View our interactive experience to learn more about PepsiCo's Annual Report and more Information. Annual Report. Full Report. Annual Report Full Report. Annual Report. Annual Report. Full Report. Annual Report. See Note 1 to our consolidated financial statements for financial.
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Annual Report and Form 10K. Pepsico, Inc. PDF · Form 10K (HTML). Pepsico, Inc. does not currently have any hardcopy reports on AnnualReports. com. Pepsi Co. continues to be the largest multinational producer of both snack foods and beverages in the world. They operate through six business segments all of. PepsiCo, Inc. Annual Report On Form K. PDF. Published: ; File Format: PDF; Views: Size: M; Language: English Groupe Danone Economic and Social Report · Tyson Foods Inc. Annual Report.
Frito-Lay holds a significant leadership market position in the snack industry worldwide and faces local and regional competitors as well as national and global snack competitors on issues related to price, quality, variety and distribution. In the beverage industry, The Coca-Cola Company is our primary competitor.
In the United States, The Coca-Cola Company has a slightly larger share of carbonated soft drink consumption, while we have a larger share for chilled juices and isotonics. We also face many local value brand competitors in the United States.
Internationally, The Coca-Cola Company has a significant market share advantage for carbonated beverages. In addition, internationally we compete with strong local carbonated beverage brands in many countries. We believe that the strength of our brands, innovation and marketing coupled with the quality of our products and flexibility of our distribution network, enable us to compete effectively.
Nielsen Corporation reports that exclude Wal-Mart, as Wal-Mart does not report data to these services. Regulatory Environment The conduct of our businesses, and the production, distribution, sale, advertising, labeling, safety, transportation and use of many of our products, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as to foreign laws and regulations administered by government entities and agencies in markets where we operate.
It is our policy to follow the laws and regulations around the world that apply to our businesses.
In many jurisdictions, compliance with competition laws is of special importance to us due to our competitive position in those jurisdictions. We rely on legal, operational and environmental compliance programs, as well as local in-house and outside counsel, to guide our businesses in complying with applicable laws and regulations of the countries in which we do business.
The cost of compliance with foreign laws does not have a material financial impact on our international operations. Employees As of December 25, , we employed, subject to seasonal variations, approximately , people worldwide, including approximately 60, people employed within the United States.
We believe that relations with our employees are generally good.
Item 2. Properties We own our corporate headquarters building in download, New York. Leases of plants in North America generally are on a long-term basis, expiring at various times, with options to renew for additional periods.
Most international plants are leased for varying and usually shorter periods, with or without renewal options.
We believe that our properties are in good operating condition and are suitable for the purposes for which they are being used. Frito-Lay North America Frito-Lay North America FLNA owns or leases approximately 50 food manufacturing and processing plants and approximately 1, warehouses, distribution centers and offices, including its headquarters building and a research facility in Plano, Texas.
PepsiCo Beverages North America PepsiCo Beverages North America PBNA owns or leases approximately 44 plants and production processing facilities and approximately 43 warehouses, distribution centers and offices, including its headquarters building in downtown Chicago, Illinois.
Licensed bottlers in which we have an ownership interest own or lease approximately 70 bottling plants. PepsiCo International PepsiCo International PI owns or leases approximately plants and approximately 1, warehouses, distribution centers and offices. It consists of seven three-story buildings. Each building is connected to its neighbor through a corner.
The property includes the Donald M. Kendall Sculpture Gardens with 45 contemporary sculptures open to the public. Westchester Magazine stated "The buildings' square blocks rise from the ground into low, inverted ziggurats, with each of the three floors having strips of dark windows; patterned pre-cast concrete panels add texture to the exterior surfaces. In , PepsiCo launched an initiative called the Pepsi Refresh Project,  in which individuals submit and vote on charitable and nonprofit collaborations.
NGOs warned  that the commitments did not go far enough, and in light of the deforestation crisis in Southeast Asia, have called on the company to close the gaps in its policies immediately. In this setting, PepsiCo was perceived by India-based environmental organizations as a company that diverted water to manufacture a discretionary product, making it a target for critics at the time.
In the U. In doing so, the factory used machinery that captured water naturally contained in potatoes, and used it to offset the need for outside water. Environmental advocacy organizations including the Natural Resources Defense Council and individual critics such as Rocky Anderson mayor of Salt Lake City, Utah voiced concerns in , noting that the company could conserve additional water by refraining from the production of discretionary products such as Aquafina.
