Pepsi 2012 Annual Report Download - page 46

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 imple-
ment 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 manu-
facturers, joint venture partners, independent distributors
and retailers, to make, manufacture, distribute and sell prod-
ucts is critical to our success. Damage or disruption to our or
their manufacturing or transportation and distribution capa-
bilities due to any of the following could impair our ability
to make, manufacture, transport, distribute or sell our prod-
ucts: adverse weather conditions or natural disaster, such as
a hurricane, earthquake or flooding; government action; fire;
terrorism; the outbreak or escalation of armed hostilities; pan-
demic; industrial accidents or other occupational health and
safety issues; strikes and other labor disputes; or other reasons
beyond our control or the control of our suppliers and busi-
ness partners. 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. If any of our products becomes unfit
for consumption, causes injury or is mislabeled, we may have
to engage in a product recall and/or be subject to liability. 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 lim-
itation, 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: the failure to maintain high ethical, social and
environmental standards for all of our operations and activi-
ties; the failure to achieve our goals with respect to sodium,
saturated fat and added sugar reduction or the development of
our global nutrition business; health concerns about our prod-
ucts or particular ingredients in our products; our research
and development efforts; our environmental impact, including
use of agricultural materials, packaging, energy use and waste
management; the practices of our bottlers with respect to any
of the foregoing; or our responses to any of the foregoing. 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 reputa-
tion. 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 con-
fidence 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. 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.”
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
Management’s Discussion and Analysis
2012 PEPSICO ANNUAL REPORT44