_iii - 127.indd 36
3/13/21 5:41 PM
3/13/21 5:41 PM
36
Results of Operations — Division Review
See “Non-GAAP Measures” and “Items Affecting Comparability” for a discussion of items to consider
when evaluating our results and related information regarding measures not in accordance with U.S.
Generally Accepted Accounting Principles (GAAP).
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, and “net pricing” reflects the year-over-year
combined impact of list price changes, weight changes per package, discounts and allowances.
Additionally, “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.
Net Revenue and Organic Revenue Growth
Organic revenue growth is a non-GAAP financial measure. For further information on this measure, see
“Non-GAAP Measures.”
2020
Impact of
Impact of
Reported
% Change,
GAAP
Measure
Foreign
exchange
translation
Acquisitions
and
divestitures
Organic
% Change,
Non-GAAP
Measure(a)
Organic
Volume(b)
Effective net
pricing
7 %
10 %
4 %
(8) %
2 %
25 %
18 %
5 %
—
—
—
11
4
1
—
2
(1)
—
(2)
—
—
(25)
(10)
(3)
6 %
11 %
2 %
3 %
6 %
1 %
8 %
4 %
3
10
(1)
—
6
1
5
2
3
—
3
3
—
—
3
2
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Total
(a) Amounts may not sum due to rounding.
(b) Excludes the impact of acquisitions and divestitures. In certain instances, the impact of organic volume growth on net revenue growth
differs from the unit volume growth disclosed in the following divisional discussions due to product mix, 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 franchise-owned beverage businesses, is based on CSE.
60859_10k_pgs_iii - 127.indd 37
60859_10k_pgs_iii - 127.indd 37
3/13/21 5:41 PM
3/13/21 5:41 PM
37
Operating Profit, Operating Profit Adjusted for Items Affecting Comparability and Operating Profit
Growth Adjusted for Items Affecting Comparability on a Constant Currency Basis
Operating profit adjusted for items affecting comparability and operating profit growth adjusted for items
affecting comparability on a constant currency basis are both non-GAAP financial measures. For further
information on these measures see “Non-GAAP Measures” and “Items Affecting Comparability.”
Operating Profit and Operating Profit Adjusted for Items Affecting Comparability
2020
Items Affecting Comparability(a)
Reported,
GAAP
Measure(b)
Mark-to-
market
net
impact
Restructuring
and
impairment
charges
Inventory fair
value
adjustments
and merger
and
integration
charges
Core,
Non-GAAP
Measure(b)
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Corporate unallocated expenses
Total
$
$
5,340 $
669
1,937
1,033
1,353
600
590
(1,442)
10,080 $
— $
—
—
—
—
—
—
(73)
(73) $
83 $
5
47
31
48
14
5
36
269 $
29 $
—
66
—
—
173
7
(20)
255 $
5,452
674
2,050
1,064
1,401
787
602
(1,499)
10,531
Reported,
GAAP Measure
$
2019
Items Affecting Comparability(a)
Mark-to-market
net impact
Restructuring and
impairment
charges
Inventory fair
value adjustments
and merger and
integration
charges
Core,
Non-GAAP
Measure
5,258 $
544
2,179
1,141
1,327
671
477
(1,306)
10,291 $
— $
—
—
—
—
—
—
(112)
(112) $
22 $
2
51
62
99
38
47
47
368 $
— $
—
—
—
46
7
—
2
55 $
5,280
546
2,230
1,203
1,472
716
524
(1,369)
10,602
$
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Corporate unallocated expenses
Total
See “Items Affecting Comparability.”
(a)
(b) Operating profit for 2020 includes the charges taken as a result of the COVID-19 pandemic. See Note 1 to our consolidated financial statements for
further information.
60859_10k_pgs_iii - 127.indd 38
60859_10k_pgs_iii - 127.indd 38
3/13/21 5:41 PM
3/13/21 5:41 PM
38
Operating Profit Growth and Operating Profit Growth Adjusted for Items Affecting Comparability on a
Constant Currency Basis
Impact of Items Affecting Comparability(a)
Impact of
2020
Reported
% Change,
GAAP
Measure
Mark-to-
market
net
impact
Restructuring
and
impairment
charges
Inventory fair
value
adjustments
and merger
and
integration
charges
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Corporate unallocated
expenses
Total
2 %
23 %
(11) %
(10) %
2 %
(11) %
24 %
10 %
(2) %
—
—
—
—
—
—
—
(6)
—
See “Items Affecting Comparability” for further information.
(a)
(b) Amounts may not sum due to rounding.
FLNA
1
—
—
(2)
(4)
(3.5)
(10)
2
(1)
1
—
3
—
(3)
24
2
3.5
2
Core
% Change,
Non-GAAP
Measure(b)
3 %
24 %
(8) %
(12) %
(5) %
10 %
15 %
10 %
(1) %
Foreign
exchange
translation
—
—
—
11
4
—
1
—
2
Core
Constant
Currency
% Change,
Non-GAAP
Measure(b)
3 %
24 %
(8) %
— %
(0.5) %
10 %
16 %
10 %
1 %
Net revenue grew 7% and unit volume grew 3%. The net revenue growth was driven by effective net
pricing and organic volume growth. The unit volume growth primarily reflects double-digit growth in
variety packs and dips, and high-single-digit growth in trademark Tostitos and Ruffles, partially offset by
a double-digit decline in nuts and seeds.
Operating profit increased 2%, primarily reflecting the net revenue growth and productivity savings,
partially offset by certain operating cost increases. Additionally, the charges taken as a result of the
COVID-19 pandemic reduced operating profit growth by 4 percentage points.
QFNA
Net revenue and unit volume each increased 10%. The net revenue growth reflects organic volume growth
and favorable pricing, partially offset by unfavorable mix. The unit volume growth was driven by double-
digit growth in oatmeal and pancake syrup and mix and high-single-digit growth in ready-to-eat cereals.
The COVID-19 pandemic drove an increase in consumer demand, which had a positive impact on both net
revenue and unit volume growth.
Operating profit grew 23%, reflecting the net revenue growth and productivity savings, partially offset by
certain operating cost increases. Additionally, the charges taken as a result of the COVID-19 pandemic
reduced operating profit growth by 3 percentage points.
PBNA
Net revenue increased 4%, primarily driven by effective net pricing, partially offset by a decrease in
organic volume. Unit volume decreased 1%, driven by a 5% decrease in CSD volume, largely offset by a
4% increase in non-carbonated beverage (NCB) volume. The NCB volume increase primarily reflected a
high-single-digit increase in Gatorade sports drinks, a double-digit increase in our energy portfolio,
primarily due to acquisitions, and a low-single-digit increase in our overall water portfolio, partially offset
by a mid-single-digit decrease in our juice and juice drinks portfolio. In addition, acquisitions contributed
2 percentage points to net revenue growth.
39
60859_10k_pgs_iii - 127.indd 39
60859_10k_pgs_iii - 127.indd 39
3/13/21 5:41 PM
3/13/21 5:41 PM
Operating profit decreased 11%, reflecting certain operating cost increases, including incremental
information technology costs, a 14-percentage-point impact of the charges taken as a result of the
COVID-19 pandemic and the organic volume decrease. These impacts were partially offset by the
effective net pricing, productivity savings, lower advertising and marketing expenses, and a 4-percentage-
point impact of lower commodity costs. Prior-year gains associated with sales of assets negatively
impacted operating profit performance by 2 percentage points. Additionally, impairment charges
associated with a coconut water brand negatively impacted operating profit performance by 2 percentage
points. Acquisitions positively contributed 4 percentage points to operating profit performance.
In the fourth quarter of 2020, we received notice of termination without cause from Vital Pharmaceuticals,
Inc., which would end our distribution rights of Bang Energy drinks, effective October 24, 2023.
LatAm
Net revenue decreased 8%, primarily reflecting an 11-percentage-point impact of unfavorable foreign
exchange, partially offset by effective net pricing.
Snacks unit volume grew slightly, primarily reflecting low-single-digit growth in Brazil, partially offset by
a slight decline in Mexico.
Beverage unit volume declined 1%, primarily reflecting a high-single-digit decline in Argentina, a mid-
single-digit decline in Honduras and a low-single-digit decline in Guatemala, partially offset by double-
digit growth in Brazil, low-single-digit growth in Mexico and mid-single-digit growth in Chile. The
COVID-19 pandemic contributed to a decrease in consumer demand, which had a negative impact on
beverage unit volume performance.
Operating profit decreased 10%, primarily reflecting certain operating cost increases and a 9-percentage-
point impact of higher commodity costs due to transaction-related foreign exchange. These impacts were
partially offset by productivity savings and the effective net pricing. Additionally, unfavorable foreign
exchange and certain charges taken as a result of the COVID-19 pandemic negatively impacted operating
profit performance by 11 percentage points and 8 percentage points, respectively.
Europe
Net revenue increased 2%, reflecting organic volume growth, partially offset by a 4-percentage-point
impact of unfavorable foreign exchange.
Snacks unit volume grew 4%, primarily reflecting double-digit growth in Turkey, high-single-digit growth
in the United Kingdom and France and mid-single-digit growth in the Netherlands, partially offset by a
low-single-digit decline in Spain. Additionally, Russia and Poland each experienced low-single-digit
growth.
Beverage unit volume grew 11%, primarily reflecting double-digit growth in Germany and France,
partially offset by a mid-single-digit decline in Poland and a low-single-digit decline in Turkey.
Additionally, Russia experienced low-single-digit growth and the United Kingdom experienced mid-
single-digit growth.
Operating profit increased 2%, primarily reflecting the organic volume growth, productivity savings, a 4-
percentage-point impact of lower restructuring and impairment charges, a 3-percentage-point impact of
the prior-year inventory fair value adjustments and merger and integration charges primarily associated
with our acquisition of SodaStream International Ltd. (SodaStream) and a 2-percentage-point impact of a
gain on an asset sale. These impacts were partially offset by certain operating cost increases and a 2-
percentage-point impact of higher commodity costs due to transaction-related foreign exchange.
Additionally, the charges taken as a result of the COVID-19 pandemic and unfavorable foreign exchange
reduced operating profit growth by 6 percentage points and 4 percentage points, respectively.
40
60859_10k_pgs_iii - 127.indd 40
60859_10k_pgs_iii - 127.indd 40
3/13/21 5:41 PM
3/13/21 5:41 PM
AMESA
Net revenue increased 25%, primarily reflecting a 28-percentage-point impact of the Pioneer Foods
acquisition, partially offset by a 3-percentage-point impact of the prior-year refranchising of a portion of
our beverage business in India. Net revenue was also negatively impacted by the COVID-19 pandemic.
Snacks unit volume grew 199%, primarily reflecting a 195-percentage-point impact of the Pioneer Foods
acquisition, double-digit growth in Pakistan and mid-single-digit growth in the Middle East. Additionally,
India and South Africa (excluding our Pioneer Foods acquisition) each experienced low-single-digit
growth.
Beverage unit volume declined 5%, primarily reflecting a double-digit decline in India and a high-single-
digit decline in Pakistan, partially offset by slight growth in the Middle East and low-single-digit growth
in Nigeria. Our Pioneer Foods acquisition positively contributed 2 percentage points to beverage unit
volume performance. The COVID-19 pandemic contributed to a decrease in consumer demand, which had
a negative impact on beverage unit volume performance.
Operating profit decreased 11%, primarily reflecting certain operating cost increases, partially offset by
productivity savings, lower advertising and marketing expenses and a 3-percentage-point impact of lower
commodity costs. The inventory fair value adjustments and merger and integration charges associated with
our Pioneer Foods acquisition negatively impacted operating profit performance by 24 percentage points
and were partially offset by Pioneer Foods’ 9-percentage-point positive contribution to operating profit
performance. Additionally, the charges taken as a result of the COVID-19 pandemic negatively impacted
operating profit performance by 5 percentage points.
APAC
Net revenue increased 18%, primarily reflecting a 10-percentage-point impact of our Be & Cheery
acquisition, organic volume growth and effective net pricing.
Snacks unit volume grew 17%, primarily reflecting a 10-percentage-point impact of our Be & Cheery
acquisition and double-digit growth in Indonesia, partially offset by a low-single-digit decline in Thailand.
Additionally, China (excluding our Be & Cheery acquisition) and Australia each experienced mid-single-
digit growth and Taiwan experienced low-single-digit growth.
Beverage unit volume grew 1%, primarily reflecting high-single-digit growth in China, partially offset by
a double-digit decline in the Philippines, a mid-single-digit decline in Vietnam and a low-single-digit
decline in Thailand. The COVID-19 pandemic contributed to a decrease in consumer demand, which had
a negative impact on beverage unit volume growth.
Operating profit increased 24%, primarily reflecting the net revenue growth, productivity savings and a
10-percentage-point impact of lower restructuring and impairment charges, partially offset by certain
operating cost increases and higher advertising and marketing expenses.
60859_10k_pgs_iii - 127.indd 41
60859_10k_pgs_iii - 127.indd 41
3/13/21 5:41 PM
3/13/21 5:41 PM
41
Other Consolidated Results
Other pension and retiree medical benefits income/(expense)
Net interest expense and other
Annual tax rate
Net income attributable to PepsiCo (a)
(3) %
Net income attributable to PepsiCo per common share – diluted (a)
(2) %
(a) The charges taken as a result of the COVID-19 pandemic negatively impacted both net income attributable to PepsiCo
performance and net income attributable to PepsiCo per common share performance by 8 percentage points. See Note 1 to
our consolidated financial statements for further information.
(44)
$
$ (935)
$ 7,314
$ 5.20
$ 7,120
$ 5.12
20.9 %
21.0 %
2020
$ 117
$ (1,128)
2019
Change
$ 161
$ (193)
Other pension and retiree medical benefits income increased $161 million, primarily reflecting the
recognition of fixed income gains on plan assets, the impact of discretionary plan contributions and higher
prior-year settlement losses, partially offset by the decrease in discount rates.
Net interest expense and other increased $193 million, primarily due to higher average debt balances,
lower interest rates on cash, as well as lower gains on the market value of investments used to
economically hedge a portion of our deferred compensation liability. These impacts were partially offset
by lower interest rates on debt and higher average cash balances.
The reported tax rate decreased 0.1 percentage points, primarily reflecting the net tax benefits related to
the TRAF, partially offset by an increase in reserves for uncertain tax positions in foreign jurisdictions.
Non-GAAP Measures
Certain financial measures contained in this Form 10-K adjust for the impact of specified items and are
not in accordance with U.S. GAAP. We use non-GAAP financial measures internally to make operating
and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall
business performance and as a factor in determining compensation for certain employees. We believe
presenting non-GAAP financial measures in this Form 10-K provides additional information to facilitate
comparison of our historical operating results and trends in our underlying operating results and provides
additional transparency on how we evaluate our business. We also believe presenting these measures in
this Form 10-K allows investors to view our performance using the same measures that we use in
evaluating our financial and business performance and trends.
We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that
may be significant or that could affect an understanding of our ongoing financial and business
performance or trends. Examples of items for which we may make adjustments include: amounts related
to mark-to-market gains or losses (non-cash); charges related to restructuring plans; amounts associated
with mergers, acquisitions, divestitures and other structural changes; pension and retiree medical related
items; charges or adjustments related to the enactment of new laws, rules or regulations, such as
significant tax law changes; amounts related to the resolution of tax positions; tax benefits related to
reorganizations of our operations; debt redemptions, cash tender or exchange offers; asset impairments
(non-cash); and remeasurements of net monetary assets. See below and “Items Affecting Comparability”
for a description of adjustments to our U.S. GAAP financial measures in this Form 10-K.
Non-GAAP information should be considered as supplemental in nature and is not meant to be considered
in isolation or as a substitute for the related financial information prepared in accordance with U.S.
GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar
non-GAAP measures presented by other companies.
60859_10k_pgs_iii - 127.indd 42
60859_10k_pgs_iii - 127.indd 42
3/13/21 5:41 PM
3/13/21 5:41 PM
42
The following non-GAAP financial measures contained in this Form 10-K are discussed below:
Cost of sales, gross profit, selling, general and administrative expenses, other pension and retiree medical
benefits income/expense, provision for income taxes, net income attributable to noncontrolling interests
and net income attributable to PepsiCo, each adjusted for items affecting comparability, operating profit
and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting
comparability, and the corresponding constant currency growth rates
These measures exclude the net impact of mark-to-market gains and losses on centrally managed
commodity derivatives that do not qualify for hedge accounting, restructuring and impairment charges
related to our 2019 Multi-Year Productivity Plan (2019 Productivity Plan) and our 2014 Multi-Year
Productivity Plan (2014 Productivity Plan), inventory fair value adjustments and merger and integration
charges associated with our acquisitions, pension-related settlement charges and net tax related to the TCJ
Act (see “Items Affecting Comparability” for a detailed description of each of these items). We also
evaluate performance on operating profit, adjusted for items affecting comparability, and net income
attributable to PepsiCo per common share – diluted, adjusted for items affecting comparability, each on a
constant currency basis, which measure our 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. We believe these measures provide useful
information in evaluating the results of our business because they exclude items that we believe are not
indicative of our ongoing performance.
Organic revenue growth
We define organic revenue growth as net revenue growth adjusted for the impact of foreign exchange
translation, as well as the impact from acquisitions, divestitures and other structural changes. We believe
organic revenue growth provides useful information in evaluating the results of our business because it
excludes items that we believe are not indicative of ongoing performance or that we believe impact
comparability with the prior year.
See “Net Revenue and Organic Revenue Growth” in “Results of Operations – Division Review” for
further information.
Free cash flow
We define free cash flow as net cash provided by operating activities less capital spending, plus sales of
property, plant and equipment. Since net capital spending is essential to our product innovation initiatives
and maintaining 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
operating activities. Free cash flow is used by us primarily for acquisitions and financing activities,
including debt repayments, dividends and share repurchases. Free cash flow is not a measure of cash
available for discretionary expenditures since we have certain non-discretionary obligations such as debt
service that are not deducted from the measure.
See “Free Cash Flow” in “Our Liquidity and Capital Resources” for further information.
60859_10k_pgs_iii - 127.indd 43
60859_10k_pgs_iii - 127.indd 43
3/13/21 5:41 PM
3/13/21 5:41 PM
43
Return on invested capital (ROIC) and net ROIC, excluding items affecting comparability
We define ROIC as net income attributable to PepsiCo plus interest expense after-tax divided by the sum
of quarterly average debt obligations and quarterly average common shareholders’ equity. Although ROIC
is a common financial metric, numerous methods exist for calculating ROIC. Accordingly, the method
used by management to calculate ROIC may differ from the methods other companies use to calculate
their ROIC.
We believe this metric serves as a measure of how well we use our capital to generate returns. In addition,
we use net ROIC, excluding items affecting comparability, to compare our performance over various
reporting periods on a consistent basis because it removes from our operating results the impact of items
that we believe are not indicative of our ongoing performance and reflects how management evaluates our
operating results and trends. We define net ROIC, excluding items affecting comparability, as ROIC,
adjusted for quarterly average cash, cash equivalents and short-term investments, after-tax interest income
and items affecting comparability. We believe the calculation of ROIC and net ROIC, excluding items
affecting comparability, provides useful information to investors and is an additional relevant comparison
of our performance to consider when evaluating our capital allocation efficiency.
See “Return on Invested Capital” in “Our Liquidity and Capital Resources” for further information.
Items Affecting Comparability
Our reported financial results in this Form 10-K are impacted by the following items in each of the
following years:
2020
Cost of
sales
Gross profit
Selling,
general and
administrative
expenses
Operating
profit
Other
pension
and
retiree
medical
benefits
income
Provision for
income
taxes(a)
Net income
attributable
to PepsiCo
7,120
1,894 $
Reported, GAAP Measure
Items Affecting Comparability
$ 31,797 $
38,575 $
28,495 $
10,080 $
117 $
Mark-to-market net impact
Restructuring and impairment charges
Inventory fair value adjustments and
merger and integration charges
Pension-related settlement charge
64
(30)
(32)
—
Core, Non-GAAP Measure
$ 31,799 $
(64)
30
9
(239)
(73)
269
32
—
38,573 $
(223)
—
28,042 $
255
—
10,531 $
—
20
—
205
342 $
(15)
58
18
47
2,002 $
(58)
231
237
158
7,688
Cost of
sales
Gross
profit
Selling,
general and
administrative
expenses
Operating
profit
2019
Other
pension and
retiree
medical
benefits
(expense)/
income
Provision for
income
taxes(a)
Net income
attributable to
noncontrolling
interests
Net income
attributable
to PepsiCo
Reported, GAAP Measure
$ 30,132 $ 37,029 $
26,738 $
10,291 $
(44) $
1,959 $
39 $
7,314
Items Affecting Comparability
Mark-to-market net impact
57
(57)
55
Restructuring and
impairment charges
Inventory fair value
adjustments and merger
and integration charges
Pension-related settlement
charges
Net tax related to the TCJ
Act
(115)
115
(253)
(34)
—
—
34
—
—
(21)
—
—
(112)
368
55
—
—
—
2
—
273
—
(25)
67
8
62
8
—
5
—
—
—
(87)
298
47
211
(8)
Core, Non-GAAP Measure
$ 30,040 $ 37,121 $
26,519 $
10,602 $
231 $
2,079 $
44 $
7,775
44
60859_10k_pgs_iii - 127.indd 44
60859_10k_pgs_iii - 127.indd 44
3/13/21 5:41 PM
3/13/21 5:41 PM
(a)
Provision for income taxes is the expected tax charge/benefit on the underlying item based on the tax laws and income tax rates applicable to the
underlying item in its corresponding tax jurisdiction.
Net income attributable to PepsiCo per common share – diluted, GAAP measure
Mark-to-market net impact
Restructuring and impairment charges
Inventory fair value adjustments and merger and integration charges
Pension-related settlement charges
Net tax related to the TCJ Act
Core net income attributable to PepsiCo per common share – diluted, non-GAAP measure
Impact of foreign exchange translation
Growth in core net income attributable to PepsiCo per common share – diluted, on a
constant currency basis, non-GAAP measure
$
$
2020
5.12
(0.04)
0.17
0.17
0.11
—
$
5.52 (a) $
2019
5.20
(0.06)
0.21
0.03
0.15
(0.01)
5.53 (a)
Change
(2) %
— %
2
2 %
(a) Does not sum due to rounding.
Mark-to-Market Net Impact
We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives
include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge
accounting treatment are marked to market each period with the resulting gains and losses recorded in
corporate unallocated expenses as either cost of sales or selling, general and administrative expenses,
depending on the underlying commodity. These gains and losses are subsequently reflected in division
results when the divisions recognize the cost of the underlying commodity in operating profit. Therefore,
the divisions realize the economic effects of the derivative without experiencing any resulting mark-to-
market volatility, which remains in corporate unallocated expenses.
Restructuring and Impairment Charges
2019 Multi-Year Productivity Plan
The 2019 Productivity Plan, publicly announced on February 15, 2019, will leverage new technology and
business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and
information systems, including deploying the right automation for each market; and simplify our
organization and optimize our manufacturing and supply chain footprint. In connection with this plan, we
expect to incur pre-tax charges of approximately $2.5 billion, including cash expenditures of
approximately $1.6 billion. Plan to date through December 26, 2020, we have incurred pre-tax charges of
$797 million, including cash expenditures of $518 million. In our 2021 financial results, we expect to
incur pre-tax charges of approximately $500 million, including cash expenditures of approximately $400
million, with the balance to be reflected in our 2022 and 2023 financial results. These charges will be
funded primarily through cash from operations. We expect to incur the majority of the remaining pre-tax
charges and cash expenditures in our 2021 and 2022 results.
2014 Multi-Year Productivity Plan
The 2014 Productivity Plan was completed in 2019. The total plan pre-tax charges and cash expenditures
approximated the previously disclosed plan estimates of $1.3 billion and $960 million, respectively.
See Note 3 to our consolidated financial statements for further information related to our 2019 and 2014
Productivity Plans. We regularly evaluate productivity initiatives beyond the productivity plans and other
initiatives discussed above and in Note 3 to our consolidated financial statements.
Inventory Fair Value Adjustments and Merger and Integration Charges
In 2020, we recorded inventory fair value adjustments and merger and integration charges related to our
acquisitions of BFY Brands, Inc. (BFY Brands), Rockstar, Pioneer Foods and Be & Cheery. Inventory fair
value adjustments and merger and integration charges include fair value adjustments to the acquired
45
60859_10k_pgs_iii - 127.indd 45
60859_10k_pgs_iii - 127.indd 45
3/13/21 5:41 PM
3/13/21 5:41 PM
inventory included in the acquisition-date balance sheets and closing costs, employee-related costs,
contract termination costs, changes in the fair value of contingent consideration and other integration
costs. Merger and integration charges also include liabilities to support socioeconomic programs in South
Africa, which are irrevocable conditions of our acquisition of Pioneer Foods.
In 2019, we recorded inventory fair value adjustments and merger and integration charges primarily
related to SodaStream’s acquired inventory included in acquisition-date balance sheet, as well as merger
and integration charges, including employee-related costs.
See Note 14 to our consolidated financial statements for further information.
Pension-Related Settlement Charges
In 2020, we recorded a pension settlement charge related to lump sum distributions exceeding the total of
annual service and interest cost.
In 2019, we recorded pension settlement charges related to the purchase of a group annuity contract and
one-time lump sum payments to certain former employees who had vested benefits.
See Note 7 to our consolidated financial statements for further information.
Net Tax Related to the TCJ Act
During the fourth quarter of 2017, the TCJ Act was enacted in the United States. We recognized net tax
benefits in 2019 related to the TCJ Act.
See Note 5 to our consolidated financial statements for further information.
60859_10k_pgs_iii - 127.indd 46
60859_10k_pgs_iii - 127.indd 46
3/13/21 5:41 PM
3/13/21 5:41 PM
46
Our Liquidity and Capital Resources
We believe that our cash generating capability and financial condition, together with our revolving credit
facilities, working capital lines and other available methods of debt financing, such as commercial paper
borrowings and long-term debt financing, will be adequate to meet our operating, investing and financing
needs, including with respect to our net capital spending plans. Our primary sources of cash available to
fund cash outflows, such as our anticipated dividend payments, debt repayments, payments for
acquisitions, including the contingent consideration related to Rockstar, and the transition tax liability
under the TCJ Act, include cash from operations, proceeds obtained from issuances of commercial paper
and long-term debt and cash and cash equivalents. See “Item 1A. Risk Factors,” “Our Business Risks” and
Note 8 to our consolidated financial statements for further information.
Our sources and uses of cash were not materially adversely impacted by COVID-19 in 2020 and, to date,
we have not identified any material liquidity deficiencies as a result of the COVID-19 pandemic. Based on
the information currently available to us, we do not expect the impact of COVID-19 to have a material
impact on our liquidity. We will continue to monitor and assess the impact COVID-19 may have on our
business and financial results. See Note 1 to our consolidated financial statements for further information.
The CARES Act and related notices include several significant provisions, such as delaying certain
payroll tax payments, mandatory transition tax payments under the TCJ Act and estimated income tax
payments. The CARES Act did not have a material impact on our financial results in 2020, including on
our annual estimated effective tax rate or on our liquidity. We will continue to monitor and assess the
impact similar legislation in other countries may have on our business and financial results. See “Item 1A.
Risk Factors” and “Our Business Risks” for further information related to the COVID-19 pandemic.
As of December 26, 2020, cash, cash equivalents and short-term investments in our consolidated
subsidiaries subject to currency controls or currency exchange restrictions were not material.
The TCJ Act imposed a mandatory one-time transition tax on undistributed international earnings,
including $18.9 billion held in our consolidated subsidiaries outside the United States as of December 30,
2017. As of December 26, 2020, our mandatory transition tax liability was $3.2 billion, which must be
paid through 2026 under the provisions of the TCJ Act; we currently expect to pay approximately $309
million of this liability in 2021. See “Credit Facilities and Long-Term Contractual Commitments.” Any
additional guidance issued by the IRS may impact our recorded amounts for this transition tax liability.
See Note 5 to our consolidated financial statements for further discussion of the TCJ Act.
As part of our evolving market practices, we work with our suppliers to optimize our terms and
conditions, which include the extension of payment terms. Our current payment terms with a majority of
our suppliers generally range from 60 to 90 days, which we deem to be commercially reasonable. We will
continue to monitor economic conditions and market practice working with our suppliers to adjust as
necessary. We also maintain voluntary supply chain finance agreements with several participating global
financial institutions. Under these agreements, our suppliers, at their sole discretion, may elect to sell their
accounts receivable with PepsiCo to these participating global financial institutions. Supplier participation
in these financing arrangements is voluntary. Our suppliers negotiate their financing agreements directly
with the respective global financial institutions and we are not a party to these agreements. These
financing arrangements allow participating suppliers to leverage PepsiCo’s creditworthiness in
establishing credit spreads and associated costs, which generally provides our suppliers with more
favorable terms than they would be able to secure on their own. Neither PepsiCo nor any of its
subsidiaries provide any guarantees to any third party in connection with these financing arrangements.