The court ruling stated that the "percentage of pesticides" found in the tested beverages was "within the tolerance limits subsequently prescribed in respect of such product," since at the time of testing "there was no provision governing pesticide adulteration in cold drinks. Department of State. When prices increase, we may or may not pass on such increases to our customers.
See Note 10 to our consolidated financial statements for additional information on how we manage our exposure to commodity costs. Risk Factors — Our operating results may be adversely affected by increased costs, disruption of supply or shortages of raw materials and other supplies.
Our Brands. We also hold long-term licenses to use valuable trademarks in connection with our products in certain markets, including Dole and Ocean Spray. 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 for the primary purpose of enhancing brand awareness. We either own or have licenses to use a number of patents which relate to some of our products, their packaging, the processes for their production and the design and operation of various equipment used in our businesses. Some of these patents are licensed to others.
Our businesses are affected by seasonal variations. For instance, our beverage sales are higher during the warmer months and certain food and dairy sales are higher in the cooler months. Weekly beverage 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 does not have a material impact on our financial results. Our Customers. Our primary customers include wholesale distributors, foodservice distributors, grocery stores, convenience stores, mass merchandisers, membership stores and authorized independent bottlers. 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. In , sales to Wal-Mart Stores, Inc. These percentages include concentrate sales to our independent bottlers which were used in finished goods sold by them to these retailers. Our Competition. Our businesses operate in highly competitive markets. Our beverage, snack and food brands compete against global, regional, local and private label manufacturers and other value competitors.
In many countries in which we do business, The Coca-Cola Company is our primary beverage competitor.
In many markets, we compete against numerous regional and local companies. Many of our snack and food brands hold significant leadership positions in the snack and food industry worldwide. Our beverage, snack and food brands compete on the basis of price, quality, product variety and distribution.
Success in this competitive environment is dependent on effective promotion of existing products, the introduction of new products and the effectiveness of our advertising campaigns, marketing programs, product packaging, pricing, increased efficiency in production techniques and brand and trademark development and protection. We believe that the strength of our brands, innovation and marketing, coupled with the quality of our products and flexibility of our distribution network, allows us to compete effectively.
The categories and category share information in the charts above are through December based on data provided and verified by SymphonyIRI Group, Inc. The above charts include data from most major retail chains including Wal-Mart but exclude data from certain customers that do not report to this service.
The sample of retailers submitting data to SymphonyIRI Group was expanded in ; therefore, data shown in the above chart is not comparable to data shown in this chart in our Annual Report on Form K. Does not sum due to rounding. Data on Kraft includes percent retail sales for Kraft Foods, Inc. Research and Development. We engage in a variety of research and development activities and continue to invest to accelerate growth in these activities and to drive innovation globally.
These activities principally involve the development of new products, improvement in the quality of existing products, improvement and modernization of production processes, the development and implementation of new technologies to enhance the quality and value of both current and proposed product lines and research and development efforts focused on identification of opportunities to transform and grow our product portfolio in the short and long term.
Our research platforms are shared across specializations, countries and regions in order to generate innovation. In , we continued to expand our portfolio of products made with nutritious ingredients, increasing the amount of whole grains, fruits, vegetables, nuts, seeds and low-fat dairy in certain of our products, and we continued to take steps to reduce the average amount of sodium, saturated fat and added sugar per serving in certain of our products.
We also invested in agricultural development and the development and implementation of new technologies to both enhance the quality and value of our current and future product lines and to minimize our impact on the environment. We made investments to conserve energy and raw materials, and to reduce waste in our facilities, and to improve our packaging process to continue to reduce total packaging volume, recycle containers, use renewable resources and remove environmentally sensitive materials.
Consumer research is excluded from research and development costs and included in other marketing costs. Regulatory Environment and Environmental Compliance. The conduct of our businesses, including the production, storage, distribution, sale, advertising, marketing, labeling, safety and health practices, transportation and use of many of our products, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as.
It is our policy to abide by the laws and regulations around the world that apply to our businesses. In the United States, we are required to comply with a variety of laws and regulations, including but not limited to: In our business dealings, we are also required to comply with the Foreign Corrupt Practices Act.
In addition, we are also subject to various state and local statutes and regulations, including state consumer protection laws. For example, in California, Proposition 65 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.
The State of California continues to evaluate various components and, consequently, food and beverage producers who sell products in California, including PepsiCo, may be required to provide warning labels on their products.
Risk Factors — Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation.
