Pepsi 2012 Annual Report Download - page 44

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 reme-
diation, product liability, toxic tort and related indemnification
proceedings in connection with certain historical activities and
contractual obligations of businesses acquired by our subsid-
iaries. 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 poten-
tial 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. See “Our financial perfor-
mance 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 develop-
ments and risks in the markets where our products are sold.”
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. We com-
pete with other large companies in each of the food, snack and
beverage categories, including Nestlé S.A., Danone, Mondelēz
International, Kellogg Company, General Mills and DPSG. 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. See also “Unfavorable economic
conditions may have an adverse impact on our business results
or financial condition.”
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, pres-
ent important future growth opportunities for us. However,
there can be no assurance that our existing products, vari-
ants 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 oth-
erwise. 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 neces-
sary infrastructure investments or for any other reason, our
financial performance could be adversely affected. Unstable
economic or political conditions, civil unrest or other develop-
ments 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: foreign
ownership restrictions; nationalization of our assets; regula-
tions on the transfer of funds to and from foreign countries,
which, from time to time, result in significant cash balances in
foreign countries such as Venezuela, and on the repatriation
of funds; currency hyperinflation, devaluation or fluctuation,
such as the devaluation of the Venezuelan bolivar; 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 U.K. 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 purchasing power, thereby reducing
demand for our products. See “Demand for our products
may be adversely affected by changes in consumer prefer-
ences and tastes or if we are unable to innovate or market our
products effectively.”, “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 financial performance could suffer if we are
unable to compete effectively.”, “Disruption of our supply chain
could have an adverse impact on our business, financial condi-
tion and results of operations.” and “Failure to successfully
complete or integrate acquisitions and joint ventures into our
existing operations, or to complete or manage divestitures or
refranchising, could have an adverse impact on our business,
financial condition and results of operations.”
Management’s Discussion and Analysis
2012 PEPSICO ANNUAL REPORT42