We have no economic interest in our suppliers’ decision to participate in these agreements. Our
obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. All
outstanding amounts related to suppliers participating in such financing arrangements are recorded within
47
60859_10k_pgs_iii - 127.indd 47
60859_10k_pgs_iii - 127.indd 47
3/13/21 5:41 PM
3/13/21 5:41 PM
accounts payable and other current liabilities in our consolidated balance sheet. We have been informed by
the participating financial institutions that as of December 26, 2020 and December 28, 2019, $1.2 billion
and $1.1 billion, respectively, of our accounts payable to suppliers who participate in these financing
arrangements are outstanding. These supply chain finance arrangements did not have a material impact on
our liquidity or capital resources in the periods presented and we do not expect such arrangements to have
a material impact on our liquidity or capital resources for the foreseeable future.
Furthermore, our cash provided from operating activities is somewhat 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 transactions to increase shareholder value and enhance our business results, including
acquisitions, divestitures, joint ventures, dividends, share repurchases, productivity and other efficiency
initiatives and other structural changes. These transactions may result in future cash proceeds or payments.
The table below summarizes our cash activity:
Net cash provided by operating activities
Net cash used for investing activities
Net cash provided by/(used for) financing activities
Operating Activities
2020
2019
$ 10,613 $ 9,649
$ (11,619) $ (6,437)
$ 3,819 $ (8,489)
In 2020, net cash provided by operating activities was $10.6 billion, compared to $9.6 billion in the prior
year. The increase in operating cash flow primarily reflects lower net cash tax payments and lower pre-tax
pension and retiree medical plan contributions in the current year.
Investing Activities
In 2020, net cash used for investing activities was $11.6 billion, primarily reflecting net cash paid in
connection with our acquisitions of Rockstar of $3.85 billion, Pioneer Foods of $1.2 billion and Be &
Cheery of $0.7 billion, net capital spending of $4.2 billion, as well as purchases of short-term investments
with maturities greater than three months of $1.1 billion.
In 2019, net cash used for investing activities was $6.4 billion, primarily reflecting $4.1 billion of net
capital spending, as well as $1.9 billion of the remaining cash paid in connection with our acquisition of
SodaStream.
See Note 1 to our consolidated financial statements for further discussion of capital spending by division;
see Note 9 to our consolidated financial statements for further discussion of our investments in debt
securities; and see Note 14 to our consolidated financial statements for further discussion of our
acquisitions.
We regularly review our plans with respect to net capital spending, including in light of the ongoing
uncertainty caused by the COVID-19 pandemic on our business, and believe that we have sufficient
liquidity to meet our net capital spending needs.
Financing Activities
In 2020, net cash provided by financing activities was $3.8 billion, primarily reflecting proceeds from
issuances of long-term debt of $13.8 billion, partially offset by the return of operating cash flow to our
shareholders through dividend payments and share repurchases of $7.5 billion, payments of long-term
debt borrowings of $1.8 billion and debt redemptions of $1.1 billion.
60859_10k_pgs_iii - 127.indd 48
60859_10k_pgs_iii - 127.indd 48
3/13/21 5:41 PM
3/13/21 5:41 PM
48
In 2019, net cash used for financing activities was $8.5 billion, primarily reflecting the return of operating
cash flow to our shareholders through dividend payments and share repurchases of $8.3 billion, payments
of long-term debt borrowings of $4.0 billion and debt redemptions of $1.0 billion, partially offset by
proceeds from issuances of long-term debt of $4.6 billion.
See Note 8 to our consolidated financial statements for further discussion of debt obligations.
We annually review our capital structure with our Board of Directors, including our dividend policy and
share repurchase activity. On February 13, 2018, we announced the 2018 share repurchase program
providing for the repurchase of up to $15.0 billion of PepsiCo common stock which commenced on July
1, 2018 and will expire on June 30, 2021. In addition, on February 11, 2021, we announced a 5% increase
in our annualized dividend to $4.30 per share from $4.09 per share, effective with the dividend expected to
be paid in June 2021. We expect to return a total of approximately $5.9 billion to shareholders in 2021,
comprised of dividends of approximately $5.8 billion and share repurchases of approximately $100
million. We have recently completed our share repurchase activity and do not expect to repurchase any
additional shares for the balance of 2021.
Free Cash Flow
The table below reconciles net cash provided by operating activities, as reflected in our cash flow
statement, to our free cash flow. Free cash flow is a non-GAAP financial measure. For further information
on free cash flow see “Non-GAAP Measures.”
Net cash provided by operating activities, GAAP measure
Capital spending
Sales of property, plant and equipment
Free cash flow, non-GAAP measure
2020
10,613
(4,240)
55
6,428
$
$
$
$
2019
9,649
(4,232)
170
5,587
Change
10 %
15 %
We use free cash flow primarily for acquisitions and financing activities, including debt repayments,
dividends and share repurchases. We expect to continue to return free cash flow to our shareholders
through dividends and share repurchases while maintaining Tier 1 commercial paper access, which we
believe will facilitate appropriate financial flexibility and ready access to global capital and credit markets
at favorable interest rates. However, see “Item 1A. Risk Factors” and “Our Business Risks” for certain
factors that may impact our credit ratings or our operating cash flows.
Any downgrade of our credit ratings by a credit rating agency, especially any downgrade to below
investment grade, whether or not as a result of our actions or factors which are beyond our control, 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. See “Item 1A. Risk Factors,” “Our Business Risks” and Note 8 to our consolidated
financial statements for further discussion.
60859_10k_pgs_iii - 127.indd 49
60859_10k_pgs_iii - 127.indd 49
3/13/21 5:41 PM
3/13/21 5:41 PM
49
Credit Facilities and Long-Term Contractual Commitments
See Note 8 to our consolidated financial statements for a description of our credit facilities.
The following table summarizes our long-term contractual commitments by period:
Recorded Liabilities:
Long-term debt obligations (b)
Operating leases (c)
One-time mandatory transition tax - TCJ Act (d)
Other long-term liabilities (e)
Other:
Interest on debt obligations (f)
Purchasing commitments (g)
Marketing commitments (h)
Other long-term contractual commitments (i)
Total contractual commitments
Payments Due by Period(a)
Total
2021
2022 –
2023
2024 –
2025
2026 and
beyond
$
$
40,330 $
1,895
3,239
1,277
15,988
2,295
950
347
66,321 $
— $
486
309
159
6,895 $
663
617
135
6,298 $
333
1,351
140
1,160
894
355
85
3,448 $
2,043
1,034
366
167
11,920 $
1,771
246
161
95
10,395 $
27,137
413
962
843
11,014
121
68
—
40,558
(a) Based on year-end foreign exchange rates.
(b) Excludes $3,358 million related to current maturities of debt, $40 million related to the fair value adjustments for debt acquired in
acquisitions and interest rate swaps and payments of $260 million related to unamortized net discounts.
(c) Primarily reflects building leases. See Note 13 to our consolidated financial statements for further information on operating leases.
(d) Reflects our transition tax liability as of December 26, 2020, which must be paid through 2026 under the provisions of the TCJ Act.
(e) Reflects contingent consideration related to estimated future tax benefits associated with our acquisition of Rockstar. Also reflects
commitments to support socioeconomic programs in South Africa, which are irrevocable conditions of our acquisition of Pioneer Foods.
See Note 9 and Note 14 to our consolidated financial statements for further information.
Interest payments on floating-rate debt are estimated using interest rates effective as of December 26, 2020. Includes accrued interest of
$352 million as of December 26, 2020.
(f)
(g) Reflects non-cancelable commitments, primarily for the purchase of commodities and outsourcing services in the normal course of
business and does not include purchases that we are likely to make based on our plans but are not obligated to incur.
(h) Reflects non-cancelable commitments, primarily for sports marketing in the normal course of business.
(i) Reflects our commitment to incur capital expenditures and/or business-related costs associated with our acquisition of Pioneer Foods.
See Note 14 to our consolidated financial statements for further information.
Reserves for uncertain tax positions are excluded from the table above as we are unable to reasonably
predict the ultimate amount or timing of any such settlements. Bottler funding to independent bottlers is
not reflected in the table above as it is negotiated on an annual basis. Accrued liabilities for pension and
retiree medical plans are not reflected in the table above. See Note 7 to our consolidated financial
statements for further information regarding our pension and retiree medical obligations.
Off-Balance-Sheet Arrangements
We do not have guarantees or other off-balance-sheet financing arrangements, including variable interest
entities, that we believe could have a material impact on our financial condition or liquidity.
We coordinate, on an aggregate basis, the contract negotiations of raw material requirements, including
sweeteners, aluminum cans and plastic bottles and closures for us and 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, transactions between our independent bottlers and suppliers are
not reflected in our consolidated financial statements. As the contracting party, we could be liable to these
suppliers in the event of any nonpayment by our independent bottlers, but we consider this exposure to be
remote.
50
60859_10k_pgs_iii - 127.indd 50
60859_10k_pgs_iii - 127.indd 50
3/13/21 5:41 PM
3/13/21 5:41 PM
Return on Invested Capital
ROIC is a non-GAAP financial measure. For further information on ROIC, see “Non-GAAP Measures.”
Net income attributable to PepsiCo
Interest expense
Tax on interest expense
Average debt obligations (a)
Average common shareholders’ equity (b)
Average invested capital
2020
2019
$ 7,120
$
7,314
1,252
(278)
1,135
(252)
$ 8,094
$
8,197
$ 41,402
$ 31,975
13,536
14,317
$ 54,938
$ 46,292
ROIC, non-GAAP measure
14.7 %
17.7 %
(a)
(b)
Includes a quarterly average of short-term and long-term debt obligations.
Includes a quarterly average of common stock, capital in excess of par value, retained earnings, accumulated other comprehensive loss
and repurchased common stock.
The table below reconciles ROIC as calculated above to net ROIC, excluding items affecting
comparability.
ROIC
Impact of:
Average cash, cash equivalents and short-term investments
Interest income
Tax on interest income
Mark-to-market net impact
Restructuring and impairment charges
Inventory fair value adjustments and merger and integration charges
Pension-related settlement charges
Net tax related to the TCJ Act
Other net tax benefits
Charges related to cash tender and exchange offers
Net ROIC, excluding items affecting comparability
2020
14.7 %
2019
17.7 %
3.4
(0.2)
0.1
(0.1)
0.3
0.4
0.2
0.1
1.0
—
19.9 %
3.0
(0.5)
0.1
(0.2)
0.5
0.1
0.5
(1.0)
2.2
(0.1)
22.3 %
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 regarding uncertainties,
including those related to the COVID-19 pandemic, 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. We applied our critical accounting
policies and estimation methods consistently in all material respects and for all periods presented. We
have discussed our critical accounting policies with our Audit Committee.
Our critical accounting policies are:
•
•
•
•
revenue recognition;
goodwill and other intangible assets;
income tax expense and accruals; and
pension and retiree medical plans.
51
60859_10k_pgs_iii - 127.indd 51
60859_10k_pgs_iii - 127.indd 51
3/13/21 5:41 PM
3/13/21 5:41 PM
Revenue Recognition
We recognize revenue when our performance obligation is satisfied. Our primary performance obligation
(the distribution and sales of beverage products and food and snack products) is satisfied upon the
shipment or delivery of products to our customers, which is also when control is transferred. The transfer
of control of products to our customers is typically based on written sales terms that do not allow for a
right of return. However, our policy for DSD, including 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. As a result, we record reserves, based on estimates, for anticipated
damaged and out-of-date products. We recorded $20 million of reserves for product returns in 2020 as a
result of the COVID-19 pandemic. See Note 1 to our consolidated financial statements for further
information.
Our products are sold for cash or on credit terms. Our credit terms, which are established in accordance
with local and industry practices, typically require payment within 30 days of delivery in the United
States, and generally within 30 to 90 days internationally, and may allow discounts for early payment.
There were no material changes in credit terms as a result of the COVID-19 pandemic.
We estimate and reserve for our expected credit loss exposure based on our experience with past due
accounts and collectibility, write-off history, the aging of accounts receivable, our analysis of customer
data, and forward-looking information (including the expected impact of the global economic uncertainty
related to the COVID-19 pandemic), leveraging estimates of creditworthiness and projections of default
and recovery rates for certain of our customers (including foodservice and vending businesses). We
recorded an allowance for expected credit losses of $56 million in 2020 as a result of the COVID-19
pandemic. See Note 1 to our consolidated financial statements for further information.
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 customer shelf space and storerooms limiting the quantity
of product. For product delivered through other distribution networks, we monitor customer inventory
levels.
As discussed in “Our Customers” in “Item 1. Business,” we offer sales incentives and discounts through
various programs to customers and consumers. Total marketplace spending includes sales incentives,
discounts, advertising and other marketing activities. Sales incentives and discounts are primarily
accounted for as a reduction of revenue and include payments to customers for performing 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. Sales incentives and discounts also
include support provided to our independent bottlers through funding of advertising and other marketing
activities.
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 year, as products are
delivered, for the expected payout, which may occur after year end once reconciled and settled. These
accruals are based on contract terms and our historical experience with similar programs and require
management judgment with respect to estimating customer and consumer participation and performance
levels. Differences between estimated expense and actual incentive costs are normally insignificant and
are recognized in earnings in the period such differences are determined. In addition, certain advertising
and marketing costs are also based on annual targets and recognized during the year as incurred.
See Note 2 to our consolidated financial statements for further information on our revenue recognition and
related policies, including total marketplace spending.
52
60859_10k_pgs_iii - 127.indd 52
60859_10k_pgs_iii - 127.indd 52
3/13/21 5:41 PM
3/13/21 5:41 PM
Goodwill and Other Intangible Assets
We sell products under a number of brand names, many of which were developed by us. Brand
development costs are expensed as incurred. We also purchase brands and other intangible assets in
acquisitions. In a business combination, the consideration is first assigned to identifiable assets and
liabilities, including brands and other intangible assets, based on estimated fair values, with any excess
recorded as goodwill. Determining fair value requires significant estimates and assumptions, including
those related to the COVID-19 pandemic, 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 indefinite-lived brand criteria are not met, brands are amortized over their
expected useful lives, which generally range from 20 to 40 years. Determining the expected 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, future expansion expectations and regulatory restrictions, as
well as the macroeconomic environment of the countries in which the brand is sold.
In connection with previous acquisitions, we reacquired certain franchise rights which provided the
exclusive and perpetual rights to manufacture and/or distribute beverages for sale in specified territories.
In determining the useful life of these franchise rights, many factors were considered, including the pre-
existing perpetual bottling arrangements, the indefinite period expected for these franchise rights to
contribute to our future cash flows, as well as the lack of any factors that would limit the useful life of
these franchise rights to us, including legal, regulatory, contractual, competitive, economic or other
factors. Therefore, certain of these franchise rights are considered as indefinite-lived. Franchise rights that
are not considered indefinite-lived are amortized over the remaining contractual period of the contract in
which the right was granted.
Indefinite-lived intangible assets and goodwill are not amortized and, as a result, are assessed for
impairment at least annually, using either a qualitative or quantitative approach. We perform this annual
assessment during our third quarter, or more frequently if circumstances indicate that the carrying value
may not be recoverable. Where we use the qualitative assessment, first we determine if, based on
qualitative factors, it is more likely than not that an impairment exists. Factors considered include
macroeconomic (including those related to the COVID-19 pandemic), industry and competitive
conditions, legal and regulatory environment, historical financial performance and significant changes in
the brand or reporting unit. If the qualitative assessment indicates that it is more likely than not that an
impairment exists, then a quantitative assessment is performed.
In the quantitative assessment for indefinite-lived intangible assets and goodwill, estimated fair value is
determined using discounted cash flows and requires an analysis of several estimates including future cash
flows or income consistent with management’s strategic business plans, annual sales growth rates,
perpetuity growth assumptions and the selection of assumptions underlying a discount rate (weighted-
average cost of capital) based on market data available at the time. Significant management judgment is
necessary to estimate the impact of competitive operating, macroeconomic and other factors (including
those related to the COVID-19 pandemic) to estimate future levels of sales, operating profit or cash flows.
All assumptions used in our impairment evaluations for indefinite-lived intangible assets and goodwill,
such as forecasted growth rates (including perpetuity growth assumptions) and weighted-average cost of
capital, are based on the best available market information and are consistent with our internal forecasts
and operating plans. A deterioration in these assumptions could adversely impact our results. These
53
60859_10k_pgs_iii - 127.indd 53
60859_10k_pgs_iii - 127.indd 53
3/13/21 5:41 PM
3/13/21 5:41 PM
assumptions could be adversely impacted by certain of the risks described in “Item 1A. Risk Factors” and
“Our Business Risks.”
Amortizable intangible assets 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.
See Note 2 and Note 4 to our consolidated financial statements for further information.
Income Tax Expense and Accruals
Our annual tax rate is based on our income, statutory tax rates and tax structure and transactions, including
transfer pricing arrangements, available to us in the various jurisdictions 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 likely will 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, new
tax laws, relevant court cases or tax authority settlements. See “Item 1A. Risk Factors” for further
discussion.
An estimated annual effective tax rate is applied to our quarterly operating results. In the event there is a
significant or unusual item recognized in our quarterly operating results, the tax attributable to that item is
separately calculated and recorded at the same time as that item. We consider the tax adjustments from the
resolution 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 consolidated financial statements. As a result, our annual tax rate reflected in our consolidated
financial 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 on our consolidated
financial statements. 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 recognized in our consolidated 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 consolidated financial statements.
During the fourth quarter of 2017, the TCJ Act was enacted in the United States. Among its many
provisions, the TCJ Act imposed a mandatory one-time transition tax on undistributed international
earnings and reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. We
recorded a net tax benefit of $28 million ($0.02 per share) in 2018 related to the TCJ Act. The related
provisional measurement period allowed by the SEC ended in the fourth quarter of 2018. While our
accounting for the recorded impact of the TCJ Act was deemed to be complete, additional guidance issued
by the IRS impacted our recorded amounts after December 29, 2018. In 2019, we recognized a net tax
benefit totaling $8 million ($0.01 per share) related to the TCJ Act. See further information in “Items
Affecting Comparability.”
On May 19, 2019, a public referendum held in Switzerland passed the TRAF, effective January 1,
2020. The enactment of certain provisions of the TRAF resulted in adjustments to our deferred taxes.
During 2020, we recorded a net tax benefit of $72 million related to the adoption of the TRAF in the
54
60859_10k_pgs_iii - 127.indd 54
60859_10k_pgs_iii - 127.indd 54
3/13/21 5:41 PM
3/13/21 5:41 PM
Swiss Canton of Bern. During 2019, we recorded net tax expense of $24 million related to the impact of
the TRAF.
In 2020, our annual tax rate was 20.9% compared to 21.0% in 2019. See “Other Consolidated Results” for
further information.
See Note 5 to our consolidated financial statements for further information.
Pension and Retiree Medical Plans
Our pension plans cover certain employees in the United States and certain international employees.
Benefits are determined based on either years of service or a combination of years of service and earnings.
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. In addition, we have been phasing out certain subsidies of retiree medical benefits.
In 2020, lump sum distributions exceeded the total of annual service and interest cost and triggered a pre-
tax settlement charge in the PepsiCo Employees Retirement Plan A (Plan A) of $205 million ($158
million after-tax or $0.11 per share).
In 2020, we adopted an amendment to the U.S. defined benefit pension plans to freeze benefit accruals for
salaried participants, effective December 31, 2025. Since 2011, salaried new hires are not eligible to
participate in the defined benefit plan. After the effective date, all salaried participants will receive an
employer contribution to the 401(k) savings plan based on age and years of service regardless of employee
contribution and will have the opportunity to receive employer contributions to match employee
contributions up to defined limits. As a result of this amendment, pension benefits pre-tax expense is
expected to decrease by approximately $70 million in 2021, primarily impacting corporate unallocated
expenses.
In 2020, we approved an amendment to reorganize the U.S. qualified defined benefit pension plans that
resulted in the transfer of certain participants from Plan A to the PepsiCo Employees Retirement Plan I
(Plan I) and to a newly created plan, the PepsiCo Employees Retirement Hourly Plan (Plan H), effective
January 1, 2021. The benefits offered to the plans’ participants were unchanged. The reorganization will
facilitate a more targeted investment strategy and provide additional flexibility in evaluating opportunities
to reduce risk and volatility. No material impact to pension benefit pre-tax expense is expected from this
reorganization.
In 2020, we adopted an amendment, effective January 1, 2021, to enhance the pay credit benefits of
certain participants in Plan H. As a result of this amendment, pension benefits pre-tax expense is expected
to increase approximately $45 million in 2021, primarily impacting service cost expense.
In 2019, Plan A purchased a group annuity contract whereby a third-party insurance company assumed the
obligation to pay and administer future annuity payments for certain retirees. This transaction triggered a
pre-tax settlement charge in 2019 of $220 million ($170 million after-tax or $0.12 per share).
Also in 2019, certain former employees who had vested benefits in our U.S. defined benefit pension plans
were offered the option of receiving a one-time lump sum payment equal to the present value of the
participant’s pension benefit. This transaction triggered a pre-tax settlement charge in 2019 of $53 million
($41 million after-tax or $0.03 per share). Collectively, the group annuity contract and one-time lump sum
payments to certain former employees who had vested benefits resulted in settlement charges in 2019 of
$273 million ($211 million after-tax or $0.15 per share).
See “Items Affecting Comparability” and Note 7 to our consolidated financial statements.
55
60859_10k_pgs_iii - 127.indd 55
60859_10k_pgs_iii - 127.indd 55
3/13/21 5:41 PM
3/13/21 5:41 PM
Our Assumptions
The determination of pension and retiree medical expenses and obligations 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 components:
(1) the value of benefits earned by employees for working during the year (service cost), (2) the increase
in the projected benefit obligation due to the passage of time (interest cost), and (3) other gains and losses
as discussed in Note 7 to our consolidated financial statements, reduced by (4) the expected return on
assets for our funded plans.
Significant assumptions used to measure our annual pension and retiree medical expenses include:
•
•
•
•
•
certain employee-related demographic factors, such as turnover, retirement age and mortality;
the expected return on assets in our funded plans;
for pension expense, the rate of salary increases for plans where benefits are based on earnings;
for retiree medical expense, health care cost trend rates; and
for pension and retiree medical expense, the spot rates along the yield curve used to determine
service and interest costs and the present value of liabilities.
Certain assumptions reflect our historical experience and management’s best judgment regarding future
expectations. All actuarial assumptions are reviewed annually, except in the case of an interim
remeasurement due to a significant event such as a curtailment or settlement. Due to the significant
management judgment involved, these assumptions could have a material impact on the measurement of
our pension and retiree medical expenses and obligations.
At each measurement date, the discount rates are based on interest rates for high-quality, long-term
corporate debt securities with maturities comparable to those of our liabilities. Our U.S. obligation and
pension and retiree medical expense is based on the discount rates determined using the Mercer Above
Mean Curve. This curve includes bonds that closely match the timing and amount of our expected benefit
payments and reflects the portfolio of investments we would consider to settle our liabilities.
See Note 7 to our consolidated financial statements for information about the expected rate of return on
plan assets and our plans’ investment strategy. Although we review our expected long-term rates of return
on an annual basis, our asset returns in a given year do not significantly influence our evaluation of long-
term rates of return.
The health care trend rate used to determine our retiree medical plans’ obligation and expense is reviewed
annually. Our review is based on our claims experience, information provided by our health plans and
actuaries, and our knowledge of the health care industry. Our review of the trend rate considers factors
such as demographics, plan design, new medical technologies and changes in medical carriers.
60859_10k_pgs_iii - 127.indd 56
60859_10k_pgs_iii - 127.indd 56
3/13/21 5:41 PM
3/13/21 5:41 PM
56
Weighted-average assumptions for pension and retiree medical expense are as follows:
Pension
Service cost discount rate
Interest cost discount rate
Expected rate of return on plan assets
Expected rate of salary increases
Retiree medical
Service cost discount rate
Interest cost discount rate
Expected rate of return on plan assets
Current health care cost trend rate
2021
2020
2019
2.6 % 3.4 %
1.9 % 2.8 %
6.2 % 6.6 %
3.1 % 3.2 %
2.3 % 3.2 %
1.6 % 2.6 %
5.4 % 5.8 %
5.5 % 5.6 %
4.4 %
3.9 %
6.8 %
3.2 %
4.3 %
3.8 %
6.6 %
5.7 %
In 2020, lump sum distributions exceeded the total of annual service and interest cost and triggered a pre-
tax settlement charge in Plan A. In addition, based on our assumptions, we expect our total pension and
retiree medical expense to decrease in 2021 primarily reflecting the recognition of fixed income gains on
plan assets, the impact of discretionary plan contributions and plan changes, partially offset by lower
discount rates and lower rate of expected returns on U.S. plan assets.
Sensitivity of Assumptions
A decrease in each of the collective discount rates or in the expected rate of return assumptions would
increase expense for our benefit plans. A 25-basis-point decrease in each of the above discount rates and
expected rate of return assumptions would individually increase 2021 pre-tax pension and retiree medical
expense as follows:
Discount rates used in the calculation of expense
Expected rate of return
Funding
Assumption
Amount
$
$
55
50
We make contributions to pension trusts that 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 currently 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.
In November 2020, we received approval from our Board of Directors to make discretionary contributions
of $500 million to our U.S. qualified defined benefit plans. We contributed $300 million of the approved
amount in January 2021; we expect to contribute the remaining $200 million in the third quarter of 2021.
We made discretionary contributions to our U.S. qualified defined benefit plans of $325 million in 2020
and $400 million in 2019.
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. We continue to monitor the impact of the COVID-19 pandemic and related global economic
conditions and uncertainty on the net unfunded status of our pension and retiree medical plans. We
regularly evaluate different opportunities to reduce risk and volatility associated with our pension and
retiree medical plans. See Note 7 to our consolidated financial statements for our past and expected
contributions and estimated future benefit payments.
57
60859_10k_pgs_iii - 127.indd 57
60859_10k_pgs_iii - 127.indd 57
3/13/21 5:41 PM
3/13/21 5:41 PM
Consolidated Statement of Income
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 26, 2020, December 28, 2019 and December 29, 2018
(in millions except per share amounts)
Net Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating Profit
Other pension and retiree medical benefits income/(expense)
Net interest expense and other
Income before income taxes
Provision for/(benefit from) income taxes (See Note 5)
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
See accompanying notes to the consolidated financial statements.
2019
2020
2018
$ 70,372 $ 67,161 $ 64,661
29,381
35,280
25,170
10,110
298
(1,219)
9,189
(3,370)
12,559
44
7,314 $ 12,515
31,797
38,575
28,495
10,080
117
(1,128)
9,069
1,894
7,175
55
7,120 $
30,132
37,029
26,738
10,291
(44)
(935)
9,312
1,959
7,353
39
$
$
$
5.14 $
5.12 $
5.23 $
5.20 $
8.84
8.78
1,385
1,392
1,399
1,407
1,415
1,425
60859_10k_pgs_iii - 127.indd 58
60859_10k_pgs_iii - 127.indd 58
3/13/21 5:41 PM
3/13/21 5:41 PM
58
Consolidated Statement of Comprehensive Income
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 26, 2020, December 28, 2019 and December 29, 2018
(in millions)
Net income
Other comprehensive (loss)/income, net of taxes:
Net currency translation adjustment
Net change on cash flow hedges
Net pension and retiree medical adjustments
Other
Comprehensive income
Less: Comprehensive income attributable to
noncontrolling interests
Comprehensive Income Attributable to PepsiCo
$
See accompanying notes to the consolidated financial statements.