Outside the United States, we are subject to numerous similar and other laws and regulations, including anti-corruption laws and regulations. In addition, in many jurisdictions, compliance with competition laws is of special importance to us due to our competitive position in those jurisdictions. We rely on legal and operational compliance programs, as well as in-house and outside counsel, to guide our businesses in complying with applicable laws and regulations of the countries in which we do business.
Legislation has been introduced in certain jurisdictions in which we operate that would impose special taxes or other limitations on certain products we sell. For example, certain federal, state and local governments in the United States, and in certain other countries in which we operate, have either imposed or are considering the imposition of taxes and other limitations on the sale of certain of our products, including non-diet and diet soft drinks, fruit drinks, teas, energy drinks and flavored waters.
In the United States, federal and state legislatures are also debating proposals to require labeling of genetically modified organisms GMOs and to restrict the use of Supplemental Nutrition Assistance Program benefits to download certain beverages and foods. In addition, legislation has been enacted in certain U. It is possible that similar or more restrictive legal requirements may be proposed or enacted in the future.
The cost of compliance with U. 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 and air emissions.
In the United States, our facilities must comply with 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 on-site and sent to third-party owned and operated off-site licensed facilities. We are committed to meeting all applicable environmental compliance requirements and have internal programs in place to enhance our global environmental health and safety management.
We and our subsidiaries are subject to environmental remediation obligations in the normal course of business, as well as remediation and related indemnification obligations in connection with. While these environmental and indemnification obligations cannot be predicted with certainty, environmental compliance costs have not had, and are not expected to have, a material impact on our capital expenditures, earnings or competitive position.
The recently enacted Iran Threat Reduction and Syria Human Rights Act of TRA requires disclosure of certain activities relating to Iran by PepsiCo or its affiliates that occurred during the twelve month period covered by this report. One of our foreign subsidiaries had historically maintained a small office in Iran, which provided sales support to independent bottlers in Iran in connection with in-country sales of foreign-owned beverage brands, and which was not in contravention of any applicable U.
Starting in early , our foreign subsidiary began to take steps to close this office in Iran, including the termination of all three of its employees, and the office has ceased all commercial activity since enactment of the TRA.
Prior to the enactment of the TRA, this foreign subsidiary paid local Iranian governmental authorities taxes associated with the office and with wind-down activities. Our foreign subsidiary is currently in the process of completing the wind-down of the office in Iran pursuant to a general license from OFAC and intends to seek any further specific licenses as may be necessary in order to complete the wind-down of this office.
As of December 29, , we employed approximately , people worldwide, including approximately , people within the United States. Our employment levels are subject to seasonal variations. We or our subsidiaries are a party to numerous collective bargaining agreements. We expect that we will be able to renegotiate these collective bargaining agreements on satisfactory terms when they expire.
We believe that relations with our employees are generally good. Available Information. We are required to file annual, quarterly and current reports, proxy statements and other information with the U. In addition, 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: 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.
Demand for our products may be adversely affected by changes in consumer preferences and tastes or if we are unable to innovate or market our products effectively. We are a global food and beverage company operating in highly competitive categories and rely on continued demand for our products. To generate revenues and profits, we must sell products that appeal to our customers and to consumers.
Any significant changes in consumer preferences or any inability on our part to anticipate or react to such changes could result in reduced demand for our products and erosion of our competitive and financial position. Our success depends on: For example, our growth rate may be adversely affected if we are unable to maintain or grow our current share of the liquid refreshment beverage market in North America, or our current share of the snack market globally, or if demand for our products does not grow in emerging and developing markets.
In general, changes in product category consumption or consumer demographics could result in reduced demand for our products. Consumer preferences may shift due to a variety of factors, including the aging of the general population; consumer concerns regarding the health effects of ingredients such as sodium, sugar or other product ingredients or attributes; changes in social trends that impact travel, vacation or leisure activity patterns; changes in weather patterns or seasonal consumption cycles; negative publicity whether or not valid resulting from regulatory action or litigation against us or other companies in our industry; a downturn in economic conditions; or taxes that would increase the cost of our products to consumers.
Our continued success is also dependent on our product innovation, including maintaining a robust pipeline of new products and improving the quality of existing products, and the effectiveness of our product packaging, advertising campaigns and marketing programs, including our ability to successfully adapt to a rapidly changing media environment, such as through use of social media and online advertising campaigns and marketing programs.
Although we devote significant resources to the actions mentioned above, there can be no assurance as to our continued ability to develop and launch successful new products or variants of existing products or to effectively execute advertising campaigns and marketing programs.
