Pepsi 2012 Annual Report Download - page 42

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.
Other Relationships
Certain members of our Board of Directors also serve on
the boards of certain vendors and customers. Those Board
members do not participate in our vendor selection and nego-
tiations 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 incremen-
tal compensation for their Board services.
Our Business Risks
Forward-Looking Statements
This Annual Report contains statements reflecting our views
about our future performance that constitute “forward-
looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 (the “Reform Act”).
Statements that constitute forward-looking statements within
the meaning of the Reform Act are generally identified through
the inclusion of words such as “believe,” “expect,” “intend,”
“estimate,” “project,” “anticipate,” “will” 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 statements.
Investors are cautioned not to place undue reliance on any
such forward-looking statements, which speak only as of the
date they are made. We undertake no obligation to update
any forward-looking statement, whether as a result of new
information, future events or otherwise. The discussion of risks
below and elsewhere in this report is by no means all inclusive
but is designed to highlight what we believe are important
factors to consider when evaluating our future performance.
Demand for our products may be adversely affected by
changes in consumer preferences and tastes or if we are
unable to innovate or market our products effectively.
We are a 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 consum-
ers. 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: our ability to anticipate and respond to shifts in consumer
trends, including increased demand for products that meet
the needs of consumers who are increasingly concerned with
health and wellness; our product quality; our ability to extend
our portfolio of convenient foods in growing markets; our abil-
ity to develop new products that are responsive to consumer
preferences, including our Fun-for-You, Better-for-You and
Good-for-You products; and our ability to respond to competi-
tive product and pricing pressures. For example, our growth
rate may be adversely affected if we are unable to maintain
or grow our current share of the liquid 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 vari-
ety of factors, including the aging of the general population;
consumer concerns regarding the health effects of ingredi-
ents 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 eco-
nomic conditions; or taxes that would increase the cost of
our products to consumers. Any of these changes may reduce
consumers’ willingness to purchase our products. See also
“Changes in the legal and regulatory environment could limit
our business activities, increase our operating costs, reduce
demand for our products or result in litigation.”, “Our finan-
cial performance could suffer if we are unable to compete
effectively.”, “Unfavorable economic conditions may have an
adverse impact on our business results or financial condition.”
and “Any damage to our reputation could have a material
adverse effect on our business, financial condition and results
of operations.”
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,
Management’s Discussion and Analysis
2012 PEPSICO ANNUAL REPORT40