2020
7,175 $
2019
7,353 $
2018
12,559
$
(650)
7
(532)
(1)
(1,176)
5,999
628
(90)
283
(2)
819
8,172
55
5,944 $
39
8,133 $
(1,641)
40
(467)
6
(2,062)
10,497
44
10,453
60859_10k_pgs_iii - 127.indd 59
60859_10k_pgs_iii - 127.indd 59
3/13/21 5:41 PM
3/13/21 5:41 PM
59
Consolidated Statement of Cash Flows
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 26, 2020, December 28, 2019 and December 29, 2018
(in millions)
2020
2019
2018
Operating Activities
Net income
Depreciation and amortization
Share-based compensation expense
Restructuring and impairment charges
Cash payments for restructuring charges
Inventory fair value adjustments and merger and integration charges
Cash payments for merger and integration charges
Pension and retiree medical plan expenses
Pension and retiree medical plan contributions
Deferred income taxes and other tax charges and credits
Net tax related to the TCJ Act
Tax payments related to the TCJ Act
Other net tax benefits related to international reorganizations
Change in assets and liabilities:
Accounts and notes receivable
Inventories
Prepaid expenses and other current assets
Accounts payable and other current liabilities
Income taxes payable
Other, net
Net Cash Provided by Operating Activities
Investing Activities
Capital spending
Sales of property, plant and equipment
Acquisitions, net of cash acquired, and investments in noncontrolled affiliates
Divestitures
Short-term investments, by original maturity:
More than three months - purchases
More than three months - maturities
More than three months - sales
Three months or less, net
Other investing, net
Net Cash (Used for)/Provided by Investing Activities
(Continued on following page)
$ 7,175 $ 7,353 $ 12,559
2,399
256
308
(255)
75
(73)
221
(1,708)
(531)
(28)
(115)
(4,347)
2,548
264
289
(255)
255
(131)
408
(562)
361
—
(78)
—
2,432
237
370
(350)
55
(10)
519
(716)
453
(8)
(423)
(2)
(420)
(516)
26
766
(159)
642
10,613
(4,240)
55
(6,372)
4
(1,135)
—
—
27
42
(11,619)
(650)
(190)
(87)
735
(287)
218
9,649
(4,232)
170
(2,717)
253
—
16
62
19
(8)
(6,437)
(253)
(174)
9
882
448
(258)
9,415
(3,282)
134
(1,496)
505
(5,637)
12,824
1,498
16
2
4,564
60859_10k_pgs_iii - 127.indd 60
60859_10k_pgs_iii - 127.indd 60
3/13/21 5:41 PM
3/13/21 5:41 PM
60
Consolidated Statement of Cash Flows (continued)
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 26, 2020, December 28, 2019 and December 29, 2018
(in millions)
2020
2019
2018
Financing Activities
Proceeds from issuances of long-term debt
Payments of long-term debt
Debt redemption/cash tender and exchange offers
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
Proceeds from exercises of stock options
Withholding tax payments on restricted stock units (RSUs), performance stock
units (PSUs) and PepsiCo equity performance units (PEPunits) converted
Other financing
Net Cash Provided by/(Used for) Financing Activities
Effect of exchange rate changes on cash and cash equivalents and restricted
cash
Net Increase/(Decrease) in Cash and Cash Equivalents and Restricted
Cash
Cash and Cash Equivalents and Restricted Cash, Beginning of Year
Cash and Cash Equivalents and Restricted Cash, End of Year
See accompanying notes to the consolidated financial statements.
$ 13,809 $ 4,621 $
(1,830)
(1,100)
(3,970)
(1,007)
—
(4,007)
(1,589)
3
(17)
(1,352)
(4,930)
(2,000)
281
6
(2)
(3)
(5,304)
(3,000)
329
4,077
(3,554)
(109)
(5,509)
(2,000)
179
(96)
(48)
3,819
(114)
(45)
(8,489)
(103)
(55)
(13,769)
(129)
78
(98)
2,684
5,570
112
10,657
$ 8,254 $ 5,570 $ 10,769
(5,199)
10,769
60859_10k_pgs_iii - 127.indd 61
60859_10k_pgs_iii - 127.indd 61
3/13/21 5:41 PM
3/13/21 5:41 PM
61
Consolidated Balance Sheet
PepsiCo, Inc. and Subsidiaries
December 26, 2020 and December 28, 2019
(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 Indefinite-Lived Intangible Assets
Investments in Noncontrolled Affiliates
Deferred Income Taxes
Other Assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt obligations
Accounts payable and other current liabilities
Total Current Liabilities
Long-Term Debt Obligations
Deferred Income Taxes
Other Liabilities
Total Liabilities
Commitments and contingencies
PepsiCo Common Shareholders’ Equity
Common stock, par value 12/3¢ per share (authorized 3,600 shares; issued, net of repurchased
common stock at par value: 1,380 and 1,391 shares, respectively)
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Repurchased common stock, in excess of par value (487 and 476 shares, respectively)
Total PepsiCo Common Shareholders’ Equity
Noncontrolling interests
Total Equity
Total Liabilities and Equity
See accompanying notes to the consolidated financial statements.
2020
2019
$
$
$
8,185
1,366
8,404
4,172
874
23,001
21,369
1,703
18,757
17,612
2,792
4,372
3,312
92,918
3,780
19,592
23,372
40,370
4,284
11,340
79,366
5,509
229
7,822
3,338
747
17,645
19,305
1,433
15,501
14,610
2,683
4,359
3,011
78,547
2,920
17,541
20,461
29,148
4,091
9,979
63,679
23
3,910
63,443
(15,476)
(38,446)
13,454
98
13,552
92,918
$
23
3,886
61,946
(14,300)
(36,769)
14,786
82
14,868
78,547
$
$
$
$
60859_10k_pgs_iii - 127.indd 62
60859_10k_pgs_iii - 127.indd 62
3/13/21 5:41 PM
3/13/21 5:41 PM
62
Consolidated Statement of Equity
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 26, 2020, December 28, 2019 and December 29, 2018
(in millions except per share amounts)
2020
2019
2018
Shares
Amount
Shares
Amount
Shares
Amount
Preferred Stock
Balance, beginning of year
Conversion to common stock
Retirement of preferred stock
Balance, end of year
Repurchased Preferred Stock
Balance, beginning of year
Redemptions
Retirement of preferred stock
Balance, end of year
Common Stock
Balance, beginning of year
Shares issued in connection with preferred stock conversion to
common stock
Change in repurchased common stock
Balance, end of year
Capital in Excess of Par Value
Balance, beginning of year
Share-based compensation expense
Equity issued in connection with preferred stock conversion to
common stock
Stock option exercises, RSUs, PSUs and PEPunits converted
Withholding tax on RSUs, PSUs and PEPunits converted
Other
Balance, end of year
Retained Earnings
Balance, beginning of year
Cumulative effect of accounting changes
Net income attributable to PepsiCo
Cash dividends declared - common (a)
Retirement of preferred stock
Balance, end of year
Accumulated Other Comprehensive Loss
Balance, beginning of year
Other comprehensive (loss)/income attributable to PepsiCo
Balance, end of year
Repurchased Common Stock
Balance, beginning of year
Share repurchases
Stock option exercises, RSUs, PSUs and PEPunits converted
Other
Balance, end of year
Total PepsiCo Common Shareholders’ Equity
Noncontrolling Interests
Balance, beginning of year
Net income attributable to noncontrolling interests
Distributions to noncontrolling interests
Acquisitions
Other, net
Balance, end of year
Total Equity
$
—
—
—
—
—
—
—
—
1,391
—
(11)
1,380
(476)
(15)
4
—
(487)
—
—
—
—
—
—
—
—
23
—
—
23
3,886
263
—
(143)
(96)
—
3,910
61,946
(34)
7,120
(5,589)
—
63,443
(14,300)
(1,176)
(15,476)
(36,769)
(2,000)
322
1
(38,446)
13,454
82
55
(44)
5
—
98
$
—
—
—
—
—
—
—
—
1,409
—
(18)
1,391
(458)
(24)
6
—
(476)
—
—
—
—
—
—
—
—
23
—
—
23
3,953
235
—
(188)
(114)
—
3,886
59,947
8
7,314
(5,323)
—
61,946
(15,119)
819
(14,300)
(34,286)
(3,000)
516
1
(36,769)
14,786
84
39
(42)
—
1
82
0.8
$
(0.1)
(0.7)
—
(0.7)
—
0.7
—
1,420
1
(12)
1,409
(446)
(18)
6
—
(458)
41
(6)
(35)
—
(197)
(2)
199
—
24
—
(1)
23
3,996
250
6
(193)
(103)
(3)
3,953
52,839
(145)
12,515
(5,098)
(164)
59,947
(13,057)
(2,062)
(15,119)
(32,757)
(2,000)
469
2
(34,286)
14,518
92
44
(49)
—
(3)
84
$
13,552
$
14,868
$
14,602
(a) Cash dividends declared per common share were $4.0225, $3.7925 and $3.5875 for 2020, 2019 and 2018, respectively.
See accompanying notes to the consolidated financial statements.
63
60859_10k_pgs_iii - 127.indd 63
60859_10k_pgs_iii - 127.indd 63
3/13/21 5:41 PM
3/13/21 5:41 PM
Notes to Consolidated Financial Statements
Note 1 — Basis of Presentation and Our Divisions
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP
and 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 ability 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 50% or less. Intercompany balances and transactions
are eliminated. As a result of exchange restrictions and other operating restrictions, we do not have control
over our Venezuelan subsidiaries. As such, our Venezuelan subsidiaries are not included within our
consolidated financial results for any period presented.
Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly
related to production planning, inspection costs and raw materials handling facilities, are included in cost
of sales. The costs of moving, storing and delivering finished product, including merchandising activities,
are included in selling, general and administrative expenses.
The preparation of our consolidated financial statements 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, share-based compensation, pension and retiree medical accruals, amounts and useful lives for
intangible assets and future cash flows associated with impairment testing for indefinite-lived 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. The business and
economic uncertainty resulting from the COVID-19 pandemic has made such estimates and assumptions
more difficult to calculate. As future events and their effect cannot be determined with precision, actual
results could differ significantly from those estimates.
Our fiscal year ends on the last Saturday of each December, resulting in an additional week of results
every five or six years. While our North America results are reported on a weekly calendar basis,
substantially all of our international operations report on a monthly calendar basis. Certain operations in
our Europe segment report on a weekly calendar basis. The following chart details our quarterly reporting
schedule for the three years presented:
Quarter
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
United States and Canada
12 weeks
12 weeks
12 weeks
16 weeks
International
January, February
March, April and May
June, July and August
September, October, November and December
Unless otherwise noted, tabular dollars are 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. Certain reclassifications were made to the prior year’s consolidated financial statements to
conform to the current year presentation.
60859_10k_pgs_iii - 127.indd 64
60859_10k_pgs_iii - 127.indd 64
3/13/21 5:41 PM
3/13/21 5:41 PM
64
Our Divisions
We are organized into seven reportable segments (also referred to as divisions), as follows:
1) FLNA, which includes our branded food and snack businesses in the United States and Canada;
2) QFNA, which includes our cereal, rice, pasta and other branded food businesses in the United
States and Canada;
3) PBNA, which includes our beverage businesses in the United States and Canada;
4) LatAm, which includes all of our beverage, food and snack businesses in Latin America;
5) Europe, which includes all of our beverage, food and snack businesses in Europe;
6) AMESA, which includes all of our beverage, food and snack businesses in Africa, the Middle East
and South Asia; and
7) APAC, which includes all of our beverage, food and snack businesses in Asia Pacific, Australia
and New Zealand and China region.
Through our operations, authorized bottlers, contract manufacturers and other third parties, we make,
market, distribute and sell a wide variety of convenient beverages, foods and snacks, serving customers
and consumers in more than 200 countries and territories with our largest operations in the United States,
Mexico, Russia, Canada, the United Kingdom, China and South Africa.
The accounting policies for the divisions are the same as those described in Note 2, except for the
following allocation methodologies:
•
•
•
share-based compensation expense;
pension and retiree medical expense; and
derivatives.
Share-Based Compensation Expense
Our divisions are held accountable for share-based compensation expense and, therefore, this expense is
allocated to our divisions as an incremental employee compensation cost.
The allocation of share-based compensation expense of each division is as follows:
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Corporate unallocated expenses
2020
13 %
1 %
18 %
6 %
16 %
6 %
2 %
38 %
2019
13 %
1 %
17 %
7 %
17 %
3 %
5 %
37 %
2018
13 %
1 %
18 %
8 %
9 %
4 %
4 %
43 %
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.
Pension and Retiree Medical Expense
Pension and retiree medical service costs measured at fixed discount rates are reflected in division results.
The variance between the fixed discount rate used to determine the service cost reflected in division
results and the discount rate as disclosed in Note 7 is reflected in corporate unallocated expenses.
65
60859_10k_pgs_iii - 127.indd 65
60859_10k_pgs_iii - 127.indd 65
3/13/21 5:41 PM
3/13/21 5:41 PM
Derivatives
We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives
include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge
accounting treatment are marked to market each period with the resulting gains and losses recorded in
corporate unallocated expenses as either cost of sales or selling, general and administrative expenses,
depending on the underlying commodity. These gains and losses are subsequently reflected in division
results when the divisions recognize the cost of the underlying commodity in operating profit. Therefore,
the divisions realize the economic 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 trading or speculative purposes.
Net Revenue and Operating Profit
Net revenue and operating profit of each division are as follows:
FLNA
QFNA
PBNA
LatAm
Europe
AMESA (a)
APAC (b)
Total division
Corporate unallocated expenses
Total
Net Revenue
2019
17,078 $
2,482
21,730
7,573
11,728
3,651
2,919
67,161
—
67,161 $
2020
18,189 $
2,742
22,559
6,942
11,922
4,573
3,445
70,372
—
70,372 $
$
$
2018
16,346
2,465
21,072
7,354
10,973
3,657
2,794
64,661
—
64,661
Operating Profit
2020
5,340 $
669
1,937
1,033
1,353
600
590
11,522
(1,442)
10,080 $
2019
5,258 $
544
2,179
1,141
1,327
671
477
11,597
(1,306)
10,291 $
$
$
2018
5,008
637
2,276
1,049
1,256
661
619
11,506
(1,396)
10,110
(a)
(b)
In 2020, the increase in net revenue primarily reflects our acquisition of Pioneer Foods. See Note 14 for further information.
In 2020, the increase in net revenue primarily reflects our acquisition of Be & Cheery. See Note 14 for further information.
Our primary performance obligation is the distribution and sales of beverage and food and snack products
to our customers. The following tables reflect the approximate percentage of net revenue generated
between our beverage business and our food and snack business for each of our international divisions, as
well as our consolidated net revenue:
LatAm
Europe
AMESA (b)
APAC
PepsiCo
2020
2019
2018
Beverage(a)
10 %
55 %
30 %
25 %
45 %
Food/Snack Beverage(a)
10 %
55 %
40 %
25 %
45 %
90 %
45 %
70 %
75 %
55 %
Food/Snack
90 %
45 %
60 %
75 %
55 %
Beverage(a)
10 %
50 %
45 %
25 %
45 %
Food/Snack
90 %
50 %
55 %
75 %
55 %
(a) Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and
Europe segments, is approximately 40% of our consolidated net revenue in 2020, 2019 and 2018. Generally, our finished goods beverage
operations produce higher net revenue, but lower operating margins as compared to concentrate sold to authorized bottling partners for
the manufacture of finished goods beverages.
(b) The increase in the approximate percentage of net revenue generated by our food and snack business primarily reflects our acquisition of
Pioneer Foods. See Note 14 for further information.
60859_10k_pgs_iii - 127.indd 66
60859_10k_pgs_iii - 127.indd 66
3/13/21 5:41 PM
3/13/21 5:41 PM
66
Operating profit in 2020 includes certain pre-tax charges taken as a result of the COVID-19 pandemic.
These pre-tax charges by division are as follows:
2020
Allowances
for Expected
Credit
Losses(a)
Upfront
Payments to
Customers(b)
Inventory
Write-Downs
and Product
Returns(c)
Employee
Compensation
Expense(d)
Employee
Protection
Costs(e)
Other(f)
Total
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC (g)
Total
$
$
17 $
2
29
1
5
2
—
56 $
— $
—
56
—
3
—
—
59 $
8 $
—
28
19
11
3
3
72 $
145 $
9
115
56
23
9
(7)
350 $
59 $
3
50
18
22
7
2
161 $
— $
1
26
8
24
12
5
76 $
229
15
304
102
88
33
3
774
(a) Reflects the expected impact of the global economic uncertainty caused by COVID-19, leveraging estimates of creditworthiness,
projections of default and recovery rates for certain of our customers, including foodservice and vending businesses.
(b) Relates to promotional spending for which benefit is not expected to be received.
(c)
(d)
(e)
(f)
(g)
Includes a reserve for product returns of $20 million.
Includes incremental frontline incentive pay, crisis child care and other leave benefits and labor costs.
Includes costs associated with personal protective equipment, temperature scans, cleaning and other sanitization services.
Includes reserves for property, plant and equipment, donations of cash and product and other costs.
Income amount includes a social welfare relief credit of $11 million.
Corporate Unallocated Expenses
Corporate unallocated expenses include costs of our corporate headquarters, centrally managed initiatives
such as commodity derivative gains and losses, foreign exchange transaction gains and losses, our ongoing
business transformation initiatives, unallocated research and development costs, unallocated insurance and
benefit programs, tax-related contingent consideration and certain other items.
Other Division Information
Total assets and capital spending of each division are as follows:
FLNA
QFNA
PBNA (a)
LatAm
Europe
AMESA (b)
APAC (c)
Total division
Corporate (d)
Total
Total Assets
2020
8,730 $
1,021
37,079
6,977
17,917
5,942
5,770
83,436
9,482
92,918 $
2019
7,519
941
31,449
7,007
17,814
3,672
4,113
72,515
6,032
78,547
$
$
$
$
Capital Spending
2020
1,189 $
85
1,245
390
730
252
230
4,121
119
4,240 $
2019
1,227 $
104
1,053
557
613
267
195
4,016
216
4,232 $
2018
840
53
945
492
466
198
138
3,132
150
3,282
In 2020, the increase in assets was primarily related to our acquisition of Rockstar. See Note 14 for further information.
In 2020, the increase in assets was primarily related to our acquisition of Pioneer Foods. See Note 14 for further information.
In 2020, the increase in assets was primarily related to our acquisition of Be & Cheery. See Note 14 for further information.
(a)
(b)
(c)
(d) Corporate assets consist principally of certain cash and cash equivalents, restricted cash, short-term investments, derivative instruments,
property, plant and equipment and tax assets. In 2020, the change in assets was primarily due to an increase in cash and cash equivalents
and short-term investments. Refer to the cash flow statement for further information.
60859_10k_pgs_iii - 127.indd 67
60859_10k_pgs_iii - 127.indd 67
3/13/21 5:41 PM
3/13/21 5:41 PM
67
Amortization of intangible assets and depreciation and other amortization of each division are as follows:
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Total division
Corporate
Total
Amortization of
Intangible Assets
2020
2019
$
$
10 $
—
28
4
40
3
5
90
—
90 $
7 $
—
29
5
37
2
1
81
—
81 $
Depreciation and
Other Amortization
2020
550 $
41
899
251
350
149
91
2,331
127
2,458 $
2019
492 $
44
857
270
341
116
76
2,196
155
2,351 $
2018
457
45
821
253
319
169
80
2,144
186
2,330
2018
7
—
31
5
23
2
1
69
—
69
$
$
Net revenue and long-lived assets by country are as follows:
United States (b)
Mexico
Russia
Canada
United Kingdom
China (c)
South Africa (d)
All other countries
Total
Net Revenue
2019
38,644 $
4,190
3,263
2,831
1,723
1,300
405
14,805
67,161 $
2020
40,800 $
3,924
3,009
2,989
1,882
1,732
1,282
14,754
70,372 $
$
$
2018
37,148
3,878
3,191
2,736
1,743
1,164
432
14,369
64,661
$
$
Long-Lived Assets(a)
2020
36,657 $
1,708
3,644
2,794
874
1,649
1,484
13,423
62,233 $
2019
30,601
1,666
4,314
2,695
827
705
137
12,587
53,532
(a) Long-lived assets represent property, plant and equipment, indefinite-lived intangible assets, amortizable intangible assets and
investments in noncontrolled affiliates. See Note 2 and Note 15 for further information on property, plant and equipment. See Note 2 and
Note 4 for further information on goodwill and other intangible assets. Investments in noncontrolled affiliates are evaluated for
impairment upon a significant change in the operating or macroeconomic environment. These assets are reported in the country where
they are primarily used.
In 2020, the increase in long-lived assets was primarily related to our acquisition of Rockstar. See Note 14 for further information.
In 2020, the increase in net revenue and long-lived assets was primarily related to our acquisition of Be & Cheery. See Note 14 for
further information.
In 2020, the increase in net revenue and long-lived assets was primarily related to our acquisition of Pioneer Foods. See Note 14 for
further information.
(b)
(c)
(d)
Note 2 — Our Significant Accounting Policies
Revenue Recognition
We recognize revenue when our performance obligation is satisfied. Our primary performance obligation
(the distribution and sales of beverage products and food and snack products) is satisfied upon the
shipment or delivery of products to our customers, which is also when control is transferred.
Merchandising activities are performed after a customer obtains control of the product, are accounted for
as fulfillment of our performance obligation to ship or deliver product to our customers and are recorded
in selling, general and administrative expenses. Merchandising activities are immaterial in the context of
our contracts. In addition, we exclude from net revenue all sales, use, value-added and certain excise taxes
assessed by government authorities on revenue producing transactions.
The transfer of control of products to our customers is typically based on written sales terms that do not
allow for a right of return. However, our policy for DSD, including certain chilled products, is to remove
68
60859_10k_pgs_iii - 127.indd 68
60859_10k_pgs_iii - 127.indd 68
3/13/21 5:41 PM
3/13/21 5:41 PM
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. As a result, we record reserves, based on estimates, for
anticipated damaged and out-of-date products. We recorded $20 million of reserves for product returns in
2020 as a result of the COVID-19 pandemic. See Note 1 for further information.
As a result of the implementation of the revenue recognition guidance adopted in the first quarter of 2018,
which did not have a material impact on our accounting policies, we recorded an adjustment in the first
quarter of 2018 of $137 million to beginning retained earnings to reflect marketplace spending that our
customers and independent bottlers expected to be entitled to in line with revenue recognition.
Our products are sold for cash or on credit terms. Our credit terms, which are established in accordance
with local and industry practices, typically require payment within 30 days of delivery in the United
States, and generally within 30 to 90 days internationally, and may allow discounts for early payment.
There were no material changes in credit terms as a result of the COVID-19 pandemic.
We estimate and reserve for our expected credit loss exposure based on our experience with past due
accounts and collectibility, write-off history, the aging of accounts receivable, our analysis of customer
data, and forward-looking information (including the expected impact of the global economic uncertainty
related to the COVID-19 pandemic), leveraging estimates of creditworthiness and projections of default
and recovery rates for certain of our customers (including foodservice and vending businesses). We
recorded an allowance for expected credit losses of $56 million in 2020 as a result of the COVID-19
pandemic. See Note 1 for further information. Expected credit loss expense is classified within selling,
general and administrative expenses on our income statement.
We are exposed to concentration of credit risk from our major customers, including Walmart. In 2020,
sales to Walmart and its affiliates (including Sam’s) represented approximately 14% of our consolidated
net revenue, including concentrate sales to our independent bottlers, which were used in finished goods
sold by them to Walmart. We have not experienced credit issues with these customers.
Total Marketplace Spending
We offer sales incentives and discounts through various programs to customers and consumers. Total
marketplace spending includes sales incentives, discounts, advertising and other marketing activities.
Sales incentives and discounts are primarily accounted for as a reduction of revenue and include payments
to customers for performing 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.
Sales incentives and discounts also include support provided to our independent bottlers through funding
of advertising and other marketing activities.
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 year, as products are
delivered, for the expected payout, which may occur after year end once reconciled and settled. These
accruals are based on contract terms and our historical experience with similar programs and require
management judgment with respect to estimating customer and consumer participation and performance
levels. Differences between estimated expense and actual incentive costs are normally insignificant and
are recognized in earnings in the period such differences are determined. In addition, certain advertising
and marketing costs are also based on annual targets and recognized during the year as incurred.
The terms of most of our incentive arrangements do not exceed a year, and, therefore, do not require
highly uncertain long-term estimates. Certain arrangements, such as fountain pouring rights, may extend
beyond one year. Upfront payments to customers under these arrangements are recognized over the
69
60859_10k_pgs_iii - 127.indd 69
60859_10k_pgs_iii - 127.indd 69
3/13/21 5:41 PM
3/13/21 5:41 PM
shorter of the economic or contractual life, primarily as a reduction of revenue, and the remaining balances
of $299 million as of December 26, 2020 and $272 million as of December 28, 2019 are included in
prepaid expenses and other current assets and other assets on our balance sheet. We recorded reserves of
$59 million for upfront payments to customers in 2020 as a result of the COVID-19 pandemic. See Note 1
for further information.
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 incentives for the full year and the proportion of
each interim period’s actual gross revenue or volume, as applicable, to our forecasted annual gross
revenue or volume, as applicable. Based on our review of the forecasts at each interim period, any changes
in estimates and the related allocation of sales incentives are recognized beginning in the interim period
that they are identified. In addition, we apply a similar allocation methodology for interim reporting
purposes for certain advertising and other marketing activities. Our annual consolidated financial
statements are not impacted by this interim allocation methodology.
Advertising and other marketing activities, reported as selling, general and administrative expenses,
totaled $4.6 billion in 2020, $4.7 billion in 2019 and $4.2 billion in 2018, including advertising expenses
of $3.0 billion in both 2020 and 2019, and $2.6 billion in 2018. Deferred advertising costs are not
expensed until the year first used and consist of:
• media and personal service prepayments;
promotional materials in inventory; and
•
production costs of future media advertising.
•
Deferred advertising costs of $48 million and $55 million as of December 26, 2020 and December 28,
2019, respectively, are classified as prepaid expenses and other current assets on our balance sheet.
Distribution Costs
Distribution costs, including the costs of shipping and handling activities, which include certain
merchandising activities, are reported as selling, general and administrative expenses. Shipping and
handling expenses were $11.9 billion in 2020, $10.9 billion in 2019 and $10.5 billion in 2018.
Software Costs
We capitalize certain computer software and software development 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
(1) external direct costs of materials and services utilized in developing or obtaining computer software,
(2) compensation and related benefits for employees who are directly associated with the software projects
and (3) 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 $152 million in 2020, $166 million in 2019 and $204 million in 2018.
Net capitalized software and development costs were $664 million and $572 million as of December 26,
2020 and December 28, 2019, respectively.
Commitments and Contingencies
We are subject to various claims and contingencies related to lawsuits, certain taxes and environmental
matters, as well as commitments under contractual and other commercial obligations. We recognize
liabilities for contingencies and commitments when a loss is probable and estimable.
70
60859_10k_pgs_iii - 127.indd 70
60859_10k_pgs_iii - 127.indd 70
3/13/21 5:41 PM
3/13/21 5:41 PM
Research and Development
We engage in a variety of research and development activities and continue to invest to accelerate growth
and to drive innovation globally. Consumer research is excluded from research and development costs and
included in other marketing costs. Research and development costs were $719 million, $711 million and
$680 million in 2020, 2019 and 2018, respectively, and are reported within selling, general and
administrative expenses.
Goodwill and Other Intangible Assets
Indefinite-lived intangible assets and goodwill are not amortized and, as a result, are assessed for
impairment at least annually, using either a qualitative or quantitative approach. We perform this annual
assessment during our third quarter, or more frequently if circumstances indicate that the carrying value
may not be recoverable. Where we use the qualitative assessment, first we determine if, based on
qualitative factors, it is more likely than not that an impairment exists. Factors considered include
macroeconomic (including those related to the COVID-19 pandemic), industry and competitive
conditions, legal and regulatory environment, historical financial performance and significant changes in
the brand or reporting unit. If the qualitative assessment indicates that it is more likely than not that an
impairment exists, then a quantitative assessment is performed.
In the quantitative assessment for indefinite-lived intangible assets and goodwill, an assessment is
performed to determine the fair value of the indefinite-lived intangible asset and the reporting unit,
respectively. Estimated fair value is determined using discounted cash flows and requires an analysis of
several estimates including future cash flows or income consistent with management’s strategic business
plans, annual sales growth rates, perpetuity growth assumptions and the selection of assumptions
underlying a discount rate (weighted-average cost of capital) based on market data available at the time.
Significant management judgment is necessary to estimate the impact of competitive operating,
macroeconomic and other factors (including those related to the COVID-19 pandemic) to estimate future
levels of sales, operating profit or cash flows. All assumptions used in our impairment evaluations for
indefinite-lived intangible assets and goodwill, such as forecasted growth rates (including perpetuity
growth assumptions) and weighted-average cost of capital, are based on the best available market
information and are consistent with our internal forecasts and operating plans. A deterioration in these
assumptions could adversely impact our results.
Amortizable intangible assets 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.
See Note 4 for further information.
Other Significant Accounting Policies
Our other significant accounting policies are disclosed as follows:
• Basis of Presentation – Note 1 includes a description of our policies regarding use of estimates,
basis of presentation and consolidation.