In addition, both the launch and ongoing success of new products and advertising campaigns are inherently uncertain, especially as to their appeal to consumers.
Our failure to make the right strategic investments to drive innovation or successfully launch new products or variants of existing products could decrease demand for our existing products by negatively affecting consumer perception of existing brands, as well as result in inventory write-offs and other costs.
Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation. The conduct of our businesses, including the production, storage, distribution, sale, advertising, marketing, labeling, health and safety practices, transportation and use of many of our products, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as to laws and regulations administered by government entities and agencies outside the United States in markets in which our products are made, manufactured or sold, including in emerging and developing markets where legal and regulatory systems may be less developed.
These laws and regulations and interpretations thereof may change, sometimes dramatically, as a result of political, economic or social events. Such changes may include changes in: New laws, regulations or governmental policy and their related interpretations, or changes in any of the foregoing, may alter the environment in which we do business and, therefore, may impact our results or increase our costs or liabilities. Governmental entities or agencies in jurisdictions where we operate may also impose new labeling, product or production requirements, or other restrictions.
Studies are underway by third parties to assess the health implications of consumption of certain ingredients present in some of our products, including sugar, artificial sweeteners, as well as substances such as acrylamide that are naturally formed in a wide variety of foods when they are cooked whether commercially or at home , including french fries, potato chips, cereal, bread and coffee.
Certain of these studies of acrylamide found that it is probable that acrylamide causes cancer in laboratory animals when consumed in extraordinary amounts. If consumer concerns about the health implications of consumption of certain ingredients present in some of our products, including sugar, artificial sweeteners, or acrylamide increase as a result of these studies, other new scientific evidence, or for any other reason, whether or not valid, demand for our products could decline and we could be subject to lawsuits or new regulations that could affect sales of our products, any of which could have an adverse effect on our business, financial condition or results of operations.
We are also subject to Proposition 65 in California, a law which requires that a specific warning appear on any product sold in California that contains a substance listed by that State as having been found to cause cancer or birth defects.
If we were required to add warning labels to any of our products or place warnings in certain locations where our products are sold, sales of those products could suffer not only in those locations but elsewhere. In many jurisdictions, compliance with competition laws is of special importance to us due to our competitive position in those jurisdictions. Regulatory authorities under whose laws we operate may also have enforcement powers that can subject us to actions such as product recall, seizure of products or other sanctions, which could have an adverse effect on our sales or damage our reputation.
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Although we have policies and procedures in place that are designed to promote legal and regulatory compliance, our employees or suppliers. Violations of these laws or regulations could subject us to criminal or civil enforcement actions which could have a material adverse effect on our business. In addition, we and our subsidiaries are party to a variety of legal and environmental remediation obligations arising in the normal course of business, as well as environmental remediation, product liability, toxic tort and related indemnification proceedings in connection with certain historical activities and contractual obligations of businesses acquired by our subsidiaries.
Due to regulatory complexities, uncertainties inherent in litigation and the risk of unidentified contaminants on current and former properties of ours and our subsidiaries, the potential exists for remediation, liability and indemnification costs to differ materially from the costs we have estimated. We cannot guarantee that our costs in relation to these matters will not exceed our established liabilities or otherwise have an adverse effect on our results of operations.
Business-Regulatory Environment and Environmental Compliance. Our financial performance could suffer if we are unable to compete effectively. The food, snack and beverage industries in which we operate are highly competitive. We compete with major international food, snack and beverage companies that, like us, operate in multiple geographic areas, as well as regional, local and private label manufacturers and other value competitors.
In many countries where we do business, including the United States, our primary beverage competitor is The Coca-Cola Company. We compete on the basis of brand recognition, taste, price, quality, product variety, distribution, marketing and promotional activity, convenience, service and the ability to identify and satisfy consumer preferences. If we are unable to compete effectively, we may be unable to grow or maintain sales or gross margins in the global market or in various local markets.
This may have a material adverse impact on our revenues and profit margins. Our financial performance could be adversely affected if we are unable to grow our business in emerging and developing markets or as a result of unstable political conditions, civil unrest or other developments and risks in the markets where our products are sold. Our operations outside of the United States, particularly in Russia, Mexico, Canada and the United Kingdom, contribute significantly to our revenue and profitability, and we believe that our emerging and developing markets, particularly China, India, Brazil and the Africa and Middle East regions, present important future growth opportunities for us.
However, there can be no assurance that our existing products, variants of our existing products or new products that we make, manufacture, market or sell will be accepted or successful in any particular emerging or developing market, due to local or global competition, product price, cultural differences or otherwise.
