Pepsi 2005 Annual Report Download - page 30

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28
Our products are brought to market through
direct-store-delivery, broker-warehouse and
foodservice and vending distribution
networks. The distribution system used
depends on customer needs, product
characteristics and local trade practices.
Direct-Store-Delivery
We and our bottlers operate direct-store-
delivery systems that deliver snacks and
beverages directly to retail stores where the
products are merchandised by our employ-
ees or our bottlers. Direct-store-delivery
enables us to merchandise with maximum
visibility and appeal. Direct-store-delivery
is especially well-suited to products that
are restocked often and respond to in-store
promotion and merchandising.
Broker-Warehouse
Some of our products are delivered from
our manufacturing plants and warehouses
to customer warehouses and retail stores.
These less costly systems generally work
best for products that are less fragile and
perishable, have lower turnover, and are
less likely to be impulse purchases.
Foodservice and Vending
Our foodservice and vending sales force
distributes snacks, foods and beverages
to third-party foodservice and vending
distributors and operators, and for certain
beverages, distributes through our bottlers.
This distribution system supplies our
products to schools, businesses, stadiums,
restaurants and similar locations.
Direct-store-delivery enables
us to merchandise with
maximum visibility and appeal.
Our Distribution Network
Our businesses operate in highly competi-
tive markets. We compete against global,
regional, local and private label manufac-
turers on the basis of price, quality,
product variety and effective distribution.
In measured channels, our chief beverage
competitor, The Coca-Cola Company, has a
slightly larger share of carbonated soft
drink (CSD) consumption in the U.S.,
while we have a larger share of chilled
juices and isotonics. In addition, The
Coca-Cola Company maintains a significant
CSD share advantage in many markets
outside North America. Further, our snack
brands hold significant leadership positions
in the snack industry worldwide. Our snack
brands face local and regional competitors,
as well as national and global snack
competitors, and compete on issues related
to price, quality, variety and distribution.
Success in this competitive environment is
dependent on effective promotion of existing
products and the introduction of new
products. We believe that the strength of
our brands, innovation and marketing,
coupled with the quality of our products
and flexibility of our distribution network,
allow us to compete effectively.
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
negotiations nor in our customer negotia-
tions. 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 our anchor
bottlers and other affiliated companies and
do not receive incremental compensation
for their Board services.
Our Competition
Other Relationships