Income Taxes – Note 5.
Share-Based Compensation – Note 6.
•
•
• Pension, Retiree Medical and Savings Plans – Note 7.
• Financial Instruments – Note 9.
• Cash Equivalents – Cash equivalents are highly liquid investments with original maturities of three
months or less.
71
60859_10k_pgs_iii - 127.indd 71
60859_10k_pgs_iii - 127.indd 71
3/13/21 5:41 PM
3/13/21 5:41 PM
•
•
•
Inventories – Note 15. Inventories are valued at the lower of cost or net realizable value. Cost is
determined using the average; first-in, first-out (FIFO); or, in limited instances, last-in, first-out
(LIFO) methods.
Property, Plant and Equipment – Note 15. Property, plant and equipment is recorded at historical
cost. Depreciation is 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.
Translation of Financial Statements of Foreign Subsidiaries – 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 translation adjustment.
Recently Issued Accounting Pronouncements - Adopted
In 2016, the Financial Accounting Standards Board (FASB) issued guidance that changes the impairment
model used to measure credit losses for most financial assets. Under the new model we are required to
estimate expected credit losses over the life of our trade receivables, certain other receivables and certain
other financial instruments. The new model replaced the existing incurred credit loss model and generally
results in earlier recognition of allowances for credit losses. We adopted this guidance in the first quarter
of 2020 and the adoption did not have a material impact on our consolidated financial statements or
disclosures. On initial recognition, we recorded an after-tax cumulative effect decrease to retained
earnings of $34 million ($44 million pre-tax) as of the beginning of 2020.
Recently Issued Accounting Pronouncements - Not Yet Adopted
In 2019, the FASB issued guidance to simplify the accounting for income taxes. The guidance primarily
addresses how to (1) recognize a deferred tax liability after we transition to or from the equity method of
accounting, (2) evaluate if a step-up in the tax basis of goodwill is related to a business combination or is a
separate transaction, (3) recognize all of the effects of a change in tax law in the period of enactment,
including adjusting the estimated annual tax rate, and (4) include the amount of tax based on income in the
income tax provision and any incremental amount as a tax not based on income for hybrid tax regimes.
The guidance is effective in the first quarter of 2021 with early adoption permitted. We will adopt the
guidance when it becomes effective in the first quarter of 2021. The guidance is not expected to have a
material impact on our consolidated financial statements or related disclosures.
Note 3 — Restructuring and Impairment Charges
A summary of our restructuring and impairment charges and other productivity initiatives is as follows:
$
2020
289
—
289
—
$
2019
370
—
370
3
289
$
373
$
2018
138
170
308
8
316
2019 Productivity Plan
2014 Productivity Plan
Total restructuring and impairment charges
Other productivity initiatives
Total restructuring and impairment charges and other
productivity initiatives
$
$
72
60859_10k_pgs_iii - 127.indd 72
60859_10k_pgs_iii - 127.indd 72
3/13/21 5:41 PM
3/13/21 5:41 PM
2019 Multi-Year Productivity Plan
The 2019 Productivity Plan, publicly announced on February 15, 2019, will leverage new technology and
business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and
information systems, including deploying the right automation for each market; and simplify our
organization and optimize our manufacturing and supply chain footprint. In connection with this plan, we
expect to incur pre-tax charges of approximately $2.5 billion, including cash expenditures of
approximately $1.6 billion. These pre-tax charges are expected to consist of approximately 65% of
severance and other employee-related costs, 15% for asset impairments (all non-cash) resulting from plant
closures and related actions and 20% for other costs associated with the implementation of our initiatives.
We expect to complete this plan by 2023.
The total expected plan pre-tax charges are expected to be incurred by division approximately as follows:
Expected pre-tax charges
15 %
1 %
30 %
10 %
25 %
5 %
3 %
11 %
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Corporate
A summary of our 2019 Productivity Plan charges is as follows:
Cost of sales
Selling, general and administrative expenses
Other pension and retiree medical benefits expense
Total restructuring and impairment charges
After-tax amount
Net income attributable to PepsiCo per common share
$
$
$
$
2020
30 $
239
20
289 $
231 $
0.17 $
2019
115 $
253
2
370 $
303 $
0.21 $
2018
3
100
35
138
109
0.08
2020
2019
2018
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Corporate
Other pension and retiree medical
benefits expense
Total
$
$
83 $
5
47
31
48
14
5
36
269
20
289 $
22 $
2
51
62
99
38
47
47
368
2
370 $
Severance and other employee costs
Asset impairments
Other costs
Total
Plan to Date
through 12/26/2020
136
12
138
102
153
55
54
90
740
31 $
5
40
9
6
3
2
7
103
35
138 $
57
797
Plan to Date
through 12/26/2020
$
$
444
125
228
797
60859_10k_pgs_iii - 127.indd 73
60859_10k_pgs_iii - 127.indd 73
3/13/21 5:41 PM
3/13/21 5:41 PM
73
Severance and other employee costs primarily include severance and other termination benefits, as well as
voluntary separation arrangements. Other costs primarily include costs associated with the implementation
of our initiatives, including contract termination costs, consulting and other professional fees.
A summary of our 2019 Productivity Plan activity is as follows:
Severance
and Other
Employee Costs
Asset
Impairments
Other Costs
Total
$
2018 restructuring charges
Non-cash charges and translation
Liability as of December 29, 2018
2019 restructuring charges
Cash payments (a)
Non-cash charges and translation
Liability as of December 28, 2019
2020 restructuring charges
Cash payments (a)
Non-cash charges and translation
Liability as of December 26, 2020
$
137 $
(32)
105
149
(138)
12
128
158
(138)
(26)
122 $
— $
1 $
—
—
92
—
(92)
—
33
—
(33)
— $
—
1
129
(119)
10
21
98
(117)
3
5 $
138
(32)
106
370
(257)
(70)
149
289
(255)
(56)
127
(a) Excludes cash expenditures of $2 million and $4 million for 2020 and 2019, respectively, reported in the cash flow statement in pension
and retiree medical contributions.
Substantially all of the restructuring accrual at December 26, 2020 is expected to be paid by the end of
2021.
2014 Multi-Year Productivity Plan
The 2014 Productivity Plan, publicly announced on February 13, 2014, included the next generation of
productivity initiatives that we believed would strengthen our beverage, food and snack businesses by:
accelerating our investment in manufacturing automation; further optimizing our global manufacturing
footprint, including closing certain manufacturing facilities; re-engineering our go-to-market systems in
developed markets; expanding shared services; and implementing simplified organization structures to
drive efficiency. To build on the 2014 Productivity Plan, in the fourth quarter of 2017, we expanded and
extended the plan through the end of 2019 to take advantage of additional opportunities within the
initiatives described above that further strengthened our beverage, food and snack businesses.
The 2014 Productivity Plan was completed in 2019. In 2019, there were no material pre-tax charges
related to this plan and all cash payments were paid at year end. The total plan pre-tax charges and cash
expenditures approximated the previously disclosed plan estimates of $1.3 billion and $960 million,
respectively. These total plan pre-tax charges consisted of 59% of severance and other employee costs,
15% of asset impairments and 26% of other costs, including costs associated with the implementation of
our initiatives, including certain consulting and other contract termination costs. These total plan pre-tax
charges were incurred by division as follows: FLNA 14%, QFNA 3%, PBNA 29%, LatAm 15%, Europe
23%, AMESA 3%, APAC 3% and Corporate 10%.
60859_10k_pgs_iii - 127.indd 74
60859_10k_pgs_iii - 127.indd 74
3/13/21 5:41 PM
3/13/21 5:41 PM
74
A summary of our 2014 Productivity Plan charges is as follows:
Selling, general and administrative expenses
Other pension and retiree medical benefits expense
Total restructuring and impairment charges
After-tax amount
Net income attributable to PepsiCo per common share
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Corporate (a)
Total
$
$
$
$
$
$
(a)
Income amount primarily relates to other pension and retiree medical benefits.
A summary of our 2014 Productivity Plan activity is as follows:
Liability as of December 30, 2017
2018 restructuring charges
Cash payments (a)
Non-cash charges and translation
Liability as of December 29, 2018
Cash payments
Non-cash charges and translation
Liability as of December 28, 2019
Severance
and Other
Employee Costs
Asset
Impairments
Other Costs
Total
$
$
212 $
86
(203)
(4)
91
(77)
(14)
— $
— $
28
—
(28)
—
—
—
— $
14 $
56
(52)
5
23
(16)
(7)
— $
2018
169
1
170
143
0.10
2018
8
2
51
30
53
15
12
(1)
170
226
170
(255)
(27)
114
(93)
(21)
—
(a) Excludes cash expenditures of $11 million reported in the cash flow statement in pension and retiree medical plan contributions.
Other Productivity Initiatives
There were no material charges related to other productivity and efficiency initiatives outside the scope of
the 2019 and 2014 Productivity Plans.
We regularly evaluate different productivity initiatives beyond the productivity plans and other initiatives
described above.
60859_10k_pgs_iii - 127.indd 75
60859_10k_pgs_iii - 127.indd 75
3/13/21 5:41 PM
3/13/21 5:41 PM
75
Note 4 — Intangible Assets
A summary of our amortizable intangible assets is as follows:
2020
2019
2018
Average
Useful Life
(Years)
Gross
Accumulated
Amortization
Net
Gross
Accumulated
Amortization
Net
Acquired franchise rights (a)
Customer relationships (b)
56 – 60
$
976 $
(173) $
803 $ 846 $
(158) $
10 – 24
642
(204)
438
457
Brands
20 – 40
1,348
(1,099)
249
1,326
Other identifiable intangibles
10 – 24
474
(261)
213
459
(177)
(1,066)
(254)
688
280
260
205
Total
Amortization expense
$ 3,440 $
(1,737) $ 1,703 $ 3,088 $
(1,655) $ 1,433
$
90
$
81 $
69
(a) The change in 2020 primarily reflects our distribution agreement with Vital Pharmaceuticals, Inc., with an expected residual value
higher than our carrying value. The distribution agreement’s useful life is three years, in accordance with the three-year termination
notice issued, and is not reflected in the average useful life above.
(b) The change in 2020 primarily reflects our acquisitions of Pioneer Foods and Be & Cheery. See Note 14 for further information.
Amortization is recognized on a straight-line basis over an intangible asset’s estimated useful life.
Amortization of intangible assets for each of the next five years, based on existing intangible assets as of
December 26, 2020 and using average 2020 foreign exchange rates, is expected to be as follows:
Five-year projected amortization
$
92
$
89
$
87
$
87
$
2021
2022
2023
2024
2025
84
Depreciable and amortizable assets are evaluated for impairment upon a significant change in the
operating or macroeconomic environment. In these circumstances, if an evaluation of the undiscounted
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.
Indefinite-Lived Intangible Assets
We did not recognize any impairment charges for goodwill in each of the years ended December 26, 2020,
December 28, 2019 and December 29, 2018. In 2020, we recognized a pre-tax impairment charge of
$41 million related to a coconut water brand in PBNA. We did not recognize any material impairment
charges for indefinite-lived intangible assets in each of the years ended December 28, 2019 and
December 29, 2018. As of December 26, 2020, the estimated fair values of our indefinite-lived reacquired
and acquired franchise rights recorded at PBNA exceeded their carrying values. However, there could be
an impairment of the carrying value of PBNA’s reacquired and acquired franchise rights if future revenues
and their contribution to the operating results of PBNA’s CSD business do not achieve our expected future
cash flows or if macroeconomic conditions result in a future increase in the weighted-average cost of
capital used to estimate fair value. We have also analyzed the impact of the macroeconomic conditions in
Russia on the estimated fair value of our indefinite-lived intangible assets in Russia and have concluded
that there are no impairments for the year ended December 26, 2020. However, there could be an
impairment of the carrying value of certain brands in Russia, including juice and dairy brands, if there is a
deterioration in these conditions, if future revenues and their contributions to the operating results do not
achieve our expected future cash flows (including perpetuity growth assumptions), if there are significant
changes in the decisions regarding assets that do not perform consistent with our expectations, or if
macroeconomic conditions result in a future increase in the weighted-average cost of capital used to
estimate fair value. For further information on our policies for indefinite-lived intangible assets, see Note
2.
76
60859_10k_pgs_iii - 127.indd 76
60859_10k_pgs_iii - 127.indd 76
3/13/21 5:41 PM
3/13/21 5:41 PM
The change in the book value of indefinite-lived intangible assets is as follows:
Balance,
Beginning
2019
Acquisitions
Translation
and Other
Balance,
End of
2019
Acquisitions
Translation
and Other
Balance,
End of
2020
$
297 $
(3) $
5 $
299 $
164 $
2 $
FLNA (a)
Goodwill
Brands
Total
QFNA
Goodwill
Brands
Total
PBNA (b)
Goodwill
Reacquired franchise rights
Acquired franchise rights
Brands
Total
LatAm
Goodwill
Brands
Total
Europe (c) (d)
Goodwill
Reacquired franchise rights
Acquired franchise rights
Brands
Total
AMESA (e)
Goodwill
Brands
Total
APAC (f)
Goodwill
Brands
Total
Total goodwill
Total reacquired franchise rights
Total acquired franchise rights
Total brands
Total
161
458
184
25
209
9,813
7,058
1,510
353
18,734
509
127
636
3,361
497
161
4,188
8,207
437
—
437
207
101
308
14,808
7,555
1,671
4,955
—
(3)
6
(14)
(8)
66
—
—
418
484
—
—
—
440
—
—
(139)
301
11
—
11
—
—
—
520
—
—
265
1
6
(1)
—
(1)
19
31
7
(8)
49
(8)
(2)
(10)
160
8
(4)
132
296
(2)
—
(2)
—
(1)
(1)
173
39
3
122
162
461
189
11
200
9,898
7,089
1,517
763
19,267
501
125
626
3,961
505
157
4,181
8,804
446
—
446
207
100
307
15,501
7,594
1,674
5,342
179
343
—
—
—
2,280
—
16
2,400
4,696
—
—
—
(2)
—
—
—
(2)
560
183
743
306
309
615
465
340
805
189
—
189
12,189
7,107
1,536
3,122
23,954
458
108
566
(1)
1
—
(11)
(11)
11
18
3
(41)
(9)
(43)
(17)
(60)
(153)
3,806
(9)
15
(109)
(256)
90
31
121
41
36
77
496
172
4,072
8,546
1,096
214
1,310
554
445
999
3,308
(52)
18,757
—
16
9
18
3,071
(112)
7,603
1,708
8,301
$
28,989 $
785 $
337 $
30,111 $
6,395 $
(137) $
36,369
(a) The change in acquisitions in 2020 primarily reflects our acquisition of BFY Brands.
(b) The change in acquisitions in 2020 primarily reflects our acquisition of Rockstar. See Note 14 for further information. The change in
acquisitions in 2019 primarily reflects our acquisition of CytoSport Inc.
(c) The change in translation and other in 2020 primarily reflects the depreciation of the Russian ruble. The change in translation and other
in 2019 primarily reflects the appreciation of the Russian ruble.
(d) The change in acquisitions in 2019 primarily reflects our acquisition of SodaStream. See Note 14 for further information.
(e) The change in acquisitions in 2020 primarily reflects our acquisition of Pioneer Foods. See Note 14 for further information.
(f) The change in acquisitions in 2020 primarily reflects our acquisition of Be & Cheery. See Note 14 for further information.
77
60859_10k_pgs_iii - 127.indd 77
60859_10k_pgs_iii - 127.indd 77
3/13/21 5:41 PM
3/13/21 5:41 PM
Note 5 — Income Taxes
The components of income before income taxes are as follows:
United States
Foreign
$
$
The provision for/(benefit from) income taxes consisted of the following:
2020
4,070 $
4,999
9,069 $
2019
4,123 $
5,189
9,312 $
2018
3,864
5,325
9,189
Current:
U.S. Federal
Foreign
State
Deferred:
U.S. Federal
Foreign
State
2020
2019
2018
715 $
932
110
1,757
652 $
807
196
1,655
437
378
63
878
273
(167)
31
137
1,894 $
325
(31)
10
304
1,959 $
140
(4,379)
(9)
(4,248)
(3,370)
$
$
A reconciliation of the U.S. Federal statutory tax rate to our annual tax rate is as follows:
U.S. Federal statutory tax rate
State income tax, net of U.S. Federal tax benefit
Lower taxes on foreign results
One-time mandatory transition tax - TCJ Act
Remeasurement of deferred taxes - TCJ Act
International reorganizations
Tax settlements
Other, net
Annual tax rate
Tax Cuts and Jobs Act
2020
21.0 %
1.2
(0.8)
—
—
—
—
(0.5)
20.9 %
2019
21.0 %
1.6
(0.9)
(0.1)
—
—
—
(0.6)
21.0 %
2018
21.0 %
0.5
(2.2)
0.1
(0.4)
(47.3)
(7.8)
(0.6)
(36.7) %
During the fourth quarter of 2017, the TCJ Act was enacted in the United States. Among its many
provisions, the TCJ Act imposed a mandatory one-time transition tax on undistributed international
earnings and reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018.
In 2017, the SEC issued guidance related to the TCJ Act which allowed recording of provisional tax
expense using a measurement period, not to exceed one year, when information necessary to complete the
accounting for the effects of the TCJ Act is not available. We elected to apply the measurement period
provisions of this guidance to certain income tax effects of the TCJ Act when it became effective in the
fourth quarter of 2017.
As a result of the enactment of the TCJ Act, we recognized a provisional net tax expense of $2.5 billion
($1.70 per share) in the fourth quarter of 2017.
78
60859_10k_pgs_iii - 127.indd 78
60859_10k_pgs_iii - 127.indd 78
3/13/21 5:41 PM
3/13/21 5:41 PM
The provisional measurement period allowed by the SEC ended in the fourth quarter of 2018. As a result,
in 2018, we recognized a net tax benefit of $28 million ($0.02 per share) related to the TCJ Act. While our
accounting for the recorded impact of the TCJ Act was deemed to be complete, additional guidance issued
by the IRS impacted our recorded amounts after December 29, 2018. In 2019, we recognized a net tax
benefit totaling $8 million ($0.01 per share) related to the TCJ Act. There were no tax amounts recognized
in 2020 related to the TCJ Act.
As of December 26, 2020, our mandatory transition tax liability was $3.2 billion, which must be paid
through 2026 under the provisions of the TCJ Act. We reduced our liability through cash payments and
application of tax overpayments by $78 million in 2020, $663 million in 2019 and $150 million in 2018.
We currently expect to pay approximately $309 million of this liability in 2021.
The TCJ Act also created a requirement that certain income earned by foreign subsidiaries, known as
global intangible low-tax income (GILTI), must be included in the gross income of their U.S. shareholder.
The FASB allows an accounting policy election of either recognizing deferred taxes for temporary
differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period
expense when incurred. During the first quarter of 2018, we elected to treat the tax effect of GILTI as a
current-period expense when incurred.
Coronavirus Aid, Relief, and Economic Security Act
The CARES Act was enacted on March 27, 2020 in the United States. The CARES Act and related notices
include several significant provisions, such as delaying certain payroll tax payments, mandatory transition
tax payments under the TCJ Act and estimated income tax payments. The CARES Act did not have a
material impact on our financial results in 2020, including on our annual estimated effective tax rate or on
our liquidity. We will continue to monitor and assess the impact similar legislation in other countries may
have on our business and financial results.
Other Tax Matters
On May 19, 2019, a public referendum held in Switzerland passed the TRAF, effective January 1,
2020. The enactment of certain provisions of the TRAF resulted in adjustments to our deferred taxes.
During 2020, we recorded a net tax benefit of $72 million related to the adoption of the TRAF in the
Swiss Canton of Bern. During 2019, we recorded net tax expense of $24 million related to the impact of
the TRAF. While the accounting for the impacts of the TRAF are deemed to be complete, further
adjustments to our financial statements and related disclosures could be made in future quarters, including
in connection with final tax return filings.
In 2018, we reorganized certain of our international operations, including the intercompany transfer of
certain intangible assets. As a result, we recognized other net tax benefits of $4.3 billion ($3.05 per share)
in 2018. The related deferred tax asset of $4.4 billion is being amortized over a period of 15 years
beginning in 2019. Additionally, the reorganization generated significant net operating loss carryforwards
and related deferred tax assets that are not expected to be realized, resulting in the recording of a full
valuation allowance.
60859_10k_pgs_iii - 127.indd 79
60859_10k_pgs_iii - 127.indd 79
3/13/21 5:41 PM
3/13/21 5:41 PM
79
Deferred tax liabilities and assets are comprised of the following:
Deferred tax liabilities
Debt guarantee of wholly-owned subsidiary
Property, plant and equipment
Recapture of net operating losses
Right-of-use assets
Other
Gross deferred tax liabilities
Deferred tax assets
Net carryforwards
Intangible assets other than nondeductible goodwill
Share-based compensation
Retiree medical benefits
Other employee-related benefits
Pension benefits
Deductible state tax and interest benefits
Lease liabilities
Other
Gross deferred tax assets
Valuation allowances
Deferred tax assets, net
Net deferred tax assets
A summary of our valuation allowance activity is as follows:
Balance, beginning of year
Provision
Other additions/(deductions)
Balance, end of year
Reserves
2020
2019
$
578 $
1,851
504
371
159
3,463
5,008
1,146
90
153
373
80
150
371
866
8,237
(4,686)
3,551
$
(88) $
578
1,583
335
345
167
3,008
4,168
793
94
154
350
104
126
345
741
6,875
(3,599)
3,276
(268)
2020
3,599 $
1,082
5
4,686 $
2019
3,753 $
(124)
(30)
3,599 $
2018
1,163
2,639
(49)
3,753
$
$
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:
Jurisdiction
United States
Mexico
United Kingdom
Canada (Domestic)
Canada (International)
Russia
Years Open to Audit
2014-2019
2014-2019
2017-2019
2016-2019
2010-2019
2017-2019
Years Currently
Under Audit
2014-2016
2014-2016
None
2016-2017
2010-2017
None
80
60859_10k_pgs_iii - 127.indd 80
60859_10k_pgs_iii - 127.indd 80
3/13/21 5:41 PM
3/13/21 5:41 PM
In 2018, we recognized a non-cash tax benefit of $364 million ($0.26 per share) resulting from the
conclusion of certain international tax audits. Additionally, in 2018, we recognized non-cash tax benefits
of $353 million ($0.24 per share) as a result of our agreement with the IRS resolving all open matters
related to the audits of taxable years 2012 and 2013, including the associated state impact. The conclusion
of certain international tax audits and the resolution with the IRS, collectively, resulted in non-cash tax
benefits totaling $717 million ($0.50 per share) in 2018.
Our annual tax rate is based on our income, statutory tax rates and tax planning strategies and transactions,
including transfer pricing arrangements, available to us in the various jurisdictions 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 likely will 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, new tax laws, relevant court cases or tax authority settlements. 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.
As of December 26, 2020, the total gross amount of reserves for income taxes, reported in other liabilities,
was $1.6 billion. 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 $338 million as of December 26, 2020, of
which $93 million of tax expense was recognized in 2020. The gross amount of interest accrued, reported
in other liabilities, was $250 million as of December 28, 2019, of which $84 million of tax expense was
recognized in 2019.
A reconciliation of unrecognized tax benefits 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
Statutes of limitations expiration
Translation and other
Balance, end of year
Carryforwards and Allowances
2020
1,395 $
128
153
(22)
(13)
(23)
3
1,621 $
2019
1,440
179
93
(201)
(74)
(47)
5
1,395
$
$
Operating loss carryforwards totaling $28.3 billion as of December 26, 2020 are being carried forward in a
number of foreign and state jurisdictions where we are permitted to use tax operating losses from prior
periods to reduce future taxable income. These operating losses will expire as follows: $0.2 billion in
2021, $25.2 billion between 2022 and 2040 and $2.9 billion may be carried forward indefinitely. 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.
Undistributed International Earnings
In 2018, we repatriated $20.4 billion of cash, cash equivalents and short-term investments held in our
foreign subsidiaries without such funds being subject to further U.S. federal income tax liability, related to
the TCJ Act. As of December 26, 2020, we had approximately $6 billion of undistributed international
earnings. We intend to continue to reinvest $6 billion of earnings outside the United States for the
81
60859_10k_pgs_iii - 127.indd 81
60859_10k_pgs_iii - 127.indd 81
3/13/21 5:41 PM
3/13/21 5:41 PM
foreseeable future and while future distribution of these earnings would not be subject to U.S. federal tax
expense, no deferred tax liabilities with respect to items such as certain foreign exchange gains or losses,
foreign withholding taxes or state taxes have been recognized. It is not practicable for us to determine the
amount of unrecognized tax expense on these reinvested international earnings.
Note 6 — Share-Based Compensation
Our share-based compensation program is designed to attract and retain employees while also aligning
employees’ interests with the interests of our shareholders. PepsiCo has granted stock options, RSUs,
PSUs, PEPunits and long-term cash awards to employees under the shareholder-approved PepsiCo, Inc.
Long-Term Incentive Plan (LTIP). Executives who are awarded long-term incentives based on their
performance may generally elect to receive their grant in the form of stock options or RSUs, or a
combination thereof. Executives who elect stock options receive four stock options for every one RSU that
would have otherwise been granted. Certain executive officers and other senior executives do not have a
choice and are granted 66% PSUs and 34% long-term cash, each of which are subject to pre-established
performance targets.
The Company may use authorized and unissued shares to meet share requirements resulting from the
exercise of stock options and the vesting of RSUs, PSUs and PEPunits.
As of December 26, 2020, 52 million shares were available for future share-based compensation grants
under the LTIP.
The following table summarizes our total share-based compensation expense, which is primarily recorded
in selling, general and administrative expenses, and excess tax benefits recognized:
Share-based compensation expense - equity awards
Share-based compensation expense - liability awards
Restructuring charges
Total
Income tax benefits recognized in earnings related to share-based
compensation
Excess tax benefits related to share-based compensation
2020
264 $
11
(1)
274 $
2019
237 $
8
(2)
243 $
2018
256
20
(6)
270
48 $
35 $
39 $
50 $
45
48
$
$
$
$
As of December 26, 2020, there was $300 million of total unrecognized compensation cost related to
nonvested share-based compensation grants. This unrecognized compensation cost is expected to be
recognized over a weighted-average period of two years.
Method of Accounting and Our Assumptions
The fair value of share-based award grants is amortized to expense over the vesting period, primarily three
years. Awards to employees eligible for retirement prior to the award becoming fully vested are amortized
to expense over the period through the date that the employee first becomes eligible to retire and is no
longer required to provide service to earn the award. In addition, we use historical data to estimate
forfeiture rates and record share-based compensation expense only for those awards that are expected to
vest.
We do not backdate, reprice or grant share-based compensation awards retroactively. Repricing of awards
would require shareholder approval under the LTIP.
60859_10k_pgs_iii - 127.indd 82
60859_10k_pgs_iii - 127.indd 82
3/13/21 5:41 PM
3/13/21 5:41 PM
82
Stock Options
A stock option permits the holder to purchase shares of PepsiCo common stock at a specified price. 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.
Our weighted-average Black-Scholes fair value assumptions are as follows:
Expected life
Risk-free interest rate
Expected volatility
Expected dividend yield
2020
6 years
0.9 %
14 %
3.4 %
2019
5 years
2.4 %
14 %
3.1 %
2018
5 years
2.6 %
12 %
2.7 %
The expected life is the period over which our employee groups are expected to hold their options. It is
based on our historical experience 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 option activity for the year ended December 26, 2020 is as follows:
Weighted-
Average
Contractual
Life
Remaining
(years)
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value(a)
Options(a)
Outstanding at December 28, 2019
Granted
Exercised
Forfeited/expired
Outstanding at December 26, 2020
Exercisable at December 26, 2020
Expected to vest as of December 26, 2020
(a)
In thousands.
11,625 $
1,847 $
(2,440) $
(392) $
10,640 $
6,545 $
3,719 $
89.03
131.79
73.37
102.69
99.54
85.84
120.67
Restricted Stock Units and Performance Stock Units
5.26 $ 484,362
3.31 $ 387,625
90,725
8.31 $
Each RSU represents our obligation to deliver to the holder one share of PepsiCo common stock when the
award vests at the end of the service period. PSUs are awards pursuant to which a number of shares are
delivered to the holder upon vesting at the end of the service period based on PepsiCo’s performance
against specified financial performance metrics. The number of shares may be increased to the maximum
or reduced to the minimum threshold based on the results of these performance metrics in accordance with
the terms established at the time of the award. During the vesting period, RSUs and PSUs accrue dividend
equivalents that pay out in cash (without interest) if and when the applicable RSU or PSU vests and
becomes payable.