If we are unable to expand our businesses in emerging and developing markets, or achieve the return on capital we expect as a result of our investments, particularly in Russia, as a result of economic and political conditions, increased competition, reduced demand for our products, an inability to acquire or form strategic business alliances or to make necessary infrastructure investments or for any other reason, our financial performance could be adversely affected.
Unstable economic or political conditions, civil unrest or other developments and risks in the markets where our products are sold, including in Europe, Venezuela, Mexico, the Middle East and Egypt, could also have an adverse impact on our business results or financial condition.
Factors that could adversely affect our business results in these markets include: Bribery Act, and adverse consequences, such as the assessment of fines or penalties, for failing to comply with these laws and regulations.
In addition, disruption in these markets due to political instability or civil unrest could result in a decline in consumer downloading power, thereby reducing demand for our products. Unfavorable economic conditions may have an adverse impact on our business results or financial condition.
Many of the countries in which we operate, including the United States and several of the members of the European Union, have experienced and continue to experience unfavorable economic conditions. Our business or financial results may be adversely impacted by these unfavorable economic conditions, including: In addition, we cannot predict how current or worsening economic conditions will affect our critical customers, suppliers and distributors and any negative impact on our critical customers, suppliers or distributors may also have an adverse impact on our business results or financial condition.
In addition, some of the major financial institutions with which we execute transactions, including U. A ratings downgrade, bankruptcy, receivership, default or similar event involving a major financial institution may limit the availability of credit or willingness of financial institutions to extend credit on terms commercially acceptable to us or at all or, with respect to financial institutions who are parties to our financing arrangements, leave us with reduced borrowing capacity or unhedged against certain currencies or price risk associated with forecasted downloads of raw materials which could have an adverse impact on our business results or financial condition.
Our operating results may be adversely affected by increased costs, disruption of supply or shortages of raw materials and other supplies. We and our business partners use various raw materials and other supplies in our business.
PepsiCo, Inc. 2011 Annual Report On Form 10-K
The principal ingredients we use include apple, orange and pineapple juice and other juice concentrates, aspartame, corn, corn sweeteners, flavorings, flour, grapefruit and other fruits, oats, oranges, potatoes, raw milk, rice, seasonings, sucralose, sugar, vegetable and essential oils and wheat. Our key packaging materials include plastic resins, including polyethylene terephthalate PET and polypropylene resin used for plastic beverage bottles and film packaging used for snack foods, aluminum used for cans, glass bottles, closures, cardboard and paperboard cartons.
Some of these raw materials and supplies are sourced internationally and some are available from a limited number of suppliers or are in shortest supply when seasonal demand is at its peak. We are exposed to the market risks arising from adverse changes in commodity prices, affecting the cost of our raw materials and energy, including fuel. The raw materials and energy which we use for the production of our products are largely commodities that are subject to price volatility and fluctuations in availability caused by changes in global supply and demand, weather conditions, agricultural uncertainty or governmental incentives and controls.
We download these materials and energy mainly in the open market. If commodity price changes result in unexpected increases in raw materials and energy costs, we may not be able to increase our prices to offset these increased costs without suffering reduced volume, revenue and operating results. In addition, we use derivatives to hedge price risk associated with forecasted downloads of certain raw materials and energy, including fuel.
Certain of these derivatives that do not qualify for hedge accounting treatment can result in increased volatility in our net earnings in any given period due to changes in the spot prices of the underlying commodities. Failure to realize anticipated benefits from our productivity plan or global operating model could have an adverse impact on our business, financial condition and results of operations. We are implementing a strategic plan that we believe will position our business for future success and growth, to allow us to achieve a lower cost structure and operate efficiently in the highly competitive food, snack and beverage industries.
In order to capitalize on our cost reduction efforts, it will be necessary to make certain investments in our business, which may be limited due to capital constraints. In addition, it is critical that we have the appropriate personnel in place to continue to lead and execute our plan. Our future success and earnings growth depends in part on our ability to reduce costs and improve efficiencies. If we are unable to successfully implement our productivity plan or fail to implement it as timely as we anticipate, our business, financial condition and results of operations could be adversely impacted.
In addition, we have launched a global operating model to improve efficiency, decision making, innovation and brand management across the global PepsiCo organization. If we are unable to implement this model effectively, it may have a negative impact on our ability to deliver sustained or breakthrough innovation or to otherwise compete effectively.
