Pepsi 2011 Annual Report Download - page 28

Europe
Either independently or through contract manufacturers, Europe
makes, markets, sells and distributes a number of leading snack
foods including Lay’s, Walkers, Doritos, Chudo, Cheetos and Rues,
as well as many Quaker- brand cereals and snacks, through con-
solidated businesses as well as through noncontrolled aliates.
Europe also, either independently or through contract manufactur-
ers, makes, markets, sells and distributes beverage concentrates,
fountain syrups and nished goods under various beverage brands
including Pepsi, Pepsi Max, 7UP, Diet Pepsi and Tropicana. These
branded products are sold to authorized bottlers, independent
distributors and retailers. In certain markets, however, Europe oper-
ates its own bottling plants and distribution facilities. In addition,
Europe licenses the Aquana water brand to certain of its authorized
bottlers and markets this brand. Europe also, either independently
or through contract manufacturers, makes, markets and sells ready-
to-drink tea products through an international joint venture with
Unilever (under the Lipton brand name).
Europe reports two measures of volume. Snacks volume is
reported on a system- wide basis, which includes our own sales
and the sales by our noncontrolled aliates of snacks bearing
Company- owned or licensed trademarks. Beverage volume
reectsCompany- owned or authorized bottler sales of beverages
bearing Company- owned or licensed trademarks to independent
distributors and retailers (see PepsiCo Americas Beverages above).
In 2011, we acquired Wimm- Bill-Dann Foods OJSC (WBD), Russia’s
leading branded food and beverage company. WBD’s portfolio of
products is included within Europe’s snacks or beverage reporting,
depending on product type.
See Note 15 for additional information about our acquisition of
WBD in 2011.
Asia, Middle East & Africa
Either independently or through contract manufacturers, AMEA
makes, markets, sells and distributes a number of leading snack
food brands including Lay’s, Chipsy, Kurkure, Doritos, Cheetos and
Smith’s through consolidated businesses as well as through noncon-
trolled aliates. Further, either independently or through contract
manufacturers, AMEA makes, markets and sells many Quaker- brand
cereals and snacks. AMEA also makes, markets, sells and distributes
beverage concentrates, fountain syrups and nished goods, under
various beverage brands including Pepsi, Mirinda, 7UP, Mountain
Dew, Aquana and Tropicana. These branded products are sold
to authorized bottlers, independent distributors and retailers.
However, in certain markets, AMEA operates its own bottling plants
and distribution facilities. In addition, AMEA licenses the Aquana
water brand to certain of its authorized bottlers. AMEA also, either
independently or through contract manufacturers, makes, markets
and sells ready- to-drink tea products through an international joint
venture with Unilever (under the Lipton brand name). AMEA reports
two measures of volume (see Europe above).
Our Customers
Our primary customers include wholesale distributors, grocery
stores, convenience stores, mass merchandisers, membership stores,
authorized independent bottlers and foodservice distributors,
including hotels and restaurants. We normally grant our indepen-
dent bottlers exclusive contracts to sell and manufacture certain
beverage products bearing our trademarks within a specic
geographic area. These arrangements provide us with the right
tocharge our independent bottlers for concentrate, nished goods
and Aquana royalties and specify the manufacturing process
required for product quality.
Since we do not sell directly to the consumer, we rely on and
provide nancial incentives to our customers to assist in the dis-
tribution and promotion of our products. For our independent
distributors and retailers, these incentives include volume- based
rebates, product placement fees, promotions and displays. For our
independent bottlers, these incentives are referred to as bottler
funding and are negotiated annually with each bottler to support a
variety of trade and consumer programs, such as consumer incen-
tives, advertising support, new product support, and vending and
cooler equipment placement. Consumer incentives include cou-
pons, pricing discounts and promotions, and other promotional
oers. Advertising support is directed at advertising programs
and supporting independent bottler media. New product sup-
port includes targeted consumer and retailer incentives and direct
marketplace support, such as point- of-purchase materials, product
placement fees, media and advertising. Vending and cooler equip-
ment placement programs support the acquisition and placement
of vending machines and cooler equipment. The nature and type of
programs vary annually.
In 2011, sales to Wal- Mart (including Sam’s) represented approxi-
mately 11% of our total net revenue. Our top ve retail customers
represented approximately 30% of our 2011 North American net rev-
enue, with Wal- Mart (including Sam’s) representing approximately
18%. These percentages include concentrate sales to our indepen-
dent bottlers which were used in nished goods sold by them to
these retailers.
Our Distribution Network
Our products are brought to market through direct- store-delivery
(DSD), customer warehouse and foodservice and vending distribu-
tion networks. The distribution system used depends on customer
needs, product characteristics and local trade practices.
Direct- Store-Delivery
We, our independent bottlers and our distributors operate DSD
systems that deliver snacks and beverages directly to retail stores
where the products are merchandised by our employees or our bot-
tlers. DSD enables us to merchandise with maximum visibility and
appeal. DSD is especially well- suited to products that are restocked
often and respond to in- store promotion and merchandising.
Management’s Discussion and Analysis
PepsiCo, Inc.  Annual Report