The fair value of RSUs and PSUs are measured at the market price of the Company’s stock on the date of
grant.
83
60859_10k_pgs_iii - 127.indd 83
60859_10k_pgs_iii - 127.indd 83
3/13/21 5:41 PM
3/13/21 5:41 PM
A summary of our RSU and PSU activity for the year ended December 26, 2020 is as follows:
Weighted-
Average
Grant-Date
Fair Value
Weighted-
Average
Contractual
Life
Remaining
(years)
Aggregate
Intrinsic
Value(a)
RSUs/PSUs(a)
Outstanding at December 28, 2019
Granted (b)
Converted (c)
Forfeited
6,380 $
2,496 $
(2,315) $
(434) $
6,127 $
5,447 $
111.53
131.21
109.61
117.51
119.92
119.72
Outstanding at December 26, 2020 (d)
Expected to vest as of December 26, 2020
(a)
(b) Grant activity for all PSUs are disclosed at target.
(c) Represents the number of PSUs that vested during the year, net of awards above and below target levels based on the achievement of its
1.27 $ 888,832
1.26 $ 790,179
In thousands.
performance conditions.
(d) The outstanding PSUs for which the vesting period has not ended as of December 26, 2020, at the threshold, target and maximum award
levels were zero, 1 million and 2 million, respectively.
PEPunits
PEPunits provide an opportunity to earn shares of PepsiCo common stock with a value that adjusts based
upon changes in PepsiCo’s absolute stock price as well as PepsiCo’s Total Shareholder Return relative to
the S&P 500 over a three-year performance period. The fair value of PEPunits is measured using the
Monte-Carlo simulation model, which incorporates into the fair-value determination the possibility that
the market condition may not be satisfied until actual performance is determined.
PEPunits were last granted in 2015 and all outstanding PEPunits were converted to 278,000 shares in
2018.
Long-Term Cash
Certain executive officers and other senior executives were granted long-term cash awards for which final
payout is based on PepsiCo’s Total Shareholder Return relative to a specific set of peer companies and
achievement of a specified performance target over a three-year performance period.
Long-term cash awards that qualify as liability awards under share-based compensation guidance are
valued through the end of the performance period on a mark-to-market basis using the Monte Carlo
simulation model.
60859_10k_pgs_iii - 127.indd 84
60859_10k_pgs_iii - 127.indd 84
3/13/21 5:41 PM
3/13/21 5:41 PM
84
A summary of our long-term cash activity for the year ended December 26, 2020 is as follows:
Long-Term
Cash
Award(a)
Balance
Sheet Date
Fair Value(a)
Contractual
Life
Remaining
(years)
Outstanding at December 28, 2019
$
Granted (b)
Vested (c)
Forfeited
44,224
18,975
(15,686)
—
47,513 $
42,658 $
Outstanding at December 26, 2020 (d)
Expected to vest as of December 26, 2020
(a)
(b) Grant activity for all long-term cash awards are disclosed at target.
(c) Represents the amount of long-term cash awards that vested during the year, net of awards above and below target levels based on the
45,669
41,318
1.23
1.14
In thousands.
$
$
achievement of its market conditions.
(d) The outstanding long-term cash awards for which the vesting period has not ended as of December 26, 2020, at the threshold, target and
maximum award levels were zero, 48 million and 95 million, respectively.
Other Share-Based Compensation Data
The following is a summary of other share-based compensation data:
2020
2019
2018
Stock Options
Total number of options granted (a)
Weighted-average grant-date fair value of options granted
Total intrinsic value of options exercised (a)
Total grant-date fair value of options vested (a)
RSUs/PSUs
Total number of RSUs/PSUs granted (a)
Weighted-average grant-date fair value of RSUs/PSUs granted
Total intrinsic value of RSUs/PSUs converted (a)
Total grant-date fair value of RSUs/PSUs vested (a)
PEPunits
Total intrinsic value of PEPunits converted (a)
Total grant-date fair value of PEPunits vested (a)
(a)
In thousands.
1,847
8.31 $
1,286
10.89 $
1,429
$
9.80
$ 155,096 $ 275,745 $ 224,663
9,838 $ 15,506
$
8,652 $
2,496
2,754
2,634
$ 131.21 $ 116.87 $ 108.75
$ 303,165 $ 333,951 $ 260,287
$ 235,523 $ 275,234 $ 232,141
$
$
— $
— $
— $ 30,147
9,430
— $
As of December 26, 2020 and December 28, 2019, there were approximately 287,000 and 269,000
outstanding awards, respectively, consisting primarily of phantom stock units that were granted under the
PepsiCo Director Deferral Program and will be settled in shares of PepsiCo common stock pursuant to the
LTIP at the end of the applicable deferral period, not included in the tables above.
60859_10k_pgs_iii - 127.indd 85
60859_10k_pgs_iii - 127.indd 85
3/13/21 5:41 PM
3/13/21 5:41 PM
85
Note 7 — Pension, Retiree Medical and Savings Plans
In 2020, lump sum distributions exceeded the total of annual service and interest cost and triggered a pre-
tax settlement charge in Plan A of $205 million ($158 million after-tax or $0.11 per share).
In 2020, we adopted an amendment to the U.S. defined benefit pension plans to freeze benefit accruals for
salaried participants, effective December 31, 2025. Since 2011, salaried new hires are not eligible to
participate in the defined benefit plan. After the effective date, all salaried participants will receive an
employer contribution to the 401(k) savings plan based on age and years of service regardless of employee
contribution and will have the opportunity to receive employer contributions to match employee
contributions up to defined limits. As a result of this amendment, pension benefits pre-tax expense is
expected to decrease by approximately $70 million in 2021, primarily impacting corporate unallocated
expenses.
In 2020, we approved an amendment to reorganize the U.S. qualified defined benefit pension plans that
resulted in the transfer of certain participants from Plan A to Plan I and to a newly created plan, Plan H,
effective January 1, 2021. The benefits offered to the plans’ participants were unchanged. The
reorganization will facilitate a more targeted investment strategy and provide additional flexibility in
evaluating opportunities to reduce risk and volatility. No material impact to pension benefit pre-tax
expense is expected from this reorganization.
In 2020, we adopted an amendment, effective January 1, 2021, to enhance the pay credit benefits of
certain participants in Plan H. As a result of this amendment, pension benefits pre-tax expense is expected
to increase approximately $45 million in 2021, primarily impacting service cost expense.
In 2019, Plan A purchased a group annuity contract whereby a third-party insurance company assumed the
obligation to pay and administer future annuity payments for certain retirees. This transaction triggered a
pre-tax settlement charge in 2019 of $220 million ($170 million after-tax or $0.12 per share).
Also in 2019, certain former employees who had vested benefits in our U.S. defined benefit pension plans
were offered the option of receiving a one-time lump sum payment equal to the present value of the
participant’s pension benefit. This transaction triggered a pre-tax settlement charge in 2019 of $53 million
($41 million after-tax or $0.03 per share). Collectively, the group annuity contract and one-time lump sum
payments to certain former employees who had vested benefits resulted in settlement charges in 2019 of
$273 million ($211 million###$0.15 per share).
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, as well as changes in our
assumptions, are determined at each measurement date. These differences are recognized as a component
of net gain or loss in accumulated other comprehensive loss. If this net accumulated gain or loss exceeds
10% of the greater of the market-related value of plan assets or plan obligations, a portion of the net gain
or loss is included in other pension and retiree medical benefits (expense)/income for the following year
based upon the average remaining service life for participants in Plan A (approximately 10 years) and
retiree medical (approximately 8 years), or the remaining life expectancy for participants in Plan I
(approximately 23 years). In 2021, we expect the average remaining service life for participants in Plan A
to be approximately 9 years, the remaining life expectancy for participants in Plan I to be approximately
27 years and the average remaining service life for participants in Plan H to be approximately 11 years.
The cost or benefit of plan changes that increase or decrease benefits for prior employee service (prior
service cost/(credit)) is included in other pension and retiree medical benefits (expense)/income on a
straight-line basis over the average remaining service life for participants in both Plan A and Plan H,
except that prior service cost/(credit) for salaried participants subject to the freeze will be amortized on a
86
60859_10k_pgs_iii - 127.indd 86
60859_10k_pgs_iii - 127.indd 86
3/13/21 5:41 PM
3/13/21 5:41 PM
straight-line basis over the period up to the effective date of the freeze, or the remaining life expectancy
for participants in Plan I.
Selected financial information for our pension and retiree medical plans is as follows:
Change in projected benefit obligation
Obligation at beginning of year
Service cost
Interest cost
Plan amendments
Participant contributions
Experience loss
Benefit payments
Settlement/curtailment
Special termination benefits
Other, including foreign currency adjustment
Obligation at end of year
Change in fair value of plan assets
Fair value at beginning of year
Actual return on plan assets
Employer contributions/funding
Participant contributions
Benefit payments
Settlement
Other, including foreign currency adjustment
Fair value at end of year
Funded status
Amounts recognized
Other assets
Other current liabilities
Other liabilities
Net amount recognized
Pension
Retiree Medical
U.S.
2020
2019
International
2020
2019
2020
2019
$ 15,230 $ 13,807 $
434
435
(221)
—
2,042
(378)
(808)
19
—
381
543
15
—
2,091
(341)
(1,268)
2
—
$ 16,753 $ 15,230 $
$ 14,302 $ 12,258 $
1,908
387
—
(378)
(754)
—
3,101
550
—
(341)
(1,266)
—
$ 15,465 $ 14,302 $
(928) $
$
(1,288) $
3,753 $
86
85
(17)
2
467
(92)
(24)
—
170
4,430 $
3,732 $
401
120
2
(92)
(29)
169
4,303 $
(127) $
3,098 $
73
97
1
2
515
(100)
(31)
—
98
3,753 $
3,090 $
551
122
2
(100)
(31)
98
3,732 $
(21) $
988 $
25
25
(25)
—
81
(89)
—
—
1
1,006 $
302 $
47
55
—
(89)
—
—
315 $
(691) $
$
797 $
744 $
110 $
99 $
— $
(53)
(52)
(2,032)
(1,620)
(1)
(236)
(1)
(119)
(51)
(640)
$
(1,288) $
(928) $
(127) $
(21) $
(691) $
996
23
36
—
—
36
(105)
—
—
2
988
285
78
44
—
(105)
—
—
302
(686)
—
(58)
(628)
(686)
Amounts included in accumulated other comprehensive loss (pre-tax)
Net loss/(gain)
Prior service (credit)/cost
Total
$
4,116 $
3,516 $
1,149 $
914 $
(212) $
(285)
(119)
114
(19)
—
(45)
(32)
$
3,997 $
3,630 $
1,130 $
914 $
(257) $
(317)
Changes recognized in net loss/(gain) included in other comprehensive loss
Net loss/(gain) arising in current year
Amortization and settlement recognition
Foreign currency translation loss/(gain)
Total
$
1,009 $
(409)
(120) $
(457)
—
—
268 $
(75)
42
152 $
(44)
26
50 $
23
—
$
600 $
(577) $
235 $
134 $
73 $
(24)
27
(1)
2
Accumulated benefit obligation at end of year
$ 15,949 $ 14,255 $
4,108 $
3,441
The net loss/(gain) arising in the current year is primarily attributable to the decrease in discount rate,
offset by actual asset returns exceeding expected returns.
87
60859_10k_pgs_iii - 127.indd 87
60859_10k_pgs_iii - 127.indd 87
3/13/21 5:41 PM
3/13/21 5:41 PM
The amount we report in operating profit as pension and retiree medical cost is service cost, which is the
value of benefits earned by employees for working during the year.
The amounts we report below operating profit as pension and retiree medical cost consist of the following
components:
•
Interest cost is the accrued interest on the projected benefit obligation due to the passage of time.
• Expected return on plan assets is the long-term return we expect to earn on plan investments for
our funded plans that will be used to settle future benefit obligations.
• Amortization of prior service cost/(credit) represents the recognition in the income statement of
benefit changes resulting from plan amendments.
•
• Amortization of net loss/(gain) represents the recognition in the income statement of changes in the
amount of plan assets and the projected benefit obligation based on changes in assumptions and
actual experience.
Settlement/curtailment loss/(gain) represents the result of actions that effectively eliminate all or a
portion of related projected benefit obligations. Settlements are triggered when payouts to settle the
projected benefit obligation of a plan due to lump sums or other events exceed the annual service
and interest cost. Settlements are recognized when actions are irrevocable and we are relieved of
the primary responsibility and risk for projected benefit obligations. Lump sum payouts are
generally higher when interest rates are lower. Curtailments are due to events such as plant
closures or the sale of a business resulting in a reduction of future service or benefits. Curtailment
losses are recognized when an event is probable and estimable, while curtailment gains are
recognized when an event has occurred (when the related employees terminate or an amendment is
adopted).
Special termination benefits are the additional benefits offered to employees upon departure due to
actions such as restructuring.
•
The components of total pension and retiree medical benefit costs are as follows:
Pension
Retiree Medical
U.S.
International
Service cost
Other pension and retiree medical benefits (income)/expense:
Interest cost
Expected return on plan assets
Amortization of prior service cost/(credits)
Amortization of net losses/(gains)
Settlement/curtailment losses (a)
Special termination benefits
Total other pension and retiree medical benefits
(income)/expense
Total
2020
2018
2019
$ 434 $ 381 $ 431 $ 86 $ 73 $ 92 $ 25 $ 23 $ 32
2019
2018
2020
2018
2020
2019
$ 435 $ 543 $ 482 $ 85 $ 97 $ 93 $ 25 $ 36 $ 34
(19)
(188)
(929)
(20)
—
12
(8)
32
196
—
12
213
1
—
19
(18)
(19)
(27)
—
—
(892)
10
161
296
1
(202)
—
61
19
—
(16)
(12)
(23)
—
—
(943)
3
179
8
36
(197)
—
45
6
2
$ (54) $ 119 $ (235) $ (37) $ (47) $ (51) $ (26) $ (28) $ (12)
(5) $ 20
$ 380 $ 500 $ 196 $ 49 $ 26 $ 41 $
(1) $
(a)
In 2020, U.S. includes a settlement charge of $205 million ($158 million after-tax or $0.11 per share) related to lump sum distributions
exceeding the total of annual service and interest cost. In 2019, U.S. includes settlement charges related to the purchase of a group
annuity contract of $220 million ($170 million after-tax or $0.12 per share) and a pension lump sum settlement charge of $53 million
($41 million after-tax or $0.03 per share).
60859_10k_pgs_iii - 127.indd 88
60859_10k_pgs_iii - 127.indd 88
3/13/21 5:41 PM
3/13/21 5:41 PM
88
The following table provides the weighted-average assumptions used to determine net periodic benefit
cost and projected benefit obligation for our pension and retiree medical plans:
Net Periodic Benefit Cost
Service cost discount rate
Interest cost discount rate
Expected return on plan assets
Rate of salary increases
Projected Benefit Obligation
Discount rate
Rate of salary increases
Pension
Retiree Medical
U.S.
International
2020
2019
2018
2020
2019
2018
2020
2019
2018
3.4 %
2.9 %
6.8 %
3.1 %
4.4 %
4.1 %
7.1 %
3.1 %
3.8 %
3.4 %
7.2 %
3.1 %
3.2 %
2.4 %
5.6 %
3.3 %
4.2 %
3.2 %
5.8 %
3.7 %
3.5 %
2.8 %
6.0 %
3.7 %
3.2 %
2.6 %
5.8 %
4.3 %
3.8 %
6.6 %
3.6 %
3.0 %
6.5 %
2.5 %
3.0 %
3.3 %
3.1 %
4.4 %
3.1 %
2.0 %
3.3 %
2.5 %
3.3 %
3.4 %
3.7 %
2.3 %
3.1 %
4.2 %
The following table provides selected information about plans with accumulated benefit obligation and
total projected benefit obligation in excess of plan assets:
Pension
Retiree Medical
U.S.
International
2020
Selected information for plans with accumulated benefit obligation in excess of plan assets(a)
2020
2019
2019
2020
2019
Obligation for service to date
Fair value of plan assets
$
$
(5,537) $
(9,194) $
(172) $
4,156 $
8,497 $
123 $
(192)
151
Selected information for plans with projected benefit obligation in excess of plan assets
Benefit obligation
Fair value of plan assets
$
$
(9,172) $
(10,169) $
(2,933) $
(632) $
(1,006) $
7,088 $
8,497 $
2,696 $
512 $
315 $
(988)
302
(a) The decrease in U.S. pension plans in 2020 primarily reflects the approved reorganization of the U.S. qualified defined benefit plans,
resulting in the transfer of obligations and plan assets relating to certain participants from Plan A to Plan I and Plan H.
Of the total projected pension benefit obligation as of December 26, 2020, approximately $854 million
relates to plans that we do not fund because the funding of such plans does not receive favorable tax
treatment.
Future Benefit Payments
Our estimated future benefit payments are as follows:
Pension
2021
2022
2023
2024
2025
2026 - 2030
$
925 $
1,080 $
915 $
960 $
990 $
5,270
Retiree medical (a)
(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 $1 million for each of the years from 2021 through 2025 and
approximately $4 million in total for 2026 through 2030.
95 $
95 $
90 $
85 $
80 $
370
$
These future benefit payments to beneficiaries include payments from both funded and unfunded plans.
60859_10k_pgs_iii - 127.indd 89
60859_10k_pgs_iii - 127.indd 89
3/13/21 5:41 PM
3/13/21 5:41 PM
89
Funding
Contributions to our pension and retiree medical plans were as follows:
Discretionary (a)
Non-discretionary
Total
Pension
Retiree Medical
2020
2019
2018
2020
2019
2018
$
$
339 $
417 $
1,417 $
168
255
198
507 $
672 $
1,615 $
— $
55
55 $
— $
44
44 $
37
56
93
(a)
Includes $325 million contribution in 2020, $400 million contribution in 2019 and $1.4 billion contribution in 2018 to fund Plan A in the
United States.
In November 2020, we received approval from our Board of Directors to make discretionary contributions
of $500 million to our U.S. qualified defined benefit plans. We contributed $300 million of the approved
amount in January 2021; we expect to contribute the remaining $200 million in the third quarter of 2021.
In addition, in 2021, we expect to make non-discretionary contributions of approximately $160 million to
our U.S. and international pension benefit plans and approximately $50 million for retiree medical
benefits.
We continue to monitor the impact of the COVID-19 pandemic and related global economic conditions
and uncertainty on the net unfunded status of our pension and retiree medical plans. We regularly evaluate
opportunities to reduce risk and volatility associated with our pension and retiree medical plans.
Plan Assets
Our pension plan investment strategy includes the use of actively managed accounts and is reviewed
periodically in conjunction with plan obligations, an evaluation of market conditions, tolerance for risk
and cash requirements for benefit payments. This strategy is also applicable to funds held for the retiree
medical plans. Our investment objective includes ensuring that funds are available to meet the plans’
benefit obligations when they become due. Assets contributed to our pension plans are no longer
controlled by us, but become the property of our individual pension plans. However, we are indirectly
impacted by changes in these plan assets as compared to changes in our projected obligations. Our overall
investment policy is to prudently invest plan assets in a well-diversified portfolio of equity and high-
quality debt securities and real estate to achieve our long-term return expectations. Our investment policy
also permits the use of derivative instruments, such as futures and forward contracts, to reduce interest rate
and foreign currency risks. Futures contracts represent commitments to purchase or sell securities at a
future date and at a specified price. Forward contracts consist of currency forwards.
For 2021 and 2020, our expected long-term rate of return on U.S. plan assets is 6.4% and 6.8%,
respectively. Our target investment allocations for U.S. plan assets are as follows:
Fixed income
U.S. equity
International equity
Real estate
2021
51 %
24 %
21 %
4 %
2020
50 %
25 %
21 %
4 %
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.
The expected return on plan assets is based on our investment strategy and 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
90
60859_10k_pgs_iii - 127.indd 90
60859_10k_pgs_iii - 127.indd 90
3/13/21 5:41 PM
3/13/21 5:41 PM
reasonableness of the long-term rates. We evaluate our expected return assumptions annually to ensure
that they are reasonable. To calculate the expected return on plan assets, our market-related value of assets
for fixed income is the actual fair value. For all other asset categories, such as equity securities, 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.
Plan assets measured at fair value as of year-end 2020 and 2019 are categorized consistently by Level 1
(quoted prices in active markets for identical assets), Level 2 (significant other observable inputs) and
Level 3 (significant unobservable inputs) in both years and are as follows:
U.S. plan assets (a)
Equity securities, including preferred stock (b)
Government securities (c)
Corporate bonds (c)
Mortgage-backed securities (c)
Contracts with insurance companies (d)
Cash and cash equivalents (e)
Sub-total U.S. plan assets
Real estate commingled funds measured at net asset value (f)
Dividends and interest receivable, net of payables
Total U.S. plan assets
International plan assets
Equity securities (b)
Government securities (c)
Corporate bonds (c)
Fixed income commingled funds (g)
Contracts with insurance companies (d)
Cash and cash equivalents
Sub-total international plan assets
Real estate commingled funds measured at net asset value (f)
Dividends and interest receivable
Total international plan assets
Fair Value
Hierarchy Level
2020
2019
1
2
2
2
3
1, 2
1, 2
2
2
1
3
1
$
$
$
$
7,179 $
2,177
5,437
119
9
278
15,199
517
64
15,780 $
2,119 $
937
445
509
50
33
4,093
202
8
4,303 $
6,605
2,154
4,737
159
9
275
13,939
605
60
14,604
1,973
725
331
437
42
24
3,532
193
7
3,732
(a)
(b)
Includes $315 million and $302 million in 2020 and 2019, respectively, of retiree medical plan assets that are restricted for purposes of providing
health benefits for U.S. retirees and their beneficiaries.
Invested in U.S. and international common stock and commingled funds, and the preferred stock portfolio was invested in domestic and
international corporate preferred stock investments. The common stock is based on quoted prices in active markets. The commingled funds are
based on the published price of the fund and include one large-cap fund that represents 13% and 16% of total U.S. plan assets for 2020 and 2019,
respectively. The preferred stock investments are based on quoted bid prices for comparable securities in the marketplace and broker/dealer
quotes in active markets. The international portfolio includes Level 1 assets of $2,119 million and $1,941 million for 2020 and 2019,
respectively, and Level 2 assets of $32 million for 2019.
(c) These investments are based on quoted bid prices for comparable securities in the marketplace and broker/dealer quotes in active markets.
Corporate bonds of U.S.-based companies represent 30% and 28% of total U.S. plan assets for 2020 and 2019, respectively.
(d) Based on the fair value of the contracts as determined by the insurance companies using inputs that are not observable. The changes in Level 3
amounts were not significant in the years ended December 26, 2020 and December 28, 2019.
(e) Cash and cash equivalents in the U.S. includes Level 1 assets of $178 million and $159 million for 2020 and 2019, respectively, and Level 2
assets of $100 million and $116 million for 2020 and 2019, respectively.
(f) The real estate commingled funds include investments in limited partnerships. These funds are based on the net asset value of the appraised value
of investments owned by these funds as determined by independent third parties using inputs that are not observable. The majority of the funds
are redeemable quarterly subject to availability of cash and have notice periods ranging from 45 to 90 days.
(g) Based on the published price of the fund.
60859_10k_pgs_iii - 127.indd 91
60859_10k_pgs_iii - 127.indd 91
3/13/21 5:41 PM
3/13/21 5:41 PM
91
Retiree Medical Cost Trend Rates
Average increase assumed
Ultimate projected increase
Year of ultimate projected increase
2021
6 %
5 %
2040
2020
6 %
5 %
2039
These assumed health care cost trend rates have an impact on the retiree medical plan expense and
obligation, however the cap on our share of retiree medical costs limits the impact.
Savings Plan
Certain U.S. employees are eligible to participate in a 401(k) savings plan, which is a voluntary defined
contribution plan. The plan is designed to help employees accumulate savings for retirement and we make
Company matching contributions for certain employees on a portion of employee contributions based on
years of service.
Certain U.S. salaried employees, who are not eligible to participate in a defined benefit pension plan, are
also eligible to receive an employer contribution based on age and years of service regardless of employee
contribution.
In 2020, 2019 and 2018, our total Company contributions were $225 million, $197 million and $180
million, respectively.
Note 8 — Debt Obligations
The following table summarizes our debt obligations:
Short-term debt obligations (b)
Current maturities of long-term debt
Commercial paper (0.2%)
Other borrowings (1.7% and 6.4%)
Long-term debt obligations (b)
Notes due 2020 (2.7%)
Notes due 2021 (2.2% and 2.4%)
Notes due 2022 (2.5% and 2.7%)
Notes due 2023 (1.5% and 2.8%)
Notes due 2024 (2.1% and 3.4%)
Notes due 2025 (2.7% and 3.1%)
Notes due 2026-2060 (2.9% and 3.4%)
Other, due 2020-2026 (1.3% and 1.3%)
2020(a)
2019(a)
$
$
3,358 $
396
26
3,780 $
2,848
—
72
2,920
—
3,356
3,867
3,017
3,067
3,227
27,165
29
43,728
(3,358)
2,840
3,276
3,831
1,272
1,839
1,691
17,219
28
31,996
(2,848)
$ 40,370 $ 29,148
Less: current maturities of long-term debt obligations
Total
(a) Amounts are shown net of unamortized net discounts of $260 million and $163 million for 2020 and 2019, respectively.
(b) The interest rates presented reflect weighted-average effective interest rates at year-end. Certain of our fixed rate indebtedness have been
swapped to floating rates through the use of interest rate derivative instruments. See Note 9 for further information regarding our interest
rate derivative instruments.
60859_10k_pgs_iii - 127.indd 92
60859_10k_pgs_iii - 127.indd 92
3/13/21 5:41 PM
3/13/21 5:41 PM
92
As of December 26, 2020 and December 28, 2019, our international debt of $29 million and $69 million,
respectively, was related to borrowings from external parties, including various lines of credit. These lines
of credit are subject to normal banking terms and conditions and are fully committed at least to the extent
of our borrowings.
In 2020, we issued the following senior notes:
Interest Rate
2.250 %
2.625 %
2.750 %
3.500 %
3.625 %
3.875 %
0.750 %
1.625 %
0.250 %
0.500 %
0.400 %
1.400 %
0.400 %
1.050 %
Maturity Date
March 2025 $
March 2027 $
March 2030 $
March 2040 $
March 2050 $
March 2060 $
May 2023 $
May 2030 $
May 2024 €
May 2028 €
October 2023 $
February 2031 $
October 2032 €
October 2050 €
Amount(a)
1,500
500
1,500
750
1,500
750
1,000
1,000
1,000
1,000
750
750
750
750
(a) Represents gross proceeds from issuances of long-term debt excluding debt issuance costs, discounts and premiums.
The net proceeds from the issuances of the above notes will be used for general corporate purposes,
including the repayment of commercial paper.
In 2020, we entered into a new 364-day unsecured revolving credit agreement (364-Day Credit
Agreement) which expires on May 31, 2021. The 364-Day Credit Agreement enables us and our
borrowing subsidiaries to borrow up to $3.75 billion in U.S. dollars and/or euros, subject to customary
terms and conditions. We may request that commitments under this agreement be increased up to $4.5
billion in U.S dollars and/or euros. 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 term loan
would mature no later than the anniversary of the then effective termination date. The 364-Day Credit
Agreement replaced our $3.75 billion 364-day credit agreement, dated as of June 3, 2019. The 364-Day
Credit Agreement is in addition to the five-year unsecured revolving credit agreement (Five-Year Credit
Agreement) we entered into in 2019, and which expires on June 3, 2024. The Five-Year Credit Agreement
enables us and our borrowing subsidiaries to borrow up to $3.75 billion in U.S. dollars and/or euros,
including a $0.75 billion swing line subfacility for euro-denominated borrowings permitted to be
borrowed on a same-day basis, subject to customary terms and conditions. We may request that
commitments under this agreement be increased up to $4.5 billion in U.S. dollars and/or euros.
Additionally, we may, once a year, request renewal of the agreement for an additional one-year period.
Funds borrowed under the 364-Day Credit Agreement and Five-Year Credit Agreement may be used for
general corporate purposes. Subject to certain conditions, we may borrow, prepay and reborrow amounts
under these agreements. As of December 26, 2020, there were no outstanding borrowings under the 364-
Day Credit Agreement or the Five-Year Credit Agreement.
In 2020, one of our international consolidated subsidiaries borrowed 21.7 billion South African rand, or
approximately $1.3 billion, from our two unsecured bridge loan facilities (Bridge Loan Facilities) to fund
93
60859_10k_pgs_iii - 127.indd 93
60859_10k_pgs_iii - 127.indd 93
3/13/21 5:41 PM
3/13/21 5:41 PM
our acquisition of Pioneer Foods. These borrowings were fully repaid in April 2020 and no further
borrowings under these Bridge Loan Facilities are permitted.