Disruption of our supply chain could have an adverse impact on our business, financial condition and results of operations. Our ability, and that of our suppliers, third-party business partners, including our independent bottlers, contract manufacturers, joint venture partners, independent distributors and retailers, to make, manufacture, distribute and sell products is critical to our success. Damage or disruption to our or their manufacturing or transportation.
Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, as well as require additional resources to restore our supply chain. Any damage to our reputation could have a material adverse effect on our business, financial condition and results of operations. Maintaining a good reputation globally is critical to selling our branded products.
Product contamination or tampering, the failure to maintain high standards for product quality, safety and integrity, including with respect to raw materials and ingredients obtained from suppliers, or allegations of product quality issues, mislabeling or contamination, even if untrue, may reduce demand for our products or cause production and delivery disruptions. A widespread product recall or a significant product liability issue could cause our products to be unavailable for a period of time, which could further reduce consumer demand and brand equity.
In addition, we operate globally, which requires us to comply with numerous local regulations, including, without limitation, anti-corruption laws and competition laws.
In the event that our employees, bottlers or agents engage in improper activities abroad, we may be subject to enforcement actions, litigation, loss of sales or other consequences which may cause us to suffer damage to our reputation in the United States and abroad. Our reputation could also be adversely impacted by any of the following, or by adverse publicity whether or not valid relating thereto: In addition, water is a limited resource in many parts of the world and demand for water continues to increase.
Our reputation could be damaged if we or others in our industry do not act, or are perceived not to act, responsibly with respect to water use. Failure to comply with local laws and regulations, to maintain an effective system of internal controls or to provide accurate and timely financial information could also hurt our reputation.
Furthermore, the rising popularity of social networking and other consumer-oriented technologies has increased the speed and accessibility of information dissemination, and, as a result, negative or inaccurate posts or comments on such sites may also generate adverse publicity that could damage our reputation. Damage to our reputation or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and could have a material adverse effect on our business, financial condition and results of operations, as well as require additional resources to rebuild our reputation.
Failure to successfully complete or integrate acquisitions and joint ventures into our existing operations, or to complete or manage divestitures or refranchisings, could have an adverse impact on our business, financial condition and results of operations. We regularly evaluate potential acquisitions, joint ventures, divestitures and refranchisings.
Potential issues associated with these activities could include, among other things, our ability to realize the full extent of the benefits or cost savings that we expect to realize as a result of the completion of an acquisition, divestiture.
With respect to acquisitions, the following also pose potential risks: With respect to joint ventures, we share ownership and management responsibility of a company with one or more parties who may or may not have the same goals, strategies, priorities or resources as we do and joint ventures are intended to be operated for the benefit of all co-owners, rather than for our exclusive benefit. In addition, acquisitions and joint ventures outside of the United States increase our exposure to risks associated with operations outside of the United States, including fluctuations in exchange rates and compliance with the Foreign Corrupt Practices Act and other anti-corruption and anti-bribery laws, and laws and regulations outside the United States.
With respect to divestitures and refranchisings, we may not be able to complete such transactions on terms commercially favorable to us or at all.
In addition, as divestitures and refranchisings may reduce our direct control over certain aspects of our business, any failure to maintain good relations with divested or refranchised businesses in our supply or sales chain may adversely impact sales or business performance. If an acquisition or joint venture is not successfully completed or integrated into our existing operations, or if a divestiture or refranchising is not successfully completed or managed, our business, financial condition and results of operations could be adversely impacted.
If we are unable to hire or retain key employees or a highly skilled and diverse workforce, it could have a negative impact on our business. Our continued growth requires us to hire, retain and develop our leadership bench and a highly skilled and diverse workforce. We compete to hire new employees and then must train them and develop their skills and competencies. Any unplanned turnover or our failure to develop an adequate succession plan to backfill current leadership positions, including our Chief Executive Officer, or to hire and retain a diverse workforce could deplete our institutional knowledge base and erode our competitive advantage.
In addition, our operating results could be adversely affected by increased costs due to increased competition for employees, higher employee turnover or increased employee benefit costs.
Trade consolidation or the loss of any key customer could adversely affect our financial performance. We must maintain mutually beneficial relationships with our key customers, including Wal-Mart, as well as other retailers, to effectively compete. The loss of any of our key customers, including Wal-Mart, could have an adverse effect on our financial performance. In addition, our industry has been affected by increasing concentration of retail ownership, particularly in the United States and Europe, which may impact our ability to compete as such retailers may demand lower pricing and increased promotional programs.
