Pepsi 2011 Annual Report Download - page 31

for a period of time, which could further reduce consumer demand
and brand equity. Our reputation could also be adversely impacted
by any of the following, or by adverse publicity (whether or not
valid) relating thereto: the failure to maintain high ethical, social and
environmental standards for all of our operations and activities; the
failure to achieve our goals with respect to sodium, saturated fat and
added sugar reduction or the development of our global nutrition
business; our research and development eorts; our environmental
impact, including use of agricultural materials, packaging, energy
use and waste management; or our responses to any of the fore-
going. In addition, water is a limited resource in many parts of the
world and demand for water continues to increase. Our reputation
could be damaged if we or others in our industry do not act, or are
perceived not to act, responsibly with respect to water use. Failure
to comply with local laws and regulations, to maintain an eec-
tive system of internal controls or to provide accurate and timely
nancial information could also hurt our reputation. Damage to our
reputation or loss of consumer condence in our products for any
of these or other reasons could result in decreased demand for our
products and could have a material adverse eect on our business,
nancial condition and results of operations, as well as require addi-
tional resources to rebuild our reputation.
Our financial performance could be adversely affected if we are unable
to grow our business in developing and emerging markets or as a result
of unstable political conditions, civil unrest or other developments and
risks in the markets where our products are sold.
Our operations outside of the United States, particularly in Russia,
Mexico, Canada and the United Kingdom, contribute signicantly
to our revenue and protability, and we believe that our businesses
in developing and emerging markets, particularly China and India,
present important future growth opportunities for us. However,
there can be no assurance that our existing products, variants of
our existing products or new products that we make, manufac-
ture, market or sell will be accepted or successful in any particular
developing or emerging market, due to local competition, product
price, cultural dierences or otherwise. If we are unable to expand
our businesses in developing and emerging markets, or achieve
the return on capital we expect as a result of our investments,
particularly in Russia, as a result of economic and political condi-
tions, increased competition, reduced demand for our products, an
inability to acquire or form strategic business alliances or to make
necessary infrastructure investments or for any other reason, our
nancial performance could be adversely aected. Unstable politi-
cal conditions, civil unrest or other developments and risks in the
markets where our products are sold, including in Russia, the Middle
East and Egypt, could also have an adverse impact on our business
results or nancial condition. Factors that could adversely aect our
business results in these markets include: foreign ownership restric-
tions; nationalization of our assets; regulations on the transfer of
funds to and from foreign countries, which, from time to time, result
in signicant cash balances in foreign countries such as Venezuela,
and on the repatriation of funds; currency hyperination or devalu-
ation; the lack of well- established or reliable legal systems; and
increased costs of business due to compliance with complex foreign
and United States laws and regulations that apply to our interna-
tional operations, including the Foreign Corrupt Practices Act and
the UK Bribery Act, and adverse consequences, such as the assess-
ment of nes or penalties, for failing to comply with these laws and
regulations. In addition, disruption in these markets due to political
instability or civil unrest could result in a decline in consumer pur-
chasing power, thereby reducing demand for our products. See also
“Demand for our products may be adversely aected by changes in
consumer preferences and tastes or if we are unable to innovate or
market our products eectively.”, “Our nancial performance could
suer if we are unable to compete eectively.”, “Changes in the
legal and regulatory environment could limit our business activities,
increase our operating costs, reduce demand for our products or
result in litigation.” and “Disruption of our supply chain could have
an adverse impact on our business, nancial condition and results
of operations.”
Trade consolidation or the loss of any key customer could adversely
affect our financial performance.
We must maintain mutually benecial relationships with our key
customers, including Wal- Mart, as well as other retailers, to eec-
tively compete. The loss of any of our key customers, including
Wal- Mart, could have an adverse eect on our nancial perfor-
mance. In addition, in the event that retail ownership becomes more
concentrated, retailers may demand lower pricing and increased
promotional programs. Further, should larger retailers increase uti-
lization of their own distribution networks and private label brands,
the competitive advantages we derive from our go- to-market
systems and brand equity may be eroded. Failure to appropriately
respond to any such actions or to oer eective sales incentives and
marketing programs to our customers could reduce our ability to
secure adequate shelf space at our retailers and adversely aect our
nancial performance.
Changes in the legal and regulatory environment could limit our
business activities, increase our operating costs, reduce demand for
our products or result in litigation.
The conduct of our businesses, including the production, distribu-
tion, sale, advertising, marketing, labeling, safety, transportation
and use of many of our products, are subject to various laws and
regulations administered by federal, state and local governmental
agencies in the United States, as well as to laws and regulations
administered by government entities and agencies outside the
United States in markets in which our products are made, manufac-
tured or sold, including in emerging and developing markets where
legal and regulatory systems may be less developed. These laws
and regulations and interpretations thereof may change, sometimes
dramatically, as a result of political, economic or social events. Such
changes may include changes in: food and drug laws; laws related to
product labeling, advertising and marketing practices; laws regard-
ing the import of ingredients used in our products; laws regarding
the export of our products; laws and programs aimed at reducing
ingredients present in certain of our products, such as sodium,
Management’s Discussion and Analysis
PepsiCo, Inc.  Annual Report
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