In 2020, we paid $1.1 billion to redeem all $1.1 billion outstanding principal amount of our 2.15% senior
notes due 2020 and terminated associated interest rate swaps with a notional amount of $0.8 billion.
In 2019, we paid $1.0 billion to redeem all $1.0 billion outstanding principal amount of our 4.50% senior
notes due 2020.
In 2018, we completed a cash tender offer to redeem $1.3 billion of certain notes issued by PepsiCo and
predecessors to a PepsiCo subsidiary for $1.6 billion in cash. Also in 2018, we completed an exchange
offer for certain notes issued by predecessors to a PepsiCo subsidiary for newly issued PepsiCo notes.
These notes were issued in an aggregate principal amount of $732 million, equal to the exchanged notes.
As a result of the above transactions, we recorded a pre-tax charge of $253 million ($191 million after-tax
or $0.13 per share) to interest expense in 2018, primarily representing the tender price paid over the
carrying value of the tendered notes.
Note 9 — Financial Instruments
Derivatives and Hedging
We are exposed to market risks arising from adverse changes in:
•
•
•
commodity prices, affecting the cost of our raw materials and energy;
foreign exchange rates and currency restrictions; and
interest rates.
In the normal course of business, we manage commodity price, foreign exchange and interest rate risks
through a variety of strategies, including productivity initiatives, global purchasing programs and hedging.
Ongoing productivity initiatives involve the identification and effective implementation of meaningful
cost-saving opportunities or efficiencies, including the use of derivatives. We do not use derivative
instruments for trading or speculative purposes. Our global purchasing programs include fixed-price
contracts and purchase orders and pricing agreements.
Our hedging strategies include the use of derivatives and, in the case of our net investment hedges, debt
instruments. 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. The
accounting for qualifying hedges allows changes in a hedging instrument’s fair value to offset
corresponding changes in the hedged item in the same reporting period that the hedged item impacts
earnings. Gains or losses on derivatives designated as cash flow hedges are recorded in accumulated other
comprehensive loss and reclassified to our income statement when the hedged transaction affects earnings.
If it becomes probable that the hedged transaction will not occur, we immediately recognize the related
hedging gains or losses in earnings; such gains or losses reclassified during the year ended December 26,
2020 were not material.
Cash flows from derivatives used to manage commodity price, foreign exchange or interest rate risks are
classified as operating activities in the cash flow statement. We classify both the earnings and cash flow
impact from these derivatives consistent with the underlying hedged item.
Credit Risk
We perform assessments of our counterparty credit risk regularly, including reviewing netting agreements,
if any, and 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
94
60859_10k_pgs_iii - 127.indd 94
60859_10k_pgs_iii - 127.indd 94
3/13/21 5:41 PM
3/13/21 5:41 PM
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.
Certain of our agreements with our counterparties require us to post full collateral on derivative
instruments in a net liability position if our credit rating is at A2 (Moody’s Investors Service, Inc.) or A
(S&P Global Ratings) and we have been placed on credit watch for possible downgrade or if our credit
rating falls below these levels. The fair value of all derivative instruments with credit-risk-related
contingent features that were in a net liability position as of December 26, 2020 was $283 million. We
have posted no collateral under these contracts and no credit-risk-related contingent features were
triggered as of December 26, 2020.
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 contracts and purchase orders, pricing agreements and derivative instruments, which
primarily include swaps and futures. In addition, risk to our supply of certain raw materials is mitigated
through purchases from multiple geographies and suppliers. We use derivatives, with terms of no more
than three years, to hedge price fluctuations related to a portion of our anticipated commodity purchases,
primarily for agricultural products, energy and metals. Derivatives used to hedge commodity price risk
that do not qualify for hedge accounting treatment are marked to market each period with the resulting
gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and
administrative expenses, depending on the underlying commodity. These gains and losses are
subsequently reflected in division results when the divisions recognize the cost of the underlying
commodity in operating profit.
Our commodity derivatives had a total notional value of $1.1 billion as of December 26, 2020 and
December 28, 2019.
Foreign Exchange
We are exposed to foreign exchange risks in the international markets in which our products are made,
manufactured, distributed or sold. Additionally, we are exposed to foreign exchange risk from net
investments in foreign subsidiaries, foreign currency purchases and foreign currency assets and liabilities
created in the normal course of business. We manage this risk through sourcing purchases from local
suppliers, negotiating contracts in local currencies with foreign suppliers and through the use of
derivatives, primarily forward contracts with terms of no more than two years. Exchange rate gains or
losses related to foreign currency transactions are recognized as transaction gains or losses on our income
statement as incurred. We also use net investment hedges to partially offset the effects of foreign currency
on our investments in certain of our foreign subsidiaries.
Our foreign currency derivatives had a total notional value of $1.9 billion as of December 26, 2020 and
December 28, 2019. The total notional amount of our debt instruments designated as net investment
hedges was $2.7 billion as of December 26, 2020 and $2.5 billion as of December 28, 2019. For foreign
currency derivatives that do not qualify for hedge accounting treatment, gains and losses were offset by
changes in the underlying hedged items, resulting in no material net impact on earnings.
Interest Rates
We centrally manage our debt and investment portfolios considering investment opportunities and risks,
tax consequences and overall financing strategies. We use various interest rate derivative instruments
including, but not limited to, interest rate swaps, cross-currency interest rate swaps, Treasury locks and
95
60859_10k_pgs_iii - 127.indd 95
60859_10k_pgs_iii - 127.indd 95
3/13/21 5:41 PM
3/13/21 5:41 PM
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 have been swapped to floating rates. The notional amount, interest payment and maturity
date of the interest rate and cross-currency interest rate swaps match the principal, interest payment and
maturity date of the related debt. Our cross-currency interest rate swaps have terms of no more than twelve
years. Our Treasury locks and swap locks are entered into to protect against unfavorable interest rate
changes relating to forecasted debt transactions.
Our interest rate derivatives had a total notional value of $3.0 billion as of December 26, 2020 and $5.0
billion as of December 28, 2019.
As of December 26, 2020, approximately 3% of total debt, after the impact of the related interest rate
derivative instruments, was subject to variable rates, compared to approximately 9% as of December 28,
2019.
Held-to-Maturity Debt Securities
Investments in debt securities that we have the positive intent and ability to hold until maturity are
classified as held-to-maturity. Highly liquid debt securities with original maturities of three months or less
are recorded as cash equivalents. Our held-to-maturity debt securities consist of U.S. Treasury securities
and commercial paper. As of December 26, 2020, we had $2.1 billion of investments in U.S. Treasury
securities with $2.0 billion recorded in cash and cash equivalents and $0.1 billion in short-term
investments. We had no investments in U.S. Treasury securities as of December 28, 2019. As of
December 26, 2020, we had $260 million of investments in commercial paper with $75 million recorded
in cash and cash equivalents and $185 million in short-term investments. As of December 28, 2019, we
had $130 million of investments in commercial paper recorded in cash and cash equivalents. Held-to-
maturity debt securities are recorded at amortized cost, which approximates fair value, and realized gains
or losses are reported in earnings. Our investments mature in less than one year. As of December 26, 2020
and December 28, 2019, gross unrecognized gains and losses and the allowance for expected credit losses
were not material.
60859_10k_pgs_iii - 127.indd 96
60859_10k_pgs_iii - 127.indd 96
3/13/21 5:41 PM
3/13/21 5:41 PM
96
Fair Value Measurements
The fair values of our financial assets and liabilities as of December 26, 2020 and December 28, 2019 are
categorized as follows:
2020
2019
Index funds (b)
Prepaid forward contracts (c)
Deferred compensation (d)
Contingent consideration (e)
Derivatives designated as fair
value hedging instruments:
Interest rate (f)
Derivatives designated as cash
flow hedging instruments:
Foreign exchange (g)
Interest rate (g)
Commodity (h)
Commodity (i)
Derivatives not designated as
hedging instruments:
Foreign exchange (g)
Commodity (h)
Commodity (i)
Fair Value
Hierarchy
Levels(a)
1
2
2
3
2
2
2
1
2
2
1
2
$
$
$
$
Assets(a)
$
$
$
$
231 $
18 $
— $
— $
Liabilities(a) Assets(a)
— $
— $
477 $
861 $
229 $
17 $
— $
— $
Liabilities(a)
—
—
468
—
2 $
— $
— $
5
9 $
13
—
32
54 $
71 $
307
—
—
378 $
5 $
—
2
2
9 $
32
390
5
5
432
$
Total derivatives at fair value (j)
$
$
Total
(a) Fair value hierarchy levels are defined in Note 7. Unless otherwise noted, financial assets are classified on our balance sheet within
prepaid expenses and other current assets and other assets. Financial liabilities are classified on our balance sheet within accounts
payable and other current liabilities and other liabilities.
4 $
8 $
3 $
—
19
23 $
79 $
328 $
—
7
15 $
393 $
1,731 $
23
6
32 $
41 $
287 $
2
7
24
33
470
938
(b) Based on the price of index funds. These investments are classified as short-term investments and are used to manage a portion of market
risk arising from our deferred compensation liability.
(c) Based primarily on the price of our common stock.
(d) Based on the fair value of investments corresponding to employees’ investment elections.
(e)
In connection with our acquisition of Rockstar, we recorded a liability for tax-related contingent consideration payable over up to 15
years, with an option to accelerate all remaining payments, with estimated maximum payments of approximately $1.1 billion, using
current tax rates. The fair value of the liability is estimated using probability-weighted, discounted future cash flows at current tax rates.
The significant unobservable inputs (Level 3) used to estimate the fair value include the expected future tax benefits associated with the
acquisition, the probability that the option to accelerate all remaining payments will be exercised and discount rates. The expected annual
future tax benefits range from approximately $40 million to $110 million, with an average of $70 million. The probability, in any given
year, that the option to accelerate will be exercised ranges from 3 to 25 percent, with a weighted-average payment period of
approximately 4 years. The discount rates range from less than 1 percent to 5 percent, with a weighted average of 3 percent. The
contingent consideration measured at fair value using unobservable inputs as of December 26, 2020 is $861 million, comprised of an
$882 million liability recognized at the acquisition date of Rockstar and a fair value decrease of $21 million in the year ended December
26, 2020, recorded in selling, general and administrative expenses.
(f) Based on London Interbank Offered Rate forward rates. As of December 26, 2020 and December 28, 2019, the carrying amount of
hedged fixed-rate debt was $0.2 billion and $2.2 billion, respectively, and classified on our balance sheet within short-term and long-
term debt obligations. As of December 26, 2020 and December 28, 2019, the cumulative amount of fair value hedging adjustments to
hedged fixed-rate debt was a $2 million gain and $5 million loss, respectively. As of December 26, 2020, the cumulative amount of fair
value hedging adjustments on discontinued hedges was a $19 million loss, which is being amortized over the remaining life of the related
debt obligations.
97
60859_10k_pgs_iii - 127.indd 97
60859_10k_pgs_iii - 127.indd 97
3/13/21 5:41 PM
3/13/21 5:41 PM
(g) Based on recently reported market transactions of spot and forward rates.
(h) Based on quoted contract prices on futures exchange markets.
(i) Based on recently reported market transactions of swap arrangements.
(j) Derivative assets and liabilities are presented on a gross basis on our balance sheet. Amounts subject to enforceable master netting
arrangements or similar agreements which are not offset on the balance sheet as of December 26, 2020 and December 28, 2019 were not
material. Collateral received or posted against our asset or liability positions was not material. Exchange-traded commodity futures are
cash-settled on a daily basis and, therefore, not included in the table as of December 26, 2020.
The carrying amounts of our cash and cash equivalents and short-term investments approximate fair value
due to their short-term maturity. Our cash equivalents and short-term investments are classified as Level 2
in the fair value hierarchy. The fair value of our debt obligations as of December 26, 2020 and
December 28, 2019 was $50 billion and $34 billion, respectively, based upon prices of similar instruments
in the marketplace, which are considered Level 2 inputs.
Losses/(gains) on our hedging instruments are categorized as follows:
Fair Value/Non-
designated Hedges
Losses/(Gains)
Recognized in
Income Statement(a)
2020
2019
Cash Flow and Net Investment Hedges
Losses/(Gains)
Reclassified from
Accumulated Other
Comprehensive Loss
into Income
Statement(b)
2020
Losses/(Gains)
Recognized in
Accumulated Other
Comprehensive Loss
2020
2019
Foreign exchange
Interest rate
Commodity
Net investment
Total
$
$
— $
(6)
53
—
47 $
(1) $
(64)
(17)
—
(82) $
(9) $
(96)
(21)
235
109 $
57 $
67
7
(30)
101 $
(43) $
(129)
56
—
(116) $
2019
3
7
4
—
14
(a) Foreign exchange derivative losses/gains are primarily included in selling, general and administrative expenses. Interest rate derivative
losses/gains are primarily from fair value hedges and are included in net interest expense and other. These losses/gains are substantially
offset by decreases/increases in the value of the underlying debt, which are also included in net interest expense and other. Commodity
derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying
commodity.
(b) Foreign exchange derivative losses/gains are included in cost of sales. Interest rate derivative losses/gains are included in net interest
expense and other. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses,
depending on the underlying commodity.
Based on current market conditions, we expect to reclassify net losses of $7 million related to our cash
flow hedges from accumulated other comprehensive loss into net income during the next 12 months.
60859_10k_pgs_iii - 127.indd 98
60859_10k_pgs_iii - 127.indd 98
3/13/21 5:41 PM
3/13/21 5:41 PM
98
Note 10 — Net Income Attributable to PepsiCo per Common Share
The computations of basic and diluted net income attributable to PepsiCo per common share are as
follows:
Net income attributable to PepsiCo
Preferred stock:
Redemption premium (b)
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, RSUs, PSUs and
other (c)
Employee stock ownership plan
2020
Income Shares(a)
$ 7,120
2019
2018
Income
$ 7,314
Shares(a)
Income
$ 12,515
Shares(a)
—
—
(2)
$ 7,120
1,385 $ 7,314
1,399 $ 12,513
1,415
$ 5.14
$ 5.23
$ 8.84
$ 7,120
1,385 $ 7,314
1,399 $ 12,513
1,415
—
7
—
8
—
10
(ESOP) convertible preferred stock —
$ 7,120
Diluted
Diluted net income attributable to
PepsiCo per common share
—
—
1,392 $ 7,314
—
2
1,407 $ 12,515
—
1,425
$ 5.12
$ 5.20
$ 8.78
(a) Weighted-average common shares outstanding (in millions).
(b) See Note 11 for further information.
(c) The dilutive effect of these securities is calculated using the treasury stock method.
The weighted-average amount of antidilutive securities excluded from the calculation of diluted earnings
per common share was immaterial for the years ended December 26, 2020, December 28, 2019 and
December 29, 2018.
Note 11 — Preferred Stock
In connection with our merger with The Quaker Oats Company (Quaker) in 2001, shares of our
convertible preferred stock were authorized and issued to an ESOP fund established by Quaker. Quaker
made the final award to its ESOP in June 2001.
In 2018, all of the outstanding shares of our convertible preferred stock were converted into an aggregate
of 550,102 shares of our common stock. As a result, there are no shares of our convertible preferred stock
outstanding as of December 29, 2018 and our convertible preferred stock is retired for accounting
purposes.
Activities of our preferred stock are included in the equity statement.
60859_10k_pgs_iii - 127.indd 99
60859_10k_pgs_iii - 127.indd 99
3/13/21 5:41 PM
3/13/21 5:41 PM
99
Note 12 — Accumulated Other Comprehensive Loss Attributable to PepsiCo
The changes in the balances of each component of accumulated other comprehensive loss attributable to
PepsiCo are as follows:
Balance as of December 30, 2017 (a)
Other comprehensive (loss)/income before
reclassifications (b)
Amounts reclassified from accumulated other
comprehensive loss
Net other comprehensive (loss)/income
Tax amounts
Balance as of December 29, 2018 (a)
Other comprehensive (loss)/income before
reclassifications (c)
Amounts reclassified from accumulated other
comprehensive loss
Net other comprehensive (loss)/income
Tax amounts
Balance as of December 28, 2019 (a)
Other comprehensive (loss)/income before
reclassifications (d)
Amounts reclassified from accumulated other
comprehensive loss
Net other comprehensive (loss)/income
Tax amounts
Balance as of December 26, 2020 (a)
Currency
Translation
Adjustment
Cash
Flow
Hedges
Pension and
Retiree
Medical
Other
Accumulated Other
Comprehensive
Loss Attributable to
PepsiCo
$
(10,277) $
47 $
(2,804) $
(23) $
(13,057)
(1,664)
44
(1,620)
(21)
(11,918)
(61)
111
50
(10)
87
636
(131)
—
636
(8)
(11,290)
(710)
—
(710)
60
14
(117)
27
(3)
126
(116)
10
(3)
(813)
218
(595)
128
6
—
6
—
(3,271)
(17)
(89)
468
379
(96)
(2,988)
(1,141)
465
(676)
144
(2)
—
(2)
—
(19)
(1)
—
(1)
—
(2,532)
373
(2,159)
97
(15,119)
414
482
896
(77)
(14,300)
(1,726)
349
(1,377)
201
$
(11,940) $
4 $
(3,520) $
(20) $
(15,476)
(a) Pension and retiree medical amounts are net of taxes of $1,338 million as of December 30, 2017, $1,466 million as of December 29,
2018, $1,370 million as of December 28, 2019 and $1,514 million as of December 26, 2020.
(b) Currency translation adjustment primarily reflects the depreciation of the Russian ruble, Canadian dollar, Pound sterling and Brazilian
real.
(c) Currency translation adjustment primarily reflects the appreciation of the Russian ruble, Canadian dollar, Mexican peso and Pound
sterling.
(d) Currency translation adjustment primarily reflects the depreciation of the Russian ruble and Mexican peso.
60859_10k_pgs_iii - 127.indd 100
60859_10k_pgs_iii - 127.indd 100
3/13/21 5:41 PM
3/13/21 5:41 PM
100
The following table summarizes the reclassifications from accumulated other comprehensive loss to the
income statement:
Currency translation:
Divestitures
Cash flow hedges:
Foreign exchange contracts
Foreign exchange contracts
Interest rate derivatives
Commodity contracts
Commodity contracts
Net (gains)/losses before tax
Tax amounts
Amount Reclassified from
Accumulated Other
Comprehensive Loss
2020
2019
2018
Affected Line Item in the Income
Statement
— $
— $
44
expenses
Selling, general and administrative
— $
1 $
(1) Net revenue
$
$
(43)
(129)
50
6
(116)
29
2
7
3
1
(7) Cost of sales
119 Net interest expense and other
3 Cost of sales
Selling, general and administrative
(3)
expenses
14
(2)
12 $
111
(27)
84
Net (gains)/losses after tax
$
(87) $
Pension and retiree medical items:
Amortization of net prior service credit
$
— $
(9) $
(17)
benefits income/(expense)
Other pension and retiree medical
Amortization of net losses
Settlement/curtailment losses
Net losses before tax
Tax amounts
Net losses after tax
238
227
465
169
308
468
(101)
(102)
$
364 $
366 $
Other pension and retiree medical
216
benefits income/(expense)
Other pension and retiree medical
benefits income/(expense)
19
218
(45)
173
Total net losses reclassified for the year, net of
tax
Note 13 — Leases
Lessee
$
277 $
378 $
301
We determine whether an arrangement is a lease at inception. We have operating leases for plants,
warehouses, distribution centers, storage facilities, offices and other facilities, as well as machinery and
equipment, including fleet. Our leases generally have remaining lease terms of up to 20 years, some of
which include options to extend the lease term for up to five years, and some of which include options to
terminate the lease within one year. We consider these options in determining the lease term used to
establish our right-of-use assets and lease liabilities. Our lease agreements do not contain any material
residual value guarantees or material restrictive covenants.
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the
information available at commencement date in determining the present value of lease payments.
We have lease agreements that contain both lease and non-lease components. For real estate leases, we
account for lease components together with non-lease components (e.g., common-area maintenance).
101
60859_10k_pgs_iii - 127.indd 101
60859_10k_pgs_iii - 127.indd 101
3/13/21 5:41 PM
3/13/21 5:41 PM
Components of lease cost are as follows:
Operating lease cost (a)
Variable lease cost (b)
Short-term lease cost (c)
$
$
$
2020
539 $
111 $
436 $
2019
474
101
379
Includes right-of-use asset amortization of $478 million and $412 million in 2020 and 2019, respectively.
(a)
(b) Primarily related to adjustments for inflation, common-area maintenance and property tax.
(c) Not recorded on our balance sheet.
Rent expense for the year ended December 29, 2018 was $771 million.
In 2020 and 2019, we recognized gains of $7 million and $77 million, respectively, on sale-leaseback
transactions with terms under four years.
Supplemental cash flow information and non-cash activity related to our operating leases are as follows:
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations
2020
555 $
621 $
$
$
Supplemental balance sheet information related to our operating leases is as follows:
Right-of-use assets
Other assets
Current lease liabilities
Non-current lease liabilities
Accounts payable and other current liabilities
Other liabilities
Balance Sheet Classification
$
$
$
2020
1,670 $
460 $
1,233 $
Weighted-average remaining lease term and discount rate for our operating leases are as follows:
Weighted-average remaining lease term
Weighted-average discount rate
Maturities of lease liabilities by year for our operating leases are as follows:
2021
2022
2023
2024
2025
2026 and beyond
Total lease payments
Less: Imputed interest
Present value of lease liabilities
Lessor
2020
6 years
4 %
$
$
2019
478
479
2019
1,548
442
1,118
2019
6 years
4 %
486
385
278
194
139
413
1,895
(202)
1,693
We have various arrangements for certain foodservice and vending equipment under which we are the
lessor. These leases meet the criteria for operating lease classification. Lease income associated with these
leases is not material.
102
60859_10k_pgs_iii - 127.indd 102
60859_10k_pgs_iii - 127.indd 102
3/13/21 5:41 PM
3/13/21 5:41 PM
Note 14 — Acquisitions and Divestitures
Acquisition of Pioneer Food Group Ltd.
On March 23, 2020, we acquired all of the outstanding shares of Pioneer Foods, a food and beverage
company in South Africa with exports to countries across the globe, for 110.00 South African rand per
share in cash. The total consideration transferred was approximately $1.2 billion and was funded by the
Bridge Loan Facilities entered into by one of our international consolidated subsidiaries. See Note 8 for
further information.
We accounted for the transaction as a business combination. We recognized and measured the identifiable
assets acquired and liabilities assumed at their estimated fair values on the date of acquisition, in our
AMESA segment. The assets acquired and liabilities assumed in Pioneer Foods as of the acquisition date,
which primarily include goodwill and other intangible assets of $0.8 billion and property, plant and
equipment of $0.4 billion, are based on preliminary estimates that are subject to revisions and may result
in adjustments to preliminary values as valuations are finalized. We expect to finalize these amounts as
soon as possible, but no later than the second quarter of 2021.
In connection with our acquisition of Pioneer Foods, we have made certain commitments to the South
Africa Competition Commission, including a commitment to provide the equivalent of 7.7 billion South
African rand, or approximately $0.4 billion as of the acquisition date, in value for the benefit of our
employees, agricultural development, education, developing Pioneer Foods’ operations and enterprise
development programs in South Africa. Included in this commitment is 2.2 billion South African rand, or
approximately $0.1 billion, relating to the implementation of an employee ownership plan and an
agricultural, entrepreneurship and educational development fund, which is an irrevocable condition of the
acquisition and will primarily be settled within the twelve-month period from the acquisition date. This
was recorded in selling, general and administrative expenses in 2020. The remaining commitment of
5.5 billion South African rand, or approximately $0.3 billion as of the acquisition date, relates to capital
expenditures and/or business-related costs which will be incurred and recorded over a five-year period
from the acquisition date.
Acquisition of Rockstar Energy Beverages
On April 24, 2020, we acquired Rockstar, an energy drink maker with whom we had a distribution
agreement prior to the acquisition, for an upfront cash payment of approximately $3.85 billion and
contingent consideration related to estimated future tax benefits associated with the acquisition of
approximately $0.9 billion. See Note 9 for further information about the contingent consideration.
We accounted for the transaction as a business combination. We recognized and measured the identifiable
assets acquired and liabilities assumed at their estimated fair values on the date of acquisition, primarily in
our PBNA segment. The assets acquired and liabilities assumed in Rockstar as of the acquisition date,
which primarily include goodwill and other intangible assets of $4.7 billion, are based on preliminary
estimates that are subject to revisions and may result in adjustments to preliminary values as valuations are
finalized. We expect to finalize these amounts as soon as possible, but no later than the second quarter of
2021.
Acquisition of Hangzhou Haomusi Food Co., Ltd.
On June 1, 2020, we acquired all of the outstanding shares of Be & Cheery, one of the largest online
snacks companies in China, from Haoxiangni Health Food Co., Ltd. for cash. The total consideration
transferred was approximately $0.7 billion.
We accounted for the transaction as a business combination. We recognized and measured the identifiable
assets acquired and liabilities assumed at their estimated fair values on the date of acquisition, in our
103
60859_10k_pgs_iii - 127.indd 103
60859_10k_pgs_iii - 127.indd 103
3/13/21 5:41 PM
3/13/21 5:41 PM
APAC segment. The assets acquired and liabilities assumed in Be & Cheery as of the acquisition date,
which primarily include goodwill and other intangible assets of $0.7 billion, are based on preliminary
estimates that are subject to revisions and may result in adjustments to preliminary values as valuations are
finalized. We expect to finalize these amounts as soon as possible, but no later than the third quarter of
2021.
Acquisition of SodaStream International Ltd.
On December 5, 2018, we acquired all of the outstanding shares of SodaStream, a manufacturer and
distributor of sparkling water makers, for $144.00 per share in cash, in a transaction valued at
approximately $3.3 billion. The total consideration transferred was $3.3 billion (or $3.2 billion, net of cash
and cash equivalents acquired). The purchase price allocation was finalized in the fourth quarter of 2019.
Refranchising in Thailand
In 2018, we refranchised our beverage business in Thailand by selling a controlling interest in our
Thailand bottling operations to form a joint venture, where we now have an equity method investment. We
recorded a pre-tax gain of $144 million ($126 million after-tax or $0.09 per share) in selling, general and
administrative expenses in our APAC segment as a result of this transaction.
Refranchising in Czech Republic, Hungary and Slovakia
In 2018, we refranchised our entire beverage bottling operations and snack distribution operations in
Czech Republic, Hungary and Slovakia. We recorded a pre-tax gain of $58 million ($46 million after-tax
or $0.03 per share) in selling, general and administrative expenses in our Europe segment as a result of
this transaction.
Inventory Fair Value Adjustments and Merger and Integration Charges
A summary of our inventory fair value adjustments and merger and integration charges is as follows:
Cost of sales
Selling, general and administrative expenses
Total
After-tax amount
Net income attributable to PepsiCo per common share
2020
2019
2018
$
$
$
$
32 $
223
255 $
237 $
0.17 $
34 $
21
55 $
47 $
—
75
75
75
0.03 $
0.05
Inventory fair value adjustments and merger and integration charges include fair value adjustments to the
acquired inventory included in the acquisition-date balance sheets (recorded in cost of sales) and closing
costs, employee-related costs, contract termination costs, changes in the fair value of contingent
consideration and other integration costs (recorded in selling, general and administrative expenses).
Merger and integration charges also include liabilities to support socioeconomic programs in South Africa,
which are irrevocable conditions of our acquisition of Pioneer Foods (recorded in selling, general and
administrative expenses).
60859_10k_pgs_iii - 127.indd 104
60859_10k_pgs_iii - 127.indd 104
3/13/21 5:41 PM
3/13/21 5:41 PM
104
Inventory fair value adjustments and merger and integration charges by division are as follows:
FLNA
PBNA
Europe
AMESA
APAC
Corporate (a)
Total
2020
2019
2018
Acquisition
$
29 $
— $
— BFY Brands
66
—
173
7
(20)
—
46
7
—
2
— Rockstar
57 SodaStream
— Pioneer Foods
— Be & Cheery
18 Rockstar, SodaStream
$
255 $
55 $
75
(a)
In 2020, the income amount primarily relates to the change in the fair value of contingent consideration associated with our acquisition
of Rockstar.