Further, should larger retailers increase utilization of their own distribution networks and private label brands, the competitive advantages we derive from our go-to-market systems and brand equity may be eroded. Failure to appropriately respond to any such actions or to offer effective sales incentives and marketing programs to our customers.
Our borrowing costs and access to capital and credit markets may be adversely affected by a downgrade or potential downgrade of our credit ratings. Our objective is to maintain credit ratings that provide us with ready access to global capital and credit markets.
Any downgrade of our credit ratings by a credit rating agency, especially any downgrade to below investment grade, could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, or at all.
In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper market with the same flexibility that we have experienced historically, and therefore require us to rely more heavily on more expensive types of debt financing.
Our borrowing costs and access to the commercial paper market could also be adversely affected if a credit rating agency announces that our ratings are under review for a potential downgrade. If we are not able to build and sustain proper information technology infrastructure, successfully implement our ongoing business transformation initiative or outsource certain functions effectively, our business could suffer.
We depend on information technology as an enabler to improve the effectiveness of our operations, to interface with our customers, to maintain financial accuracy and efficiency, to comply with regulatory financial reporting, legal and tax requirements, and for digital marketing activities and electronic communication among our locations around the world and between our personnel and the personnel of our independent bottlers, contract manufacturers, joint ventures, suppliers or other third-party partners.
If we do not allocate and effectively manage the resources necessary to build and sustain the proper information technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, the loss of or damage to intellectual property, or the loss of sensitive or confidential data through security breach or otherwise.
We have embarked on multi-year business transformation initiatives to migrate certain of our financial processing systems to enterprise-wide systems solutions. There can be no certainty that these initiatives will deliver the expected benefits. The failure to deliver our goals may impact our ability to process transactions accurately and efficiently and remain in step with the changing needs of the trade, which could result in the loss of customers.
In addition, the failure to either deliver the applications on time, or anticipate the necessary readiness and training needs, could lead to business disruption and loss of customers and revenue. In addition, we have outsourced certain information technology support services and administrative functions, such as payroll processing and benefit plan administration, to third-party service providers and may outsource other functions in the future to achieve cost savings and efficiencies.
If the service providers that we outsource these functions to do not perform or do not perform effectively, we may not be able to achieve the expected cost savings and may have to incur additional costs to correct errors made by such service providers.
Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, the loss of or damage to intellectual property through security breach, the loss of sensitive data through security breach or otherwise, litigation or remediation costs and could have a negative impact on employee morale.
Our information systems could also be penetrated by outside parties intent on extracting confidential information, corrupting information or disrupting business processes.
Such unauthorized access could disrupt our business and could result in the loss of assets, litigation, remediation costs, damage to our reputation and. Fluctuations in exchange rates may have an adverse impact on our business results or financial condition.
We hold assets and incur liabilities, earn revenues and pay expenses in a variety of currencies other than the U. Because our consolidated financial statements are presented in U. Our operations outside of the U. Fluctuations in exchange rates may therefore adversely impact our business results or financial condition.
Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business and operations. There is concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters.
In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products, such as sugar cane, corn, wheat, rice, oats, potatoes and various fruits. We may also be subjected to decreased availability or less favorable pricing for water as a result of such change, which could impact our manufacturing and distribution operations.
In addition, natural disasters and extreme weather conditions may disrupt the productivity of our facilities or the operation of our supply chain.
In the event that such regulation is more aggressive than the sustainability measures that we are currently undertaking to monitor our emissions and improve our energy efficiency, we may experience significant increases in our costs of operation and delivery.
In particular, increasing regulation of fuel emissions could substantially increase the cost of energy, including fuel, required to operate our facilities or transport and distribute our products, thereby substantially increasing the distribution and supply chain costs associated with our products.
As a result, climate change could negatively affect our business and operations. A portion of our workforce belongs to unions. Failure to successfully renew collective bargaining agreements, or strikes or work stoppages could cause our business to suffer.
Many of our employees are covered by collective bargaining agreements. These agreements expire on various dates. Strikes or work stoppages and interruptions could occur if we are unable to renew these agreements on satisfactory terms, which could adversely impact our operating results. The terms and conditions of existing or renegotiated agreements could also increase our costs or otherwise affect our ability to fully implement future operational changes to enhance our efficiency.
Our intellectual property rights could be infringed or challenged and reduce the value of our products and brands and have an adverse impact on our business, financial condition and results of operations.