Note 15 — Supplemental Financial Information
Balance Sheet
Accounts and notes receivable
Trade receivables
Other receivables
Total
Allowance, beginning of year
Cumulative effect of accounting change
Net amounts charged to expense (a)
Deductions (b)
Other (c)
Allowance, end of year
Net receivables
Inventories (d)
Raw materials and packaging
Work-in-process
Finished goods
Total
Property, plant and equipment, net (e)
Land
Buildings and improvements
Machinery and equipment, including fleet and software
Construction in progress
Accumulated depreciation
Total
Depreciation expense
Other assets
Noncurrent notes and accounts receivable
Deferred marketplace spending
Pension plans (f)
Right-of-use assets (g)
Other
Total
2020
2019
2018
129
—
16
(33)
(11)
101
$
$
$
$
6,892 $
1,713
8,605
105
44
79
(32)
5
201
8,404 $
6,447
1,480
7,927
101 $
—
22
(30)
12
105 $
7,822
1,720 $
205
2,247
4,172 $
1,395
200
1,743
3,338
$
1,171 $
10,214
31,276
3,679
46,340
(24,971)
21,369 $
2,335 $
1,130
9,314
29,390
3,169
43,003
(23,698)
19,305
2,257 $
2,241
109 $
130
910
1,670
493
3,312 $
85
147
846
1,548
385
3,011
Average
Useful Life
(Years)
15 - 44
5 - 15
$
$
$
$
105
60859_10k_pgs_iii - 127.indd 105
60859_10k_pgs_iii - 127.indd 105
3/13/21 5:41 PM
3/13/21 5:41 PM
Accounts payable and other current liabilities
Accounts payable
Accrued marketplace spending
Accrued compensation and benefits
Dividends payable
Current lease liabilities (g)
Other current liabilities
Total
$
$
8,853 $
2,935
2,059
1,430
460
3,855
19,592 $
8,013
2,765
1,835
1,351
442
3,135
17,541
(a)
In 2020, includes an allowance for expected credit losses of $56 million related to the COVID-19 pandemic. See Note 1 for further
information.
Includes accounts written off.
Includes adjustments related primarily to currency translation and other adjustments.
(b)
(c)
(d) Approximately 6% and 7% of the inventory cost in 2020 and 2019, respectively, were computed using the LIFO method. The differences
between LIFO and FIFO methods of valuing these inventories were not material. See Note 2 for further information.
(e) See Note 2 for further information.
(f) See Note 7 for further information.
(g) See Note 13 for further information.
Statement of Cash Flows
2020
2019
$
$
1,156 $
1,076 $
1,770 $
2,226 $
2018
1,388
1,203
Interest paid (a)
Income taxes paid, net of refunds (b)
(a)
(b)
In 2018, excludes the premiums paid in accordance with the debt transactions. See Note 8 for further information.
In 2020, 2019 and 2018, includes tax payments of $78 million, $423 million and $115 million, respectively, related to the TCJ Act.
The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported
within the balance sheet to the same items as reported in the cash flow statement.
Cash and cash equivalents
Restricted cash included in other assets (a)
Total cash and cash equivalents and restricted cash
(a) Primarily relates to collateral posted against certain of our derivative positions.
2020
8,185 $
69
8,254 $
2019
5,509
61
5,570
$
$
60859_10k_pgs_iii - 127.indd 106
60859_10k_pgs_iii - 127.indd 106
3/13/21 5:41 PM
3/13/21 5:41 PM
106
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
PepsiCo, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying Consolidated Balance Sheet of PepsiCo, Inc. and Subsidiaries (the
Company) as of December 26, 2020 and December 28, 2019, and the related Consolidated Statements of
Income, Comprehensive Income, Cash Flows, and Equity for each of the fiscal years in the three-year
period ended December 26, 2020 and the related notes (collectively, the consolidated financial
statements). We also have audited the Company’s internal control over financial reporting as of
December 26, 2020, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 26, 2020 and December 28, 2019, and the
results of its operations and its cash flows for each of the fiscal years in the three-year period ended
December 26, 2020, in conformity with U.S. generally accepted accounting principles. Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 26, 2020, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
As permitted by SEC guidance, the scope of management's assessment of the effectiveness of internal
control over financial reporting as of December 26, 2020 excluded Pioneer Food Group Ltd. and its
subsidiaries (Pioneer Foods) and Hangzhou Haomusi Food Co., Ltd. and its subsidiaries (Be & Cheery),
both of which the Company acquired in 2020. Pioneer Foods’ total assets and net revenue represented
approximately 2.2% and 1.4%, respectively, of the consolidated total assets and net revenue of the
Company as of and for the year ended December 26, 2020. Be & Cheery’s total assets and net revenue
represented approximately 1.1% and 0.4%, respectively, of the consolidated total assets and net revenue of
the Company as of and for the year ended December 26, 2020. Our audit of internal control over financial
reporting of the Company also excluded an evaluation of the internal control over financial reporting of
Pioneer Foods and Be & Cheery.
Basis for Opinions
The Company’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 accompanying Management’s Annual Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
consolidated financial statements and an opinion on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and
107
60859_10k_pgs_iii - 127.indd 107
60859_10k_pgs_iii - 127.indd 107
3/13/21 5:41 PM
3/13/21 5:41 PM
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control
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.
Definition and Limitations of Internal Control over Financial Reporting
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, projections 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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the
consolidated financial statements that were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing
separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Sales incentive accruals
As discussed in Note 2 to the consolidated financial statements, the Company offers sales incentives
and discounts through various programs to customers and consumers. A number of the sales
incentives are based on annual targets, resulting in the need to accrue for the expected liability.
These incentives are accrued for in the “Accounts payable and other current liabilities” line on the
balance sheet. These accruals are based on sales incentive agreements, expectations regarding
customer and consumer participation and performance levels, and historical experience and trends.
We identified the evaluation of certain of the Company’s sales incentive accruals as a critical audit
matter. Subjective and complex auditor judgment is required in evaluating these sales incentive
accruals as a result of the timing difference between when the product is delivered and when the
incentive is settled. This specifically related to (1) forecasted customer and consumer participation
108
60859_10k_pgs_iii - 127.indd 108
60859_10k_pgs_iii - 127.indd 108
3/13/21 5:41 PM
3/13/21 5:41 PM
and performance level assumptions underlying the accrual, and (2) the impact of historical
experience and trends.
The following are the primary procedures we performed to address this critical audit matter. We
evaluated the design and tested the operating effectiveness of certain internal controls related to the
critical audit matter. This included controls related to the Company’s sales incentive process,
including (1) the accrual methodology, (2) assumptions around forecasted customer and consumer
participation, (3) performance levels, and (4) monitoring of actual sales incentives incurred
compared to estimated sales incentives in respect of historical periods. To evaluate the timing and
amount of certain accrued sales incentives we (1) analyzed the accrual by sales incentive type as
compared to historical trends to identify specific sales incentives that may require additional testing,
(2) recalculated expenses and closing accruals on a sample basis, based on volumes sold and terms
of the sales incentives, (3) assessed the Company’s ability to accurately estimate its sales incentive
accrual by comparing previously established accruals to actual settlements, and (4) tested a sample
of settlements or claims that occurred after period end, and compared them to the recorded sales
incentive accrual.
Carrying value of certain reacquired and acquired franchise rights and certain juice and dairy
brands
As discussed in Notes 2 and 4 to the consolidated financial statements, the Company performs
impairment testing of its indefinite-lived intangible assets on an annual basis during the third quarter
of each fiscal year and whenever events and changes in circumstances indicate that there is a greater
than 50% likelihood that the asset is impaired. The carrying value of indefinite-lived intangible
assets as of December 26, 2020 was $36.4 billion which represents 39% of total assets, and includes
PepsiCo Beverages North America’s (PBNA) reacquired and acquired franchise rights which had a
carrying value of $8.6 billion as of December 26, 2020.
We identified the assessment of the carrying value of PBNA’s reacquired and acquired franchise
rights and certain of Europe’s juice and dairy brands in Russia as a critical audit matter. Significant
auditor judgment is necessary to assess the impact of competitive operating and macroeconomic
factors on future levels of sales, operating profit and cash flows. The impairment analysis of these
indefinite-lived intangible assets requires significant auditor judgment to evaluate the Company’s
forecasted revenue and profitability levels, including the expected long-term growth rates and the
selection of the discount rates to be applied to the projected cash flows.
The following are the primary procedures we performed to address this critical audit matter. We
evaluated the design and tested the operating effectiveness of certain internal controls related to the
critical audit matter. This included controls related to the Company’s indefinite-lived assets
impairment process to develop the forecasted revenue, profitability levels, and expected long-term
growth rates and select the discount rates to be applied to the projected cash flows. We also
evaluated the sensitivity of the Company’s conclusion to changes in assumptions, including the
assessment of changes in assumptions from prior periods. To assess the Company’s ability to
accurately forecast, we compared the Company’s historical forecasted results to actual results. We
compared the cash flow projections used in the impairment tests with available external industry data
and other internal information. We involved valuation professionals with specialized skills and
knowledge who assisted in evaluating (1) the long-term growth rates used in the impairment tests by
comparing against economic data and information specific to the respective assets, including
projected long-term nominal Gross Domestic Product growth in the respective local countries, and
(2) the discount rates used in the impairment tests by comparing them against discount rates that
were independently developed using publicly available market data, including that of comparable
companies.
109
60859_10k_pgs_iii - 127.indd 109
60859_10k_pgs_iii - 127.indd 109
3/13/21 5:41 PM
3/13/21 5:41 PM
Unrecognized tax benefits
As discussed in Note 5 to the consolidated financial statements, the Company’s global operating
model gives rise to income tax obligations in the United States and in certain foreign jurisdictions in
which it operates. As of December 26, 2020, the Company recorded reserves for unrecognized tax
benefits of $1.6 billion. The Company establishes reserves if it believes that certain positions taken
in its tax returns are subject to challenge and the Company likely will not succeed, even though the
Company believes the tax return position is supportable under the tax law. The Company adjusts
these reserves, as well as the related interest, in light of new information, such as the progress of a
tax examination, new tax law, relevant court rulings or tax authority settlements.
We identified the evaluation of the Company’s unrecognized tax benefits as a critical audit matter
because the application of tax law and interpretation of a tax authority’s settlement history is
complex and involves subjective judgment. Such judgments impact both the timing and amount of
the reserves that are recognized, including judgments about re-measuring liabilities for positions
taken in prior years’ tax returns in light of new information.
The following are the primary procedures we performed to address this critical audit matter. We
evaluated the design and tested the operating effectiveness of certain internal controls related to the
critical audit matter. This included controls related to the Company’s unrecognized tax benefits
process, including controls to (1) identify uncertain income tax positions, (2) evaluate the tax law
and tax authority’s settlement history used to estimate the unrecognized tax benefits, and (3) monitor
for new information that may give rise to changes to the existing unrecognized tax benefits, such as
progress of a tax examination, new tax law or tax authority settlements. We involved tax and
valuation professionals with specialized skills and knowledge, who assisted in assessing the
unrecognized tax benefits by (1) evaluating the Company’s tax structure and transactions, including
transfer pricing arrangements, and (2) assessing the Company’s interpretation of existing tax law as
well as new and amended tax laws, tax positions taken, associated external counsel opinions,
information from tax examinations, relevant court rulings and tax authority settlements.
We have served as the Company’s auditor since 1990.
/s/ KPMG LLP
New York, New York
February 10, 2021
60859_10k_pgs_iii - 127.indd 110
60859_10k_pgs_iii - 127.indd 110
3/13/21 5:41 PM
3/13/21 5:41 PM
110
GLOSSARY
Acquisitions and divestitures: 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.
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.
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.
Free cash flow: net cash provided by operating activities less capital spending, plus sales of property,
plant and equipment.
Independent bottlers: customers to whom we have granted exclusive contracts to sell and manufacture
certain beverage products bearing our trademarks within a specific geographical area.
Mark-to-market net impact: change in market value for commodity derivative 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 prices on national exchanges and recently reported transactions in the marketplace.
Organic: a measure that adjusts for impacts of acquisitions, divestitures and other structural changes, and
where applicable, foreign exchange translation and the impact of the 53rd reporting week. In excluding the
impact of foreign exchange translation, we assume constant foreign exchange rates used for translation
based on the rates in effect for the comparable prior-year period. See the definition of “Constant currency”
for further information.
Total marketplace spending: includes sales incentives and discounts offered through various programs to
our customers, consumers or independent bottlers, as well as advertising and other marketing activities.
Transaction gains and losses: the impact on our consolidated financial statements of exchange rate
changes arising from specific transactions.
111
60859_10k_pgs_iii - 127.indd 111
60859_10k_pgs_iii - 127.indd 111
3/13/21 5:41 PM
3/13/21 5:41 PM
Translation adjustment: the impact of converting our foreign affiliates’ financial statements into U.S.
dollars for the purpose of consolidating our financial statements.
60859_10k_pgs_iii - 127.indd 112
60859_10k_pgs_iii - 127.indd 112
3/13/21 5:41 PM
3/13/21 5:41 PM
112
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Our Business Risks.”
Item 8. Financial Statements and Supplementary Data.
See “Item 15. Exhibits and Financial Statement Schedules.”
Item 9A. Controls and Procedures.
(a) Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out
an evaluation, under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this
report our disclosure controls and procedures were effective to ensure that information required to be
disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed,
summarized and reported within the time periods specified in Securities and Exchange Commission rules
and forms, and (2) accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.
(b) Management’s Annual 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 supervision 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 criteria
established in Internal Control – Integrated Framework (2013) by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that evaluation, our management concluded that
our internal control over financial reporting was effective as of December 26, 2020.
As permitted by SEC guidance, the scope of management’s assessment of the effectiveness of our internal
control over financial reporting as of December 26, 2020 excluded Pioneer Foods and Be & Cheery, both
acquired in 2020. Pioneer Foods’ total assets and net revenue represented approximately 2.2% and 1.4%,
respectively, of the consolidated total assets and net revenue of PepsiCo, Inc. as of and for the year ended
December 26, 2020. Be & Cheery’s total assets and net revenue represented approximately 1.1% and
0.4%, respectively, of the consolidated total assets and net revenue of PepsiCo, Inc. as of and for the year
ended December 26, 2020.
Attestation Report of the Registered Public Accounting Firm. KPMG LLP, an independent registered
public accounting firm, has audited the consolidated financial statements included in this Annual Report
on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of
our internal control over financial reporting.
(c) Changes in Internal Control over Financial Reporting. Except as discussed, there have been no
changes in our internal control over financial reporting during our fourth quarter of 2020 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
During our fourth quarter of 2020, 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. In addition, in connection with our 2019 multi-year productivity plan, we continue
113
60859_10k_pgs_iii - 127.indd 113
60859_10k_pgs_iii - 127.indd 113
3/13/21 5:41 PM
3/13/21 5:41 PM
to migrate to shared business models across our operations to further simplify, harmonize and automate
processes. 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 effective controls over our financial reporting. These transitions have not materially affected, and
we do not expect them to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information about our directors and persons nominated to become directors is contained under the caption
“Election of Directors” in our Proxy Statement for our 2021 Annual Meeting of Shareholders to be filed
with the SEC within 120 days of the year ended December 26, 2020 (the 2021 Proxy Statement) and is
incorporated herein by reference. Information about our executive officers is reported under the caption
“Information About Executive Officers” in Part I of this report.
Information on beneficial ownership reporting compliance will be contained under the caption
“Ownership of PepsiCo Common Stock - Delinquent Section 16(a) Reports,” if applicable, in our 2021
Proxy Statement and is incorporated herein by reference.
We have a written code of conduct that applies to all of our employees, including our Chairman of the
Board of Directors and Chief Executive Officer, Chief Financial Officer and Controller, and to our Board
of Directors. Our Global Code of Conduct is distributed to all employees and is available on our website at
http://www.pepsico.com. A copy of our Global Code of Conduct may be obtained free of charge by
writing to Investor Relations, PepsiCo, Inc., 700 Anderson Hill Road, Purchase, New York 10577. Any
amendment to our Global Code of Conduct and any waiver applicable to our executive officers or senior
financial officers will be posted on our website within the time period required by the SEC and applicable
rules of The Nasdaq Stock Market LLC.
Information about the procedures by which security holders may recommend nominees to our Board of
Directors can be found in our 2021 Proxy Statement under the caption “Board Composition and
Refreshment – Shareholder Recommendations and Nominations of Director Candidates” and is
incorporated herein by reference.
Information concerning the composition of the Audit Committee and our Audit Committee financial
experts is contained in our 2021 Proxy Statement under the caption “Corporate Governance at PepsiCo –
Committees of the Board of Directors – Audit Committee” and is incorporated herein by reference.
Item 11. Executive Compensation.
Information about director and executive officer compensation, Compensation Committee interlocks and
the Compensation Committee Report is contained in our 2021 Proxy Statement under the captions “2020
Director Compensation,” “Executive Compensation,” “Corporate Governance at PepsiCo – Committees of
the Board of Directors – Compensation Committee – Compensation Committee Interlocks and Insider
Participation” and “Executive Compensation – Compensation Committee Report” and is incorporated
herein by reference.
114
60859_10k_pgs_iii - 127.indd 114
60859_10k_pgs_iii - 127.indd 114
3/13/21 5:41 PM
3/13/21 5:41 PM
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
Information with respect to securities authorized for issuance under equity compensation plans can be
found under the caption “Executive Compensation – Securities Authorized for Issuance Under Equity
Compensation Plans” in our 2021 Proxy Statement and is incorporated herein by reference.
Information on the number of shares of PepsiCo Common Stock beneficially owned by each director and
named executive officer, by all directors and executive officers as a group and on each beneficial owner of
more than 5% of PepsiCo Common Stock is contained under the caption “Ownership of PepsiCo Common
Stock” in our 2021 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information with respect to certain relationships and related transactions and director independence is
contained under the captions “Corporate Governance at PepsiCo – Related Person Transactions” and
“Corporate Governance at PepsiCo – Director Independence” in our 2021 Proxy Statement and is
incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
Information on our Audit Committee’s pre-approval policy and procedures for audit and other services
and information on our principal accountant fees and services is contained in our 2021 Proxy Statement
under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm –
Audit and Other Fees” and is incorporated herein by reference.
60859_10k_pgs_iii - 127.indd 115
60859_10k_pgs_iii - 127.indd 115
3/13/21 5:41 PM
3/13/21 5:41 PM
115
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a)1. Financial Statements
The following consolidated financial statements of PepsiCo, Inc. and its affiliates are included
herein by reference to the pages indicated on the index appearing in “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations”:
Consolidated Statement of Income – Fiscal years ended December 26, 2020, December 28, 2019
and December 29, 2018
Consolidated Statement of Comprehensive Income – Fiscal years ended December 26, 2020,
December 28, 2019 and December 29, 2018
Consolidated Statement of Cash Flows – Fiscal years ended December 26, 2020, December 28,
2019 and December 29, 2018
Consolidated Balance Sheet – December 26, 2020 and December 28, 2019
Consolidated Statement of Equity – Fiscal years ended December 26, 2020, December 28, 2019
and December 29, 2018
Notes to Consolidated Financial Statements, and
Report of Independent Registered Public Accounting Firm.
(a)2. Financial Statement Schedules
These schedules are omitted because they are not required or because the information is set forth in
the financial statements or the notes thereto.
(a)3. Exhibits
See Index to Exhibits.
60859_10k_pgs_iii - 127.indd 116
60859_10k_pgs_iii - 127.indd 116
3/13/21 5:41 PM
3/13/21 5:41 PM
116
Item 16. Form 10-K Summary.
None.
60859_10k_pgs_iii - 127.indd 117
60859_10k_pgs_iii - 127.indd 117
3/13/21 5:41 PM
3/13/21 5:41 PM
117
INDEX TO EXHIBITS
ITEM 15(a)(3)
The following is a list of the exhibits filed as part of this Form 10-K. The documents incorporated
by reference can be viewed on the SEC’s website at http://www.sec.gov.
EXHIBIT
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Amended and Restated Articles of Incorporation of PepsiCo, Inc., effective as of May 1,
2019, which are incorporated herein by reference to Exhibit 3.1 to PepsiCo, Inc.’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2019.
By-laws of PepsiCo, Inc., as amended and restated, effective as of April 15, 2020, which
are incorporated herein by reference to Exhibit 3.2 to PepsiCo, Inc.’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on April 16, 2020.
PepsiCo, Inc. agrees to furnish to the Securities and Exchange Commission, upon request, a
copy of any instrument, not otherwise filed herewith, defining the rights of holders of long-
term debt of PepsiCo, Inc. and its consolidated subsidiaries and for any of its
unconsolidated subsidiaries for which financial statements are required to be filed with the
Securities and Exchange Commission.
Indenture dated May 21, 2007 between PepsiCo, Inc. and The Bank of New York Mellon
(formerly known as The Bank of New York), as trustee, which is incorporated herein by
reference to Exhibit 4.3 to PepsiCo, Inc.’s Registration Statement on Form S-3ASR
(Registration No. 333-154314) filed with the Securities and Exchange Commission on
October 15, 2008.
Form of 5.50% Senior Note due 2040, which is incorporated herein by reference to Exhibit
4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on January 13, 2010.
Form of 4.875% Senior Note due 2040, which is incorporated herein by reference to
Exhibit 4.3 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 25, 2010.
Form of 3.600% Senior Note due 2024, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on February 28, 2014.
Form of 1.750% Senior Note due 2021, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 28, 2014.
Form of 2.625% Senior Note due 2026, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 28, 2014.
Form of 4.250% Senior Note due 2044, which is incorporated herein by reference to
Exhibit 4.1 of PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 22, 2014.
Form of 2.750% Senior Note due 2025, which is incorporated herein by reference to
Exhibit 4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 30, 2015.
4.10 Form of 3.100% Senior Note due 2022, which is incorporated herein by reference to
Exhibit 4.3 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 17, 2015.
4.11 Form of 3.500% Senior Note due 2025, which is incorporated herein by reference to
Exhibit 4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 17, 2015.
4.12 Form of 4.600% Senior Note due 2045, which is incorporated herein by reference to
Exhibit 4.5 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 17, 2015.
118
60859_10k_pgs_iii - 127.indd 118
60859_10k_pgs_iii - 127.indd 118
3/13/21 5:41 PM
3/13/21 5:41 PM
4.13 Form of 4.450% Senior Note due 2046, which is incorporated herein by reference to
Exhibit 4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 14, 2015.
4.14 Form of 2.850% Senior Note due 2026, which is incorporated herein by reference to
Exhibit 4.3 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on February 24, 2016.
4.15 Form of 4.450% Senior Note due 2046, which is incorporated herein by reference to
Exhibit 4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on February 24, 2016.
4.16 Form of 0.875% Senior Note due 2028, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 18, 2016.
4.17 Form of Floating Rate Note due 2021, which is incorporated herein by reference to Exhibit
4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on October 6, 2016.
4.18 Form of 1.700% Senior Note due 2021, which is incorporated herein by reference to
Exhibit 4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 6, 2016.
4.19 Form of 2.375% Senior Note due 2026, which is incorporated herein by reference to
Exhibit 4.5 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 6, 2016.
4.20 Form of 3.450% Senior Note due 2046, which is incorporated herein by reference to
Exhibit 4.6 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 6, 2016.
4.21 Form of Floating Rate Note due 2022, which is incorporated herein by reference to Exhibit
4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 2, 2017.
4.22 Form of 2.250% Senior Note due 2022, which is incorporated herein by reference to
Exhibit 4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 2, 2017.
4.23 Form of 4.000% Senior Note due 2047, which is incorporated herein by reference to
Exhibit 4.5 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 2, 2017.
4.24 Form of 2.150% Senior Note due 2024, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 4, 2017.
4.25 Form of 2.000% Senior Note due 2021, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 10, 2017.
4.26 Form of 3.000% Senior Note due 2027, which is incorporated herein by reference to
Exhibit 4.3 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 10, 2017.
4.27 Board of Directors Resolutions Authorizing PepsiCo, Inc.’s Officers to Establish the Terms
of the 5.50% Senior Notes due 2040 and 4.875% Senior Notes due 2040, which are
incorporated herein by reference to Exhibit 4.1 to PepsiCo, Inc.’s Quarterly Report on Form
10-Q for the 24 weeks ended June 12, 2010.
4.28 Board of Directors Resolutions Authorizing PepsiCo, Inc.’s Officers to Establish the Terms
of the 3.000% Senior Notes due 2021, the 2.750% Senior Notes due 2022, the 4.000%
Senior Notes due 2042, the 3.600% Senior Notes due 2042 and the 2.500% Senior Notes
due 2022, which are incorporated herein by reference to Exhibit 4.3 to PepsiCo, Inc.’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on May 6,
2011.
119
60859_10k_pgs_iii - 127.indd 119
60859_10k_pgs_iii - 127.indd 119
3/13/21 5:41 PM
3/13/21 5:41 PM
4.29 Form of 3.000% Senior Note due 2021, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 25, 2011.
4.30 Form of 2.750% Senior Note due 2022, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 2, 2012.
4.31 Form of 4.000% Senior Note due 2042, which is incorporated herein by reference to
Exhibit 4.3 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 2, 2012.
4.32 Form of 3.600% Senior Note due 2042, which is incorporated herein by reference to
Exhibit 4.3 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 13, 2012.
4.33 Form of 2.500% Senior Note due 2022, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 30, 2012.
4.34 Form of 2.750% Senior Note due 2023, which is incorporated herein by reference to
Exhibit 4.3 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on February 28, 2013.
4.35 Form of 7.00% Senior Note due 2029, Series A, which is incorporated herein by reference
to Exhibit 4.3 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 8, 2018.
4.36 Form of 5.50% Senior Note due 2035, Series A, which is incorporated herein by reference
to Exhibit 4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 8, 2018.
4.37 Form of 7.29% Senior Note due 2026, which is incorporated herein by reference to Exhibit
4.3 to PepsiCo, Inc.’s Registration Statement on Form S-4 (Registration No. 333-228466)
filed with the Securities and Exchange Commission on November 19, 2018.
4.38 Form of 7.44% Senior Note due 2026, which is incorporated herein by reference to Exhibit
4.4 to PepsiCo, Inc.’s Registration Statement on Form S-4 (Registration No. 333-228466)
filed with the Securities and Exchange Commission on November 19, 2018.
4.39 Form of 7.00% Senior Note due 2029, which is incorporated herein by reference to Exhibit
4.5 to PepsiCo, Inc.’s Registration Statement on Form S-4 (Registration No. 333-228466)
filed with the Securities and Exchange Commission on November 19, 2018.
4.40 Form of 5.50% Senior Note due 2035, which is incorporated herein by reference to Exhibit
4.6 to PepsiCo, Inc.’s Registration Statement on Form S-4 (Registration No. 333-228466)
filed with the Securities and Exchange Commission on November 19, 2018.
4.41 Form of 0.750% Senior Note due 2027, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 18, 2019.
4.42 Form of 1.125% Senior Note due 2031, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 18, 2019.
4.43 Form of 2.625% Senior Note due 2029, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 29, 2019.
4.44 Form of 3.375% Senior Note due 2049, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 29, 2019.
4.45 Form of 2.875% Senior Note due 2049, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 9, 2019.
120
60859_10k_pgs_iii - 127.indd 120
60859_10k_pgs_iii - 127.indd 120
3/13/21 5:41 PM
3/13/21 5:41 PM
4.46 Form of 0.875% Senior Note due 2039, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 16, 2019.
4.47 Form of 2.250% Senior Note due 2025, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 19, 2020.
4.48 Form of 2.625% Senior Note due 2027, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 19, 2020.
4.49 Form of 2.750% Senior Note due 2030, which is incorporated herein by reference to
Exhibit 4.3 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 19, 2020.
4.50 Form of 3.500% Senior Note due 2040, which is incorporated herein by reference to
Exhibit 4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 19, 2020.
4.51 Form of 3.625% Senior Note due 2050, which is incorporated herein by reference to
Exhibit 4.5 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 19, 2020.
4.52 Form of 3.875% Senior Note due 2060, which is incorporated herein by reference to
Exhibit 4.6 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 19, 2020.
4.53 Form of 0.750% Senior Note due 2023, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 1, 2020.
4.54 Form of 1.625% Senior Note due 2030, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 1, 2020.
4.55 Form of 0.250% Senior Note due 2024, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 6, 2020.
4.56 Form of 0.500% Senior Note due 2028, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 6, 2020.
4.57 Form of 0.400% Senior Note due 2023, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 7, 2020.
4.58 Form of 1.400% Senior Note due 2031, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 7, 2020.
4.59 Form of 0.400% Senior Note due 2032, which is incorporated herein by reference to
Exhibit 4.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 9, 2020.
4.60 Form of 1.050% Senior Note due 2050, which is incorporated herein by reference to
Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 9, 2020.