We possess intellectual property rights that are important to our business. These intellectual property rights include ingredient formulas, trademarks, copyrights, patents, business processes and other trade secrets which are important to our business and relate to some of our products, their packaging, the processes for their production and the design and operation of various equipment used in our businesses.
We protect our intellectual property rights globally through a combination of trademark, copyright, patent and trade secret laws, third-party assignment and nondisclosure agreements and monitoring of third-party misuses of our intellectual property.
If we fail to obtain or adequately protect our ingredient formulas, trademarks, copyrights, patents, business processes and other trade secrets, or if there is a change in law that limits or removes the current legal protections of our intellectual property, the value of our products and brands could be reduced and there could be an adverse impact on our business, financial condition and results of operations.
Potential liabilities and costs from litigation or legal proceedings could have an adverse impact on our business, financial condition and results of operations. We and our subsidiaries are party to a variety of legal claims and proceedings in the ordinary course of business, including but not limited to litigation related to our marketing or commercial practices, product labels and environmental and insurance matters.
We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued days or more preceding the end of our fiscal year and that remain unresolved. Our most significant corporate properties include our corporate headquarters building in download, New York and our data center in Plano, Texas, both of which are owned. Our corporate headquarters are undergoing renovations to improve technology and energy efficiency and make necessary infrastructure improvements.
Leases of plants in North America generally are on a long-term basis, expiring at various times, with options to renew for additional periods. Most international plants are owned or leased on a long-term basis. Furthermore, except as disclosed above, we believe that our properties generally are in good operating condition and are suitable for the purposes for which they are being used.
PEP Company Financials
FLNA also owns or leases approximately 40 food manufacturing and processing plants and approximately 1, warehouses, distribution centers and offices. QFNA also owns four plants and production processing facilities and leases one office in North America. LAF also owns or leases approximately 60 food manufacturing and processing plants and approximately warehouses, distribution centers and offices.
PAB also owns or leases approximately 80 bottling and production plants and production processing facilities and approximately warehouses, distribution centers and offices. Europe also owns or leases approximately plants and approximately warehouses, distribution centers and offices. AMEA also owns or leases approximately 55 plants and approximately distribution centers, warehouses and offices. On March 31, , we contributed our company-owned and joint venture bottling operations in China to Tingyi.
AMEA continues to utilize properties owned or leased by Tingyi. Shared Properties. QFNA also shares four warehouses and distribution centers and four offices with PAB, including a research and development laboratory in Barrington, Illinois.
Europe and AMEA share a research and development facility and an office. In addition to the 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 ventures in which we have an equity interest.
Fovarosi Asvanyviz- es Uditoipari Zrt.
In addition, we and our subsidiaries are party to a variety of legal, administrative, regulatory and government proceedings, claims and inquiries arising in the normal course of business. While the results of these proceedings, claims and inquiries cannot be predicted with certainty, management believes that the final outcome of the foregoing will not have a material adverse effect on our consolidated financial statements, results of operations or cash flows. Business — Regulatory Environment and Environmental Compliance.
Not applicable. Executive Officers of the Registrant. The following is a list of names, ages and backgrounds of our current executive officers: Abdalla joined PepsiCo in and has held a variety of senior positions.
In September he went on to lead the complete portfolio of PepsiCo businesses in Europe.
Prior to joining PepsiCo, Mr. Abdalla worked for Mars Incorporated in engineering and manufacturing roles, as well as in sales, marketing, human resources and general management. In , his region was expanded to include Africa and Central Asia. In , the snacks business in his region was included under his leadership, forming the consolidated Middle East and Africa MEA Region.
Albert P.To DSO In many markets, we compete against numerous regional and local companies. Certain arrangements, such as fountain pouring rights, may extend beyond one year. Our failure to make the right strategic investments to drive innovation or successfully launch new products or variants of existing products could decrease demand for our existing products by negatively affecting consumer perception of existing brands, as well as result in inventory write-offs and other costs.
PepsiCo is a global company and a leader in its industry. During , amid a continued unstable economic environment in Europe, certain countries continued to experience debt and credit issues as well as currency fluctuations. As such, we leverage an integrated risk management framework to identify, assess, prioritize, address, manage, monitor and communicate risks across the Company.
It could be due to an improvement of the inventory policy. Competition The Coca-Cola Company has always been considered PepsiCo's first competitor in the beverage market, and in the end of , PepsiCo surpassed The Coca-Cola Company in market value for the first time in years since both companies began to compete.
Marketing - delivering creative and innovative marketing programs worldwide 3.
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