60859_10k_pgs_iii - 127.indd 121
60859_10k_pgs_iii - 127.indd 121
3/13/21 5:41 PM
3/13/21 5:41 PM
121
4.61 Board of Directors Resolutions Authorizing PepsiCo, Inc.’s Officers to Establish the Terms
of the 2.750% Senior Note due 2023, the 3.600% Senior Notes due 2024, the 1.750%
Senior Notes due 2021, the 2.625% Senior Notes due 2026, the 4.250% Senior Notes due
2044, the 2.750% Senior Notes due 2025, the 3.100% Senior Notes due 2022, the 3.500%
Senior Notes due 2025, the 4.600% Senior Notes due 2045, the 4.450% Senior Notes due
2046, the 2.850% Senior Notes due 2026, the 0.875% Senior Note due 2028, the Floating
Rate Note due 2021, the 1.700% Senior Notes due 2021, the 2.375% Senior Notes due
2026, the 3.450% Senior Notes due 2046 the Floating Rate Notes due 2022, the 2.250%
Senior Notes due 2022, the 4.000% Senior Notes due 2047, the 2.150% Senior Notes due
2024, the 2.000% Senior Notes due 2021, the 3.000% Senior Notes due 2027, the 7.00%
Senior Notes due 2029, Series A, the 5.50% Senior Notes due 2035, Series A, the 7.29%
Senior Notes due 2026, the 7.44% Senior Notes due 2026, the 7.00% Senior Notes due
2029, the 5.50% Senior Notes due 2035, the 0.750% Senior Notes due 2027, the 1.125%
Senior Notes due 2031, the 2.625% Senior Notes due 2029, the 3.375% Senior Notes due
2049, the 2.875% Senior Notes due 2049, the 0.875% Senior Notes due 2039, the 2.250%
Senior Notes due 2025, the 2.625% Senior Notes due 2027, the 2.750% Senior Notes due
2030, the 3.500% Senior Notes due 2040, the 3.625% Senior Notes due 2050, the 3.875%
Senior Notes due 2060, the 0.750% Senior Notes due 2023, the 1.625% Senior Notes due
2030, the 0.250% Senior Notes due 2024, the 0.500% Senior Notes due 2028, the 0.400%
Senior Notes due 2023, the 1.400% Senior Notes due 2031, the 0.400% Senior Notes due
2032, and the 1.050% Senior Notes due 2050, which are incorporated herein by reference to
Exhibit 4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on February 28, 2013.
4.62 Second Supplemental Indenture, dated as of October 24, 2018, among Pepsi-Cola
Metropolitan Bottling Company, Inc., Bottling Group, LLC, and The Bank of New York
Mellon, as trustee, to the Indenture dated March 8, 1999 among The Pepsi Bottling Group,
Inc., Bottling Group, LLC and The Chase Manhattan Bank, as trustee, which is
incorporated herein by reference to Exhibit 4.3 to PepsiCo, Inc.’s Current Report on Form
8-K filed with the Securities and Exchange Commission on October 25, 2018.
4.63 First Supplemental Indenture, dated as of February 26, 2010, among Pepsi-Cola
Metropolitan Bottling Company, Inc., The Pepsi Bottling Group, Inc., Bottling Group, LLC
and The Bank of New York Mellon, as trustee, to the Indenture dated March 8, 1999
between The Pepsi Bottling Group, Inc., Bottling Group, LLC and The Chase Manhattan
Bank, as trustee, which is incorporated herein by reference to Exhibit 4.1 to PepsiCo, Inc.’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on March
1, 2010.
Indenture, dated as of March 8, 1999, by and among The Pepsi Bottling Group, Inc., as
obligor, Bottling Group, LLC, as guarantor, and The Chase Manhattan Bank, as trustee,
relating to $1,000,000,000 7% Series B Senior Note due 2029, which is incorporated herein
by reference to Exhibit 10.14 to The Pepsi Bottling Group, Inc.’s Registration Statement on
Form S-1 (Registration No. 333-70291) filed with the Securities and Exchange Commission
on March 24, 1999.
4.64
4.65 Third Supplemental Indenture, dated as of October 24, 2018, between Pepsi-Cola
Metropolitan Bottling Company, Inc. and The Bank New York Mellon Trust Company,
N.A., as trustee, to the Indenture dated as of January 15, 1993 between Whitman
Corporation and The First National Bank of Chicago, as trustee, which is incorporated
herein by reference to Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 25, 2018.
60859_10k_pgs_iii - 127.indd 122
60859_10k_pgs_iii - 127.indd 122
3/13/21 5:41 PM
3/13/21 5:41 PM
122
4.66 Second Supplemental Indenture, dated as of February 26, 2010, among Pepsi-Cola
Metropolitan Bottling Company, Inc., PepsiAmericas, Inc. and The Bank New York Mellon
Trust Company, N.A., as trustee, to the Indenture dated as of January 15, 1993 between
Whitman Corporation and The First National Bank of Chicago, as trustee, which is
incorporated herein by reference to Exhibit 4.2 to PepsiCo, Inc.’s Current Report on Form
8-K filed with the Securities and Exchange Commission on March 1, 2010.
4.67 First Supplemental Indenture, dated as of May 20, 1999, between Whitman Corporation
and The First National Bank of Chicago, as trustee, to the Indenture dated as of January 15,
1993, between Whitman Corporation and The First National Bank of Chicago, as trustee,
each of which is incorporated herein by reference to Exhibit 4.3 to Post-Effective
Amendment No. 1 to PepsiAmericas, Inc.’s Registration Statement on Form S-8
(Registration No. 333-64292) filed with the Securities and Exchange Commission on
December 29, 2005.
4.68 Form of PepsiAmericas, Inc. 7.29% Note due 2026, which is incorporated herein by
reference to Exhibit 4.7 to PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the quarterly
period ended March 20, 2010.
4.69 Second Supplemental Indenture, dated as of October 24, 2018, between Pepsi-Cola
Metropolitan Bottling Company, Inc. and Wells Fargo Bank, National Association, as
trustee, to the Indenture dated as of August 15, 2003 between PepsiAmericas, Inc. and
Wells Fargo Bank Minnesota, National Association, as trustee, which is incorporated herein
by reference to Exhibit 4.4 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on October 25, 2018.
4.70 First Supplemental Indenture, dated as of February 26, 2010, among Pepsi-Cola
Metropolitan Bottling Company, Inc., PepsiAmericas, Inc. and Wells Fargo Bank, National
Association, as trustee, to the Indenture dated as of August 15, 2003 between
PepsiAmericas, Inc. and Wells Fargo Bank Minnesota, National Association, as trustee,
which is incorporated herein by reference to Exhibit 4.3 to PepsiCo, Inc.’s Current Report
on Form 8-K filed with the Securities and Exchange Commission on March 1, 2010.
Indenture dated as of August 15, 2003 between PepsiAmericas, Inc. and Wells Fargo Bank
Minnesota, National Association, as trustee, which is incorporated herein by reference to
Exhibit 4 to PepsiAmericas, Inc.’s Registration Statement on Form S-3 (Registration
No. 333-108164) filed with the Securities and Exchange Commission on August 22, 2003.
4.71
4.72 Form of PepsiAmericas, Inc. 5.50% Note due 2035, which is incorporated herein by
reference to Exhibit 4.17 to PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the
quarterly period ended March 20, 2010.
4.73 Description of Securities.
10.1 Form of PepsiCo, Inc. Director Indemnification Agreement, which is incorporated herein
by reference to Exhibit 10.20 to PepsiCo, Inc.’s Annual Report on Form 10-K for the fiscal
year ended December 25, 2004.*
10.2 Severance Plan for Executive Employees of PepsiCo, Inc. and Affiliates, which is
incorporated herein by reference to Exhibit 10.5 to PepsiCo, Inc.’s Quarterly Report on
Form 10-Q for the fiscal quarter ended September 6, 2008.*
10.3 Form of Aircraft Time Sharing Agreement, which is incorporated herein by reference to
Exhibit 10 to PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended
March 21, 2009.*
10.4 Specified Employee Amendments to Arrangements Subject to Section 409A of the Internal
Revenue Code, adopted February 18, 2010 and March 29, 2010, which is incorporated
herein by reference to Exhibit 10.13 to PepsiCo, Inc.’s Quarterly Report on Form 10-Q for
the quarterly period ended March 20, 2010.*
10.5 PepsiCo, Inc. 2007 Long-Term Incentive Plan, as amended and restated March 13, 2014,
which is incorporated herein by reference to Exhibit 10.1 to PepsiCo, Inc.’s Current Report
on Form 8-K filed with the Securities and Exchange Commission on March 14, 2014.*
10.6 The PepsiCo International Retirement Plan Defined Benefit Program, as amended and
restated effective as of January 1, 2021.*
123
60859_10k_pgs_iii - 127.indd 123
60859_10k_pgs_iii - 127.indd 123
3/13/21 5:41 PM
3/13/21 5:41 PM
10.7 The PepsiCo International Retirement Plan Defined Contribution Program, as amended and
restated effective as of January 1, 2021.*
10.8 PepsiCo, Inc. Long-Term Incentive Plan (as amended and restated May 4, 2016), which is
incorporated herein by reference to Exhibit B to PepsiCo’s Proxy Statement for its 2016
Annual Meeting of Shareholders, filed with the Securities and Exchange Commission on
March 18, 2016.*
10.9 PepsiCo Pension Equalization Plan (Plan Document for the Pre-409A Program), as
amended and restated effective as of January 1, 2021.*
10.10 PepsiCo Pension Equalization Plan (Plan Document for the 409A Program), as amended
and restated effective as of January 1, 2021.*
10.11 PepsiCo Automatic Retirement Contribution Equalization Plan, as amended and restated
effective as of January 1, 2019, which is incorporated by reference to Exhibit 10.26 to
PepsiCo, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 29,
2018.*
10.12 PepsiCo Director Deferral Program (Plan Document for the 409A Program), amended and
restated effective as of January 1, 2020, which is incorporated by reference to Exhibit 10.25
to PepsiCo, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 28,
2019.*
10.13 Form of Annual Long-Term Incentive Award Agreement, which is incorporated herein by
reference to Exhibit 10.49 to PepsiCo, Inc.’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2016.*
10.14 PepsiCo Executive Income Deferral Program (Plan Document for the 409A Program),
amended and restated effective as of January 1, 2019, which is incorporated by reference to
Exhibit 10.27 to PepsiCo, Inc.’s Annual Report on Form 10-K for the fiscal year ended
December 28, 2019.*
10.15 Amendment to Certain PepsiCo Award Agreements, which is incorporated herein by
reference to Exhibit 10.45 to PepsiCo, Inc.’s Annual Report on Form 10-K for the fiscal
year ended December 30, 2017. *
10.16 PepsiCo, Inc. Long Term Incentive Plan (as amended and restated December 20,
2017),which is incorporated herein by reference to Exhibit 10.47 to PepsiCo, Inc.’s Annual
Report on Form 10-K for the fiscal year ended December 30, 2017.*
10.17 Form of Annual Long-Term Incentive Award Agreement, which is incorporated herein by
reference to Exhibit 10.1 to PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the
quarterly period ended March 24, 2018.*
10.18 Form of Performance-Based Long-Term Incentive Award Agreement, which
is
incorporated herein by reference to Exhibit 10.2 to PepsiCo, Inc.’s Quarterly Report on
Form 10-Q for the quarterly period ended March 24, 2018.*
10.19 PepsiCo, Inc. Executive Incentive Compensation Plan, as amended and restated effective
February 13, 2019, which is incorporated by reference to Exhibit 10.36 to PepsiCo, Inc.’s
Annual Report on Form 10-K for the fiscal year ended December 29, 2018.*
10.20 PepsiCo, Inc. Executive Incentive Compensation Plan (as amended and restated effective
February 4, 2021).*
10.21 Form of Annual Long-Term Incentive Award Agreement, which is incorporated herein by
reference to Exhibit 10.1 to PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the
quarterly period ended March 23, 2019.*
10.22 PepsiCo Executive Income Deferral Program (Plan Document for the Pre-409A Program),
amended and restated effective as of January 1, 2019, which is incorporated by reference to
Exhibit 10.35 to PepsiCo, Inc.’s Annual Report on Form 10-K for the fiscal year ended
December 28, 2019.*
10.23 Form of Annual Long-Term Incentive Award Agreement, which is incorporated herein by
reference to Exhibit 10.1 to PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the
quarterly period ended March 21, 2020.*
124
60859_10k_pgs_iii - 127.indd 124
60859_10k_pgs_iii - 127.indd 124
3/13/21 5:41 PM
3/13/21 5:41 PM
21
23
24
31
32
99.1
Subsidiaries of PepsiCo, Inc.
Consent of KPMG LLP.
Power of Attorney.
Certification of our Chief Executive Officer and our Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of our Chief Executive Officer and our Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
364-Day Credit Agreement, dated as of June 1, 2020, among PepsiCo, as borrower, the
lenders named therein, and Citibank, N.A., as administrative agent, which is incorporated
by reference to Exhibit 99.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 3, 2020.
101
99.2 Five-Year Credit Agreement, dated as of June 3, 2019, among PepsiCo, as borrower, the
lenders named therein, and Citibank, N.A., as administrative agent, which is incorporated
by reference to Exhibit 99.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 3, 2020.
The following materials from PepsiCo, Inc.’s Annual Report on Form 10-K for the fiscal
year ended December 26, 2020 formatted in iXBRL (Inline eXtensible Business Reporting
Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of
Comprehensive Income, (iii) the Consolidated Statements of Cash Flows, (iv) the
Consolidated Balance Sheets, (v) the Consolidated Statements of Equity and (vi) Notes to
Consolidated Financial Statements.
The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended
December 26, 2020, formatted in Inline XBRL and contained in Exhibit 101.
104
* Management contracts and compensatory plans or arrangements required to be filed as exhibits pursuant to Item
15(a)(3) of this report.
60859_10k_pgs_iii - 127.indd 125
60859_10k_pgs_iii - 127.indd 125
3/13/21 5:41 PM
3/13/21 5:41 PM
125
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, PepsiCo has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 10, 2021
PepsiCo, Inc.
By: /s/ Ramon L. Laguarta
Ramon L. Laguarta
Chairman of the Board of Directors and Chief
Executive Officer
60859_10k_pgs_iii - 127.indd 126
60859_10k_pgs_iii - 127.indd 126
3/13/21 5:41 PM
3/13/21 5:41 PM
126
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of PepsiCo and in the capacities and on the date indicated.
SIGNATURE
/s/ Ramon L. Laguarta
Ramon L. Laguarta
/s/ Hugh F. Johnston
Hugh F. Johnston
/s/ Marie T. Gallagher
Marie T. Gallagher
/s/ Segun Agbaje
Segun Agbaje
/s/ Shona L. Brown
Shona L. Brown
/s/ Cesar Conde
Cesar Conde
/s/ Ian M. Cook
Ian M. Cook
/s/ Dina Dublon
Dina Dublon
/s/ Richard W. Fisher
Richard W. Fisher
/s/ Michelle Gass
Michelle Gass
/s/ Dave J. Lewis
Dave J. Lewis
/s/ David C. Page
David C. Page
/s/ Robert C. Pohlad
Robert C. Pohlad
/s/ Daniel Vasella
Daniel Vasella
/s/ Darren Walker
Darren Walker
/s/ Alberto Weisser
Alberto Weisser
TITLE
Chairman of the Board of Directors
and Chief Executive Officer
DATE
February 10, 2021
Vice Chairman, Executive Vice President February 10, 2021
and Chief Financial Officer
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
February 10, 2021
Senior Vice President and Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
127
60859_10k_pgs_iii - 127.indd 127
60859_10k_pgs_iii - 127.indd 127
3/13/21 5:41 PM
3/13/21 5:41 PM
Reconciliation of GAAP and
Non-GAAP Information
In discussing financial results and guidance, we refer to the following
measures which are not in accordance with U.S. Generally Accepted
Accounting Principles (GAAP): organic revenue, core results, core
constant currency results and free cash flow. We use non-GAAP
financial measures internally to make operating and strategic decisions,
including the preparation of our annual operating plan, evaluation
of our overall business performance and as a factor in determining
compensation for certain employees. We believe presenting non-
GAAP financial measures provides additional information to facilitate
comparison of our historical operating results and trends in our
underlying operating results, and provides additional transparency
on how we evaluate our business. We also believe presenting these
measures allows investors to view our performance using the same
measures that we use in evaluating our financial and business
performance and trends.
We consider quantitative and qualitative factors in assessing whether to
adjust for the impact of items that may be significant or that could affect
an understanding of our ongoing financial and business performance
or trends. For further information regarding these non-GAAP financial
measures, including further information on the excluded items for the
periods presented, refer to “Non-GAAP Measures,” “Items Affecting
Comparability” and “Our Liquidity and Capital Resources” in “Item
7 – Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our 2020 Form 10-K. The non-GAAP financial
measures contained in this Annual Report exclude the impact of the
following items:
Mark-to-market net impact: Mark-to-market net gains and losses on
commodity derivatives in corporate unallocated expenses. These
gains and losses are subsequently reflected in division results when
the divisions recognize the cost of the underlying commodity in
operating profit.
Restructuring and impairment charges: Expenses related to the multi-
year productivity plan publicly announced in 2019.
Inventory fair value adjustments and merger and integration charges:
In 2020, charges related to our acquisitions of BFY Brands, Inc.,
Rockstar Energy Beverages, Pioneer Food Group Ltd, and Hangzhou
Haomusi Food Co., Ltd. In 2019, charges primarily related to our
acquisition of SodaStream International Ltd.
Pension-related settlement charges: In 2020, a settlement charge related
to lump sum distributions exceeding the total of annual service and
interest cost. In 2019, settlement charges related to the purchase of a
group annuity contract and settlement charges related to one-time lump
sum payments to certain former employees who had vested benefits.
Net tax related to the TCJ Act: Net tax amounts related to the TCJ Act.
Additionally, free cash flow is a measure management uses to monitor
cash flow performance. We define free cash flow as net cash provided by
operating activities less capital spending, plus sales of property, plant
and equipment. Since net capital spending is essential to our product
innovation initiatives and maintaining 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 operating activities.
Non-GAAP information should be considered as supplemental in nature
and is not meant to be considered in isolation or as a substitute for the
related financial information prepared in accordance with U.S. GAAP. In
addition, our non-GAAP financial measures may not be the same as or
comparable to similar non-GAAP financial measures presented by other
companies.
128
60859_10k_pgs_i-ii, 128-132.indd 128
60859_10k_pgs_i-ii, 128-132.indd 128
3/13/21 5:40 PM
3/13/21 5:40 PM
PepsiCo Annual Report 2020 Operating Profit Reconciliation
Reported operating profit, GAAP measure
Mark-to-market net impact
Restructuring and impairment charges
Inventory fair value adjustments and merger and
integration charges
Core operating profit, non-GAAP measure
Diluted EPS Reconciliation
Reported diluted EPS, GAAP measure
Mark-to-market net impact
Restructuring and impairment charges
Inventory fair value adjustments and merger and
integration charges
Pension-related settlement charges
Net tax related to the TCJ Act
Core diluted EPS, non-GAAP measure
Impact of foreign exchange translation
Core constant currency diluted EPS growth,
non-GAAP measure
Year Ended
December 26, 2020
December 28, 2019
% Change
$ 10,080
$ 10,291
(2)%
(73)
269
255
$ 10,531
(112)
368
55
$ 10,602
(1)%
Year Ended
December 26, 2020
December 28, 2019
% Change
$ 5.12
(0.04)
0.17
0.17
0.11
—
$ 5.52
$ 5.20
(0.06)
0.21
0.03
0.15
(0.01)
$ 5.53
(2)%
—%
2
2%
Net Cash Provided by Operating Activities Reconciliation
Net cash provided by operating activities, GAAP measure
Capital spending
Sales of property, plant and equipment
Free cash flow, non-GAAP measure
Year Ended
December 26, 2020
December 28, 2019
% Change
$ 10,613
(4,240)
55
$ 6,428
$ 9,649
(4,232)
170
$ 5,587
10%
15%
Note — Dollars are presented in millions, except per share amounts. Certain amounts above may not sum due to rounding.
60859_10k_pgs_i-ii, 128-132.indd 129
60859_10k_pgs_i-ii, 128-132.indd 129
3/13/21 5:40 PM
3/13/21 5:40 PM
129
PepsiCo Annual Report 2020
Net Revenue Growth Reconciliation
PepsiCo
Quaker Foods North America
Reported
% change,
GAAP measure
5%
10%
Year Ended December 26, 2020
Impact of
Foreign exchange
translation
Acquisitions
and divestitures
2
—
(3)
—
Net Revenue Growth Reconciliation
Reported
% change,
GAAP measure
Quarter Ended December 26, 2020
Impact of
Foreign exchange
translation
Acquisitions
and divestitures
PepsiCo
Global snacks and foods
Global beverages
International developing and emerging
markets
International developed markets
9%
9%
8%
DD%
DD%
2
2
1
HSD
(MSD)
(5)
(6)
(3)
(DD)
—
MSD is defined as mid-single digit. HSD is defined as high-single digit. DD is defined as double-digit.
Note — Dollars are presented in millions, except per share amounts. Certain amounts above may not sum due to rounding.
Organic
% change,
non-GAAP
measure
4%
11%
Organic
% change,
non-GAAP
measure
6%
5%
6%
MSD%
MSD%
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
(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 “aim,” “anticipate,” “believe,” “drive,”
“estimate,” “expect,” “expressed confidence,” “forecast,” “future,”
“goal,” “guidance,” “intend,” “may,” “objective,” “outlook,” “plan,”
“position,” “potential,” “project,” “seek,” “should,” “strategy,” “target,”
“will” or similar statements or variations of such words and other
similar expressions. All statements addressing our future operating
performance, and statements addressing events and developments that
we expect or anticipate will occur in the future, are forward-looking
statements 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
statement. These risks and uncertainties include, but are not limited
to, those described in “Item 1A. Risk Factors” on pages 11–22 of our
Annual Report on Form 10-K and “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations — Our
Business — Our Business Risks” of our Annual Report on Form 10-K
included herewith. 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.
130
60859_10k_pgs_i-ii, 128-132.indd 130
60859_10k_pgs_i-ii, 128-132.indd 130
3/13/21 5:40 PM
3/13/21 5:40 PM
PepsiCo Annual Report 2020 Common Stock Information
Stock Trading Symbol — PEP
Stock Exchange Listings
The Nasdaq Global Select Market is the principal market for our common stock,
which is also listed on the SIX Swiss Exchange.
Dividend Policy
Dividends are usually declared in February, May, July and November and paid at
the end of March, June and September and the beginning of January.
On February 4, 2021, the Board of Directors of PepsiCo declared a quarterly
dividend of $1.0225 per share payable March 31, 2021, to shareholders of record
on March 5, 2021. For the remainder of 2021, the record dates for these dividend
payments are expected to be June 4, September 3 and December 3, 2021, subject
to approval of the Board of Directors. On February 11, 2021, we announced a 5%
increase in our annualized dividend to $4.30 per share from $4.09 per share,
effective with the dividend expected to be paid in June 2021. We have paid
consecutive quarterly cash dividends since 1965.
Year-End Market Price of Stock
Based on calendar year-end (in U.S. Dollars)
Annualized Cash Dividends Declared
Per share (in U.S. Dollars)
150
125
100
75
50
2016
2017
2018
2019
2020
The closing price for a share of PepsiCo common stock on The New York
Stock Exchange for the year ended 2016 and The Nasdaq Global Select Market
for the years ended 2017–2020 was the price reported by Bloomberg. Past
performance is not necessarily indicative of future stock price performance.
2020
2019
2018
2017
2016
4.0225
3.7925
3.5875
3.1675
2.96
Comparison of Cumulative Total Shareholder Return
(in U.S. Dollars)
The graph below matches PepsiCo, Inc.’s cumulative five-year total shareholder return on common stock with the cumulative total returns of the S&P 500®
index and the S&P® Average of Industry Groups index.* The graph tracks the performance of a $100 investment in our common stock and in each index (with
the reinvestment of all dividends) from 12/31/2015 to 12/31/2020.
PepsiCo, Inc.
S&P 500
S&P Avg. of Ind. Groups*
$200
$150
$100
$50
$0
12/15
12/16
12/17
12/18
12/19
12/20
* 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
beverage and foods businesses. The return for PepsiCo, the S&P 500, and the S&P Average indices are calculated through December 31, 2020.
PepsiCo, Inc.
S&P 500®
S&P® Average of Industry Groups*
12/15
$100
$100
$100
12/16
$108
$112
$106
12/17
$127
$136
$115
12/18
$121
$130
$104
12/19
12/20
$154
$171
$133
$172
$203
$142
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
131
60859_10k_pgs_i-ii, 128-132.indd 131
60859_10k_pgs_i-ii, 128-132.indd 131
3/13/21 5:40 PM
3/13/21 5:40 PM
PepsiCo Annual Report 2020 Shareholder Information
Annual Meeting
The Annual Meeting of Shareholders will be conducted in a virtual-only
format on Wednesday, May 5, 2021, at 9 a.m. Eastern Daylight time at
www.virtualshareholdermeeting.com/PEP2021. The webcast will open for
shareholders at approximately 8:45 a.m. Eastern Daylight time and begin
promptly at 9 a.m. Eastern Daylight 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
communications concerning transfers, statements, dividend payments,
address changes, lost certificates and other administrative matters to:
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
Telephone: 800-226-0083
201-680-6578 (outside the U.S.)
Website: www.computershare.com/
investor
Online inquiries: www-us.computer
share.com/investor/contact
or
Manager, Shareholder Relations
PepsiCo, Inc.
700 Anderson Hill Road
Purchase, NY 10577
Telephone: 914-253-3055
Email: investor@pepsico.com
In all correspondence or telephone inquiries, please mention PepsiCo, the
name in which your shares are registered, your holder ID, your address and
your telephone number.
Long-Term Incentive Plan Participants
Associates who received Long-Term Incentive awards should address all questions
regarding your account, including outstanding options or shares received through
option exercises or vesting events to:
Morgan Stanley
Global Stock Plan Services
P.O. Box 182616
Columbus, OH 43218-2616
Telephone: 844-4-PEP-LTI (U.S. and Canada)
614-414-8060 (all other locations)
Associate Benefit Plan Participants
PepsiCo Savings 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
Website: www.netbenefits.com/pepsico
PepsiCo Stock Purchase Program
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
Telephone: 800-632-2014
Website: www.netbenefits.com/pepsico
Please have a copy of your most recent statement
available when calling with inquiries.
Corporate Information
Corporate Headquarters
PepsiCo, Inc.
700 Anderson Hill Road
Purchase, NY 10577
Telephone: 914-253-2000
PepsiCo Website
www.pepsico.com
Direct Stock Purchase
Interested investors can make their initial purchase directly through
Computershare, transfer agent for PepsiCo and Administrator for the Plan.
Please contact our transfer agent for more information.
Computershare Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
Telephone: 800-226-0083
201-680-6578 (outside the U.S.)
Website: www.computershare.com/investor
Online inquiries: www-us.computershare.com/investor/contact
Other services include dividend reinvestment, direct deposit of dividends, optional
cash investments by electronic funds transfer or check drawn on a U.S. bank, sale of
shares, online account access and electronic delivery of shareholder materials.
132
PepsiCo Annual Report 2020
Independent Auditors
KPMG LLP
345 Park Avenue
New York, NY 10154-0102
Telephone: 212-758-9700
Additional Information
PepsiCo’s Annual Report contains many of the valuable trademarks owned and/or
used by PepsiCo and its subsidiaries and affiliates in the U.S. and internationally
to distinguish products and services of outstanding quality. All other trademarks
featured herein are the property of their respective owners.
© 2021 PepsiCo, Inc.
Environmental Profile
This Annual Report was printed with Forest
Stewardship Council® (FSC®)–certified paper,
the use of 100% certified renewable wind power
resources and vegetable-based ink. PepsiCo
continues to reduce the costs and environmental
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.
60859_10k_pgs_i-ii, 128-132.indd 132
60859_10k_pgs_i-ii, 128-132.indd 132
3/13/21 5:40 PM
3/13/21 5:40 PM
.
c
n
I
l
r
e
d
n
a
x
e
A
y
d
n
a
S
y
b
g
n
i
t
n
i
r
P
.
i
m
o
c
n
o
s
d
d
a
w
w
w
.
i
n
o
s
d
d
A
y
b
n
g
s
e
D
i
“
In 2020, nothing could stop our frontline workers from making, moving, and
selling our products. They have been out there, day after day, creating smiles
for our company and, most importantly, for our consumers, our customers,
and our communities. To our entire frontline workforce around the world,
on behalf of the entire PepsiCo family, I say a huge, heartfelt thank you.
”
— Ramon L. Laguarta
P
e
p
s
i
C